Years Into the Brexit Process, the UK Still Faces Fundamental Choices for its Future Relationship with the EU

Pervez Ghauri (University of Birmingham) and Ursula Ott (Nottingham Trent University)

Pervez Ghauri and Ursula Ott in their paper “Brexit negotiations: from negotiation space to agreement zones” use bargaining theory models of rational behavior and the negotiation literature to explain various Brexit options and predict their consequences. In their paper, they argue that the so-called Ukraine plus agreement seems the option that is closest to the UK government’s negotiation objectives.

After more than forty years of UK membership in the EU, the UK and the EU have been negotiating the exit of the UK from the EU for two years. We analyze the possible outcomes of these negotiations. There are examples of countries that are not members but have a close relationship with the EU. These examples provide possible outcomes of the Brexit negotiations.

The Brexit negotiations could have been conducted amicably with offers and counteroffers. However, while the EU has been trying to be rational, the UK has been negotiating with a somewhat emotional approach. In most negotiations, parties do not get what they wish, they must give and take to come closer to reach a compromise. The UK’s negotiation stance was first illustrated in a so-called White Paper, where the UK announced twelve objectives that it wanted to achieve. These objectives were also reflected – to a certain extent – in the Withdrawal agreement. We analyze some examples that can help the UK achieve these objectives:

Norway Model

This model allows for access to the single market by paying a membership fee and allowing for free movement of people, which was clearly rejected in the British referendum and in the White Paper. Therefore, this model needs to be negotiated, which might be difficult.

Canada Model

This agreement was achieved after several years of negotiations and includes free trade in many products/services and no free movement of people. This requires a long period of negotiations and would mean uncertain and difficult times for UK residents.

Ukraine Plus Agreement

This model is rarely discussed by British politicians or by the media. However, it seems to be the closest one to the objectives listed in the White paper. In addition to free trade in most products/services and no free movement of people, this agreement includes security collaborations that are desired both by the UK and the EU.  

No deal = WTO Rules

In case no deal is agreed by 31st October 2019, all present arrangements will cease to exist, and several agreements will have to be negotiated following WTO rules for trade. This might lead to a similar arrangement as the US-EU trade relationship and may take several years to negotiate.

Withdrawal Agreement

It covers such matters as money, citizens rights, border arrangements, and dispute resolution. It also contains a transition period and an outline of the future relationship between the UK and the EU. During the transition period, special agreements on trade, financial services, security issues, and the Northern Ireland border will be negotiated. The negotiations will proceed following offers and counter-offers depending upon the bargaining power of parties.

While remaining in the EU is the best option for the UK, at present, this does not seem to be achievable unless there is a second referendum and the majority of people vote to remain. Considering the present deadlock in the UK parliament, a second referendum is a real possibility. Keeping the second referendum aside, our analysis reveals that Ukraine plus model is the most suitable for the UK. The next best option is the Canada model. The Norway model is not a viable option as the UK will have to pay a membership fee and it will have to accept some level of free movement of people.

 

Pervez Ghauri is Professor in International Business at Birmingham Business School. He is Editor in Chief for International Business Review (IBR) and Consulting Editor for Journal of International Business Studies (JIBS). He is a Fellow of AIB and EIBA and sits on the EIBA board (p.ghauri@bham.ac.uk).

Ursula F. Ott is Professor at Nottingham Business School, Nottingham Trent University. She has set up and is the Head of the Research Group in International Business, Strategy and Decisions (IBSD) (Ursula.ott@ntu.ac.uk).