On June 23, 2016, the electorate of the UK decided by a majority to leave the EU. The referendum turnout was 71.8 per cent, with more than 30 million people voting. The Leave campaign appealed to widely populist tenets without much reflection on the nature and consequences of Brexit.
The result revealed serious cracks in the UK on the Brexit issue. While England and Wales voted for Brexit, Scotland and Northern Ireland voted convincingly for Remain.
The referendum result led to the resignation of Prime Minister David Cameron and to his replacement by Theresa May, who as expected, appointed a heavily pro-Brexit cabinet. While the new government was weighing possible post-Brexit scenarios and defining its options, there was some vague expectation that, faced with the realities of Brexit, the UK might have second thoughts.
Eventually, on March 29, 2017, the Prime Minister notified the European Council of her government’s decision to leave the EU, thus triggering the withdrawal process defined in Article 50, meaning that the UK is scheduled to leave the EU on March 29, 2019.
The reaction of the EU was formally expressed in a statement of the Heads of Government published six days after the Brexit referendum. The remaining 27 member states showed remarkable unity in their determination to safeguard the interests of the Union while wishing to have the closest possible future relationship with the UK.
Malta has strong and extensive bilateral relations with the UK, and a close affinity, forged by history, tradition, language and mutual affection among the population of the two countries. Malta’s trade and economic cooperation with the UK, as well as cooperation in education, health, culture and the judiciary have their roots in a series of bilateral agreements concluded years before Malta joined the EU. Malta’s membership of the Commonwealth establishes additional bridges for closer ties with the UK.
Within the EU, the UK has been Malta’s natural ally on major issues that concern our national interest, such as the fight against plans to introduce tax harmonisation.
Moreover, the possible direct and indirect implications of Brexit on Malta’s economy are quite real. According to a report by credit rating agency Fitch, Malta is among the countries most exposed to the UK’s exit from the EU, with its exports of goods and services to the UK amounting to at least eight per cent of GDP. Moreover, Malta’s direct investments and financial assets in the UK will suffer losses should there be a permanent depreciation of sterling after Brexit.
More than half a million British tourists visit Malta each year. Possible difficulties in transport connectivity and possible weakening of sterling resulting from Brexit may impact our major tourist source market.
The crucial question is whether Brexit has the potential to dent Malta’s close relationship with the UK, as well as its extensive trade and economic exchanges with the UK. The Labour government is very skilfully using its contacts in Brussels and London to avoid this negative scenario by stressing the need for a common sense approach to Brexit.
Malta immediately insisted on constructive Brexit negotiations. It was under Malta’s presidency, at the European Council’s special meeting of April 29, 2017, that the 27 adopted guidelines for the withdrawal negotiations and for negotiations on the future relationship with the UK.
The overall objective of Brexit negotiations is to preserve the interests of citizens and businesses and the social and economic development of each member state. The Heads of Government decided that this can best be achieved by preserving the integrity of the Single Market and its four freedoms. They also commit themselves to an orderly Brexit so as to reduce uncertainty and minimise disruption as much as possible.
The EU insisted on a phased approach to the negotiations. The first phase aimed to provide as much clarity and legal certainty as possible to citizens, businesses and other stakeholders, and to international partners on the immediate effects of Brexit.
It also aimed to settle issues related to the disentanglement of the UK from its commitments to the Union and its member states. During the first phase negotiations focused on three main issues: citizens’ rights, financial settlement and the Irish border.
A provisional agreement, which left several controversial issues particularly about Ireland still unsettled, was reached on December 8, 2017. Subsequently, the European Council decided to allow negotiations to proceed to the second phase related to transition and the framework for future relationship.
Both the EU and the UK were keen on a transition period, after March 29, 2019, to allow more time for citizens and businesses to prepare for post-Brexit rules, and more time for negotiations on the future relationship. During the agreed transition period, which runs until December 31, 2020, the EU acquis will continue to apply to the UK but the British government will not have any say in decision-making.
In the meantime, the Commission published the first draft of the Withdrawal Agreement. It was an exercise by the Commission’s legal service which translated into legal terms the agreement reached in December 2017 on the first phase of negotiations. The draft also proposed text, on the basis of the EU positions, for other withdrawal issues on which agreement has not yet been reached.
Malta is among the countries most exposed to the UK’s exit, with its exports of goods and services to the UK amounting to at least eight per cent of GDP
This cleared the ground for the European Council of March 23, to define guidelines for negotiations on the post-Brexit relationship. Though the EU wishes to have the closest possible partnership, the repeatedly stated position of the UK to stay out of the Single Market and the Customs Union, inevitably will limit the scope and depth of this partnership.
The UK’s decision to stay out of the Single Market and the Customs Union will unfortunately lead to a “hard Brexit” because divergences in external tariffs and internal rules, as well as the absence of common institutions and a shared legal system, will clearly necessitate border checks and controls, with resulting negative economic consequences.
In this context, and after considering the list of proposals defined by Theresa May in her speech in March, the EU proposed “a balanced, ambitious and wide-ranging free trade agreement”.
The EU proposal for future relations includes ambitious provisions on movement of natural persons, based on full reciprocity and non-discrimination among member states, together with coordination in social security and recognition of professional qualifications.
The proposed package also includes cooperation in transport services, both air transport and other modes of transport, in order to maintain continued connectivity between the EU and the UK after Brexit.
In addition the UK is being offered participation in certain Union programmes, particularly those in the field of research and innovation and education and culture.
Within the future relationship package, the EU also signalled its readiness to establish specific partnerships in the areas of law enforcement and judicial cooperation in criminal matters, and in the fields of foreign policy, security and defence policy.
Negotiations on the post-Brexit package, started on April 16. The agreed points will be elaborated in a political declaration accompanying the Withdrawal Agreement.
It is encouraging to note that Brexit negotiations are now more relaxed, and the negotiators have developed a more positive working relationship accompanied by a better mutual understanding.
It is expected that the UK will give further ground on key issues such as the Irish border and the role of the Court of Justice of the EU in monitoring the post-Brexit agreement. There is a widespread feeling both in Brussels and in London that both sides have much to lose in a no-deal scenario.
It seems that the common sense approach to Brexit, insisted upon by Prime Minister Joseph Muscat to Brexit Minister David Davis, has taken root in both Brussels and London.
The Maltese government is committed to continue with its input for a deal that will be fair to the UK, but also based on fundamental EU principles. Indications are that the post-Brexit package being proposed by the EU, if agreed, shall not diminish Malta’s current excellent relations with the UK as it will guarantee the free flow of trade while also allowing sufficient legal space for Malta to pursue and strengthen further its special relationship with the UK.
Edward Zammit Lewis is chairman of the Standing Committee for Foreign and European Affairs.