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Brexit: An Enormous Challenge For The U.K.

Commentary: “Brexit” is a word that was coined to describe the United Kingdom’s (U.K.) June 23, 2016 vote to quit being a member of the 27-member European Union (E.U.). It is also a subject that is difficult to write about because its situation can change on an almost daily basis. Since the U.K.’s vote to secede, Brexit and politics in the U.K. have played out like a cliffhanger soap opera. One day after the fateful vote to secede, British Prime Minister David Cameron resigned his position. Many believe that when he put the Brexit vote up for a public referendum in response to members of the Parliament and public supporting the movement, Cameron thought it would not pass. Many people blame him for opening a can of worms.

Cameron was succeeded by Theresa May, who inherited the Brexit hot potato and struggled to forge a clear path of exit with the E.U. Second-guessing and controversy surrounding Brexit shadowed her tenure as British Prime Minister until she herself announced her resignation on May 24, 2018. May was replaced on July 24, 2019, by Boris Johnson, who promised to successfully shepherd the U.K. through its extraction from the E.U. He began negotiating a withdrawal plan with the E.U., but immediately experienced problems building support for a Brexit path forward. In reaction, Johnson did everything from suspending Parliament, a move that was legally rebuked, to expelling members of his party who were not behind him.

Finally, he was put in the awkward position of asking the E.U. for more time to withdraw. Because he only had a narrow parliamentary majority that was inadequate for him to pass the Brexit deal he had negotiated with the E.U., he had no other choice but to call for a general election, the third of its kind in the U.K. during the past three years. Johnson’s hand was strengthened by his party’s overwhelming victory in this general election. Thus, the path to Brexit was made possible for Johnson and his party. As part of the negotiations, the U.K. and E.U. agreed to keep all rules, processes, and regulations the same during a transition period that will last until December 31, 2020.

This gives the U.K. a little more than 10 months to negotiate a completely new economic and trading relationship with the E.U. By any standard, this appears to be a herculean task. The Johnson government must come to terms with the E.U. on everything from Customs procedures, security, e-commerce rules/protocol, logistics standards, fishing rules, and financial regulations, among others. Compared to what the U.K. and E.U. need to negotiate and put in place, the renegotiation of the North American Free Trade Agreement looks like a piece of cake.

Johnson also has publicly stated that his government intends to negotiate separate trade agreements with individual European countries once it has completely broken away from the E.U. He intends to rely heavily on the negotiation of a trade agreement with the U.S. in order to decrease strong reliance on the E.U. More than 50 percent of the U.K.’s imports come from the E.U., while almost 50 percent of its exports are purchased by the E.U.

However, by rejecting its E.U. membership and turning to the U.S. to balance its economic future, the U.K. might be backing itself into a position of weak leverage with the U.S. in future trade negotiations. U.S. negotiators might choose to play hardball with the U.K. and exact severe concessions in the path of developing a trade agreement between the two countries. The U.K. might find itself with completely different trade protocol between the U.S. and the E.U., thus creating confusion, chaos, and potentially loss of business for its companies.

From a geo-political standpoint, the U.K.’s exit from the E.U. is also incredibly complicated. This move could potentially fan the flames for a renewed Scottish independence movement from the U.K., as many Scots were perfectly content to be part of the E.U. and are wary of the uncertain future of an independent U.K. From a security standpoint, Johnson’s government negotiated for Northern Ireland, which is controlled by the U.K., to continue the current trade rules it has with the E.U. This would prevent the bizarre situation of having Customs checkpoints between this region and the Republic of Ireland, which will continue to be an E.U. member. However, a system must be established for products that the U.K. sends to Northern Ireland that will eventually be exported to the E.U. How this will function is yet to be determined.

Given what it is facing the remainder of the year, I can’t help but wonder if a successful Johnson Brexit will become a Pyrrhic victory for the U.K. Johnson will need to use every political skill to keep his party behind him as the path work is laid out for going solo. I imagine that he and his team are going to be busy for the next 10 months.