The United Kingdom formally left the European Union at the end of January this year. There is now a transition period until December 31, 2020, after which Brexit, whether hard or otherwise – depending on the outcome of the ongoing negotiations – will take effect. Experts from KU Leuven are researching how this drastic separation could have occurred and are predicting the major changes that Brexit will bring.
First things first: how did it come to this? Professor of English Linguistics Lieven Buysse has been studying British culture and the relationship with Europe for years, which has always been difficult. Even at the beginning of the European story, in 1952, the UK declined an invitation to become part of the European Coal and Steel Community. Churchill was a strong supporter of cooperation within Europe with an eye toward creating a lasting peace, but nevertheless he didn’t think it necessary to be part of it. Thanks to its colonies, the British Empire always had sufficient raw materials and a large export market.
That changed when decolonisation decimated the British Empire in the late 1950s and early 1960s, Buysse explains. Suddenly it became economically attractive to join the then-EEC. However, French President De Gaulle vetoed British accession because he felt the British were too much under American influence and too driven by self-interest rather than the ideal of political and cultural unity.
The UK eventually joined in 1973. Barely two years later, a first referendum was held. At the time, a two-thirds majority voted in favour of Europe, partly because of the economic malaise in the UK and the expectation that European membership would bring economic prosperity. Yet there was a second reason why the British had joined and also voted to stay in Europe: the desire to remain a major player on the world stage via Europe, even after decolonisation.
Carpets and vacuum cleaners
Today, the UK feels restricted in the role it wants to play on a global level, says Buysse. Due to the enlargement of the EU, the influence of the individual member states has drastically decreased, and with their great past in mind, the British do not find it easy to comply with the regulations from Brussels. ‘It feels to some as if the UK has gone from a proud sovereign state to a puppet state. The British don't like rules anyway, just because it's not in their nature to follow them. They see the standardisation pursued by the EU as an attack on their individuality. For example, there was outrage recently because the EU wants to ban overly powerful vacuum cleaners for sustainability reasons – the British love carpets and strong vacuum cleaners.’ (laughs)
‘The mood started to turn in the early 1990s,’ says Buysse. ‘Europe had started to impose budgetary restrictions to allow for a single currency and resistance grew in the UK. Conservative politicians in particular saw that political benefits could be reaped from a negative attitude towards the EU. Then the newspapers started to capitalise on that anti-European sentiment in the population by spreading nonsense stories about how Europe was going to ban a popular chip flavour or typical British sausage, for example, or impose the same letterbox on everyone. Before entering politics, Boris Johnson, as a European correspondent for British newspapers, played a role as a malefactor for years, not for ideological reasons, but because they were easy stories that sold well.
Many newspapers fostered the idea that the UK was being neglected. No one seemed to want to realise or explain that EU regulation is intended to protect the common man, jobs and businesses. Free movement within Europe for EU nationals was held responsible for the flow of non-European migrants to the UK. They pointed to Polish and Romanian workers who came to “steal" British jobs, whilst these are usually jobs that had often gone unfilled, for example in healthcare.’
‘It’s no surprise that many Britons felt they would be better off outside the EU,’ says Buysse. ‘It’s difficult for them to imagine the macroeconomic consequences of the exit and its impact on their own daily lives. But after the feeling of euphoria that Brexit brings, the moment will inevitably come when people realise that the EU wasn’t actually the cause of British feelings of dissatisfaction and discontent.’
In addition to that perception and intractability, the opportunism of individual politicians has also played a role, says Steven Van Hecke, professor of European and comparative politics. ‘In the late 1990s, Tony Blair, fearing for his domestic popularity, didn’t take the opportunity to bring the UK into the Eurozone. But history will judge that less harshly than David Cameron, who put personal calculation above the interests of his party and even his country. In the run-up to the 2015 elections, he bought back support from Eurosceptic backbenchers with a referendum on EU membership. He wanted to sideline the Lib Dems and win a parliamentary majority. But he didn’t think he would have to keep his promise, let alone lose the referendum. That responsibility is devastating.’
Boris Johnson, who came to power after Theresa May's unsuccessful tenure in office, is also more focused on maintaining his own power than on the heavy price that the British will pay for Brexit, says Van Hecke. ‘Johnson is an opportunist. An example is the legendary story that he had two opinion pieces ready for The Daily Telegraph, one in which he argued pro-remain and one pro-leave. Only at the last minute did he choose the latter because it would help him reap the benefits of Cameron's imminent defeat.’
Heels in the sand
Today, Johnson continues to change course when it suits him. At the beginning of this year, for example, he guided the withdrawal agreement through the British House of Commons and House of Lords. He succeeded mainly by moving the imminent Irish customs border, the stumbling block of Brexit for years, from the mainland to the Irish Sea. But at the beginning of September he unilaterally reversed course. ‘His word means very little,’ says Van Hecke. ‘Suppose the international negotiators manage a soft Brexit (in which the UK remains part of the European internal market, ed.), what is that worth if Johnson simply backs a law at the beginning of 2021 to undermine that? In the House of Commons, he has a majority of Brexiteers on his side.’
‘All of this ensures that Brussels no longer trusts London. Conversely, distrust had been around for some time. In that sense, I don’t expect any spectacular political changes during the night between 31 December and 1 January. The unravelling will just continue. You’re sitting here with two partners who are putting their heels deeper and deeper into the sand during their divorce, and so as far as I can see the chance of a no deal, a hard Brexit, is only increasing. And Johnson wouldn’t personally suffer the consequences.
I’m convinced that the British and Europeans will find each other in the long term, but perhaps we’ve got to drink to the bottom of this chalice first.
Direct and indirect trade
That’s not the case for European fishermen, who are at risk of having limited access to British waters, or to truck drivers who risk losing valuable time due to border controls. They, and many others, are anxiously wondering: what will be the precise economic consequences of a (hard) Brexit?
In the context of the trade relationship between the EU and the UK, approximately 45 percent of British exports go to Europe, while all EU countries together only export 8 percent to the UK. For a long time it was thought that the British would be the big losers of Brexit.
Professor of international economics Hylke Vandenbussche has helped clear up this misconception. After a period as an economic expert at the European Commission, she put together a dream team at KU Leuven that calculated the impact of Brexit on the basis of its own economic model. She published the research results in the book The Brexit Saga, which sheds new light on the consequences of the British departure.
‘Most economic trading models are gravity models,’ says Vandenbussche. ‘These explain trade between two countries on the basis of the size of the economy and the distance between two countries. They only take into account direct trade, the concrete goods that are exported, whilst we soon came to the conclusion that this isn’t enough to really measure the full impact of Brexit accurately.’
The global network model devised by Vandenbussche and her colleagues looks at direct and indirect trade. ‘You might think that, for example, the Belgian steel sector would only be affected by a British import tax on steel, but that’s not correct, because our country also supplies steel for the production of German cars. If these are exported to the UK, it will also have an impact on our steel industry due to a possible import tariff on European cars. In the event of a hard Brexit, this will lead to a decrease in trade between the EU and the UK, with all of the consequences this entails for employment.’
Jobs, jobs, jobs
According to calculations by Vandenbussche, the job loss in a no-deal situation is about four times as great as with a soft Brexit. ‘In that case, the British will see more than 500,000 jobs disappear. In a large EU country such as Germany, there will be nearly 300,000 jobs lost and some 40,000 in Belgium. That’s a lot if you consider our limited population. Relatively speaking, we are in the top three countries with the greatest job losses. This is largely due to indirect trade – we export many goods used in production processes, for example food or chemicals, that are carried in other countries. This also applies to the Czech Republic, which is far from the UK and doesn’t have many direct exports, but which does supply many input products for the German car industry.’
The economic impact of a hard Brexit is also huge for the British economy, and yet many Britons remain in favour of a no-deal. How can that be explained? Populism seems to Vandenbussche to be an overly simplistic explanation. ‘At the moment, the British think that their marriage with Europe stopped working. They’ve always been somewhat reserved lovers of the EU, but now they really have a different vision of the future, based on geopolitical relationships. Many Britons believe that Europe does not belong to the economic “coalition of the winning” and would much rather conclude trade agreements with strong players such as the US or China. They’ve had an especially long trading history with the Americans. It’s no coincidence, then, that Buckingham Palace rolled out the red carpet for Donald Trump last year during his three-day state visit to the UK, even though several members of the royal family have had issues with the president's personality.’
So the British have an alternative in mind. This outcome would particularly benefit from a no-deal, because in that case the British would be free to conclude trade agreements with whomever they want in the short term, whilst in a softer scenario they would still be bound by all kinds of rules for some time when it comes to aspects such as state subsidies to companies or tax policy. ‘According to the current exit agreement, the British must present their state subsidy policy and coordinate it with that of Europe in order to avoid unfair competition. The same with taxes; the British would love to be the most liberal open market in Europe, but the EU doesn’t want taxes for companies to be too low, because they are afraid that those companies would then move to the UK en masse.’
Vandenbussche hopes that an agreement will be reached, but the EU shouldn’t be afraid even in the event of a hard Brexit, she says. ‘It will be a tough nut to crack for everyone, but Europe needs to rely on its own capabilities, develop the single market and internal cohesion and further develop European policy. It looks like we’re moving into a period of de-globalisation at this point, but that trend will diminish over time. We need to make sure we’re strong enough when the spirit is there for a more open economy. That will only make us stronger as a trading partner.’
Steven Van Hecke is also hopeful. ‘I’m convinced that the British and Europeans will find each other in the long term, but perhaps we’ve got to drink to the bottom of this chalice first. Right now, nothing in the facts has changed; no fishermen or companies have gone bankrupt yet. I think that catharsis will only come to the British once they are shocked into realising the indisputable importance of trade with the EU and its geographic proximity. You’ll never be able to put the UK between New Zealand and Australia. A UK company exporting to the EU will always have lower transportation costs than one exporting to the Commonwealth. I refer again to the divorce metaphor: only when you notice after a while that you’re broke, then you may see that it’s beneficial to take care of a number of things together.’
Bloemen voor Pelosi
Apart from the economic situation, Brexit is also putting international relationships on edge. How would a no-deal shuffle the geopolitical cards? Van Hecke mainly foresees problems in Northern Ireland. ‘Johnson isn’t taking this matter seriously either. As Secretary of State, (between 2016 and 2018, ed.) he never went to Ireland or the border. He couldn't care less. Now he doesn't care that the Northern Irish will pay the cost of a hard Brexit.’
‘But there, too, the stubbornness of the facts will prevail, because in time a majority of Catholic Northern Irish will win a possible reunification referendum. In the meantime, things could really derail in the region. The atmosphere is so tense that one hothead is enough to rile things up and bring back old demons. In that sense, Johnson and his team are playing with fire.’
Fortunately, there are still the Americans. Nancy Pelosi, Speaker of the United States House of Representatives, recently said that Johnson should not violate the Good Friday Agreement – which ended the Irish Troubles in 1998 – or Congress would fail to approve a new British-American trade deal. ‘The Irish issue is crucial for many Americans, and rightly so, because without them peace would not have come,’ said Van Hecke.
‘That argument will be more convincing to Johnson than pressure from the EU. The UK has always had a rational political relationship with the EU, while their connection with the US is much more emotional. It remains their point of reference. And so the EU should actually send flowers to Nancy Pelosi every day, because it may be via Washington rather than Brussels that reason returns to the British. But I don’t doubt that it will eventually return. The costs of the divorce will always be greater than those of a collaboration.’
Summary: Brexit is the result of deeply rooted anti-European sentiment among the British and a lack of courage and responsibility on the part of some of their key political figures. The current breach of trust between the United Kingdom and the European Union is diminishing the chances of a soft landing by the day. A no-deal comes with a heavy economic and geopolitical price on both sides of the Channel, but the final inevitable catharsis will open up new perspectives in the long run.