Britain’s Future in Europe: Reflections on the German British Forum Conference

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

Fascinating discussion at the German British Forum Conference on the subject of Britain’s future in Europe last week.

Keynote speaker Dr Wolfgang Schäuble made it clear how much Germany valued the UK’s membership and wanted the UK to remain alongside Germany in the EU – Germany would “cry” if the UK were to leave.

Speakers ranged from CEOs of major multinational companies and fund managers to politicians, ambassadors and central bankers, and included Lord (David) Owen, Otmar Issing, Christian Noyer, Nicola Horlick, Gerard Lyons, John Kornblum, Matthew Elliott and Jürgen Maier (Siemens). All, of course, argued very capably and emotionally from their various perspectives.

So what was the outcome of the day, not that either side was admitting defeat or claiming victory?

• The “out” campaign do not know what will happen if the UK leaves the EU – only that new deals will have to be done, not only with the EU itself, but with all the other countries which are party to treaties entered into by the EU, treaties which the UK currently enjoys the benefit of. There was a general assumption that the UK was a sufficiently important country that other countries would want to (or have to) do deals with it.
• The “in” campaigners have something to offer – though there was ample debate over whether or not the agreement which David Cameron has agreed is binding and enforceable. There was an interesting intervention from the Danish Ambassador, who made the point that Denmark benefits from a similar arrangement and has never had any problems with the EU or its members seeking to ignore or not observe it.
• The two sides of the debate disagree on whether or not the UK really is important enough in the world to be able to secure all the benefits which it currently has with regard to trading with the EU and other countries under treaties which the EU has entered into. On the one hand, the “out” campaigners point to the levels of imports and exports between the UK and EU, and that the UK represents the world’s eighth largest economy. On the other hand, the “in” campaigners pointed out that the UK represents less than one per cent of the world’s population and less than three per cent of global GDP.
• While the “out” campaigners long for a “bonfire of regulations”, those businesses operating on the global stage were much less convinced that there would be much, if any benefit: their point, in short, is that when you export to the US, you comply with US requirements and when you export to Europe, you comply with EU standards. Whether the UK is in or out of the EU, it will still need to meet EU standards to export goods and services there.

The debate was enlivened by the comments of Emmanuel Macron that morning, threatening to move the refugee and asylum-seeker camps from Calais to Dover. Interestingly, the “out” campaigners immediately dismissed this sort of talk as idle threats, which would never be followed up. Much the same position as Alex Salmond took in the Scottish Independence Referendum when all the main Westminster parties swore that there would be no fiscal union with an independent Scotland.

Indeed, there are a great many similarities between the two debates – the “union” campaign in Scotland offered the certainty of a known position. The “independence” campaign could only offer hope that they could achieve something better afterwards, with no visibility over what that might be.

Therein lies perhaps the biggest problem with the whole process – voters are being asked to decide between a “known” and a largely “unknown”. The only certainty of an exit vote is that two years after the UK gives notice to leave the EU, it will leave, unless all the other EU member states (and the UK) agree to extend that date. And in that event, the UK will be a third party country outside the EU, outside the treaties with other countries which the EU has entered into, and reliant on its WTO membership to protect its international trade.

The additional uncertainty, which surprisingly was not fully raised until I brought it up at the end, is that the commercial arguments as to why or how it might benefit the UK and EU to agree a new relationship outside EU membership are only a part, and probably a small part, of the negotiations. The biggest part by far of any exit negotiations is political, and there is no guarantee that commercial rationale will overcome national politics.

With national elections coming up in France and Germany, and quite possibly new elections coming up in Spain – if an enduring government cannot be formed, – there will be little political will or appetite to engage in negotiations with the UK. Negotiation could well be seen as those countries making concessions to the UK after it had chosen to be outside the EU. Indeed, for the UK to achieve a “good” deal with the EU, the EU members would need to overcome the systemic risk which creating such a “good” deal would create to the EU itself. After all, if the UK can have a deal like that, why not any of the other members?

None of which is to say that a better place for the UK in the world could not be achieved outside the EU. Lord Owen was probably on the money when he referred to it taking a long time and a lot of negotiations to get there. We may even have seen two terms of President Trump by that point!