Arbitration offers Theresa May a way out of mess of her own making

Britain’s prime minister, Theresa May, is dithering over the exit payment to be made to the EU and over the terms of an interim separation before the final ‘divorce’, says Clive Crook            

LAST week’s Brexit talks between the UK and the European Union didn’t go well.

The deadline for an agreement is March 2019, and progress has been much too slow. UK prime minister Theresa May needs to get a grip on this process.

Britain’s government faces two
crucial obstacles. It’s in May’s power to break through both.

The first is the EU’s insistence that Britain’s exit payment, in settlement of liabilities, should be mostly agreed — the formula is that “sufficient progress” should have been made — before talks move on to post-Brexit arrangements.

The second is uncertainty over the form of a transitional, post-Brexit deal to govern relations until the two sides can fashion a permanent new agreement — a task bound to take at least several more years.

The UK is dithering on both points, and it’s clear why: Each of these
questions is politically toxic — and May’s political capital after this year’s general-election debacle stands at roughly zero.

Public opinion in Britain solidly
opposes an exit payment in the mid- to high tens of billions of euros, which the EU has said it expects.

And many of those who voted for
Brexit are sceptical of a transitional deal that leaves the UK’s obligations to the EU substantially in place, seeing this as a continuation of EU membership by other means.

So far, May has done nothing to prepare public opinion for the substantial exit payment. And she’s done nothing to make the case for a so-called off-the-shelf transition, which mostly just freezes existing arrangements.

To be fair to May, the EU is wrong to insist on “sufficient progress” on exit talks before moving to other matters.

There’s no reason why these talks shouldn’t be on parallel tracks, or bundled together, so that concessions in one area could be balanced by concessions in another.

Putting questions into a series of silos, with permission needed at each stage to move on, is a good way to make talks fail.

But the Brits had no reason to expect the EU to be obliging: Britain has spurned the EU, not the other way round, and now the EU has the upper hand.

What should May do?

On the exit payment, she should
propose independent, international
arbitration. This was suggested earlier this year by Andre Sapir of the Bruegel Institute — before it was certain that the issue would cripple the talks.

Now that it has, May should take up Sapir’s idea.

Arbitration has great substantive
advantages. It recognises, for instance, that the question of what is owed is enormously complicated, that the
parties start from positions that are far apart, and that a lot of face is at stake on both sides. It gives Britain, especially, cover for backing down.

The resulting terms would not be a surrender to EU bullying, but a principled compliance with a legitimate process that both sides agreed to invoke. The International Court of Justice, a United Nations body, or the Permanent Court of Arbitration, as Sapir suggests, would be the appropriate body.

On the form of the transition, May should come down squarely in support of her chancellor of the exchequer,
Philip Hammond — and against other ministers, notably Liam Fox — and say that the transitional deal should be,
in effect, an extension of the existing
arrangements.

After Brexit, for a period of several years, Britain would remain in the EU’s single market and customs union, would keep paying its membership dues, accept free movement, recognise the existing rights of EU citizens in the UK, and have no say in EU decision-making.

Brexit hardliners inside and outside May’s Conservative Party would denounce that as overthrowing the referendum result.

May would say: It does no such thing. Of course she would say this outcome is completely unacceptable as a long-term arrangement — and that’s precisely why it’s guaranteed to be temporary.

It’s merely the price of executing
Brexit with the least possible short-term disruption.

And she could patiently explain why Brexit hardliners should be open to this approach.

Their resistance to EU demands for liabilities, and their preference for a complex, bespoke transition that dissolves the UK’s existing rights and commitments at the outset, are leading in one direction only — to the so-called cliff-edge Brexit that will, at a minimum, impose enormous short-term
disruption on the UK economy.

And that, as John Springford, of
the Centre for European Reform has
argued, might be the worst possible
outcome for hardliners.

It would lead voters to conclude that Brexit was a terrible mistake after all — an error that they might then decide to put right.

It ought to be obvious: The hardliners have a bigger stake in a smooth Brexit than anybody else. The price for securing it is modest — a little patience. Is it really beyond the prime minister to see this, take charge, and make the case?

Clive Crook is a columnist for the
Financial Times, the National Journal. and a senior editor at The Atlantic Monthly.


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