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Brexit: More Europe, or Less?

British Prime Minister Boris Johnson outlines his government's negotiating stance with the European Union after Brexit, during a key speech at the Old Naval College in Greenwich, London, Feb. 3, 2020.
British Prime Minister Boris Johnson outlines his government's negotiating stance with the European Union after Brexit, during a key speech at the Old Naval College in Greenwich, London, Feb. 3, 2020.

Brexit Day, with its mixed emotions, exposed how wide the rift with the European Union remains and how difficult it will be to bridge the gap now that Britain has left the trading bloc.

Much of the media focus has been on the likely commercial and political repercussions for Britain. The economic shock could be severe, depending on how quickly Britain can strike free trade deals with the United States and China.

But the now 27-member EU will also be wounded.

With Britain gone, EU federalists will have less restraining them in their push for a deeper political union among the remaining member states. That, in turn, could reignite euroskepticism and trigger another populist backlash, especially in central European states, which are the most skeptical of federalism and the most determined to preserve nation-state rights, analysts say.

On the economic front, much rests with how trade negotiations unfold in the next few months between British Prime Minister Boris Johnson and Brussels.

"The problem is objectively that there will be some losses and damages, no doubt, on both sides,” said Donald Tusk, former European Council president.

Speaking to the BBC Sunday, Tusk said there was no wish to punish Britain for exiting, and he does not expect either side will want to intentionally harm the other.

"This is a process of only damage control,” he said.

But few doubt there will be damage. There seems to be no love lost between London and Brussels. The rhetorical exchanges across the English Channel in recent days have been toxic in content and tone.

FILE - Brexit supporters wave Union flags during Brexit celebrations in central London, Jan. 31, 2020.

Johnson and his ministers unleashed a series of combative statements, triggering equally bellicose responses from European leaders who appeared to be encouraging Scotland to break away from Britain.

As a way of emphasizing Britain's new status as an "independent state," Foreign Secretary Dominic Raab ordered British diplomats to spurn their erstwhile EU colleagues at international conferences and not sit next to them at gatherings.

Former British senior diplomat John Kerr predicted Sunday that the negotiations on Britain’s future relationship with the EU, which will formally start on March 3, will quickly become “nasty and (objectionable) rebarbative.”

Johnson wants to agree to the terms of Britain's future relationship with the bloc, modeled on the EU's free trade agreement with Canada, by the time a transitional period ends in December.

Johnson said if negotiations don’t go Britain’s way, he would be happy with a looser and distant relationship with the EU, and trade with the continent solely on World Trade Organization terms.

That would mean the imposition of high trade barriers, costly tariffs and time-consuming customs checks on goods traded between the EU and Britain.

On Monday, Johnson outlined his “red lines,” saying he isn’t prepared to align with the EU’s regulatory rules, while at the same time, he said he wants tariff-free trade.

"There is no need for a free trade agreement to involve accepting EU rules on competition policies, subsidies, social protection, the environment or anything similar any more than the EU should be obliged to accept UK rules," Johnson said.

But European officials say that would give Britain better terms than it enjoyed as an EU member state and give British manufacturers and farmers a competitive edge over their continental rivals by lowering production costs and making their goods cheaper.

If Britain departs from EU rules just on industrial emissions and pollution, it could save British industry about $5 billion dollars a year, reducing the price of its goods.

FILE - People celebrate Britain leaving the EU on Brexit Day at Parliament Square in London, Jan. 31, 2020.

Johnson also rejected calls by European leaders for EU trawlers to continue to have access to British fishing waters in exchange for a deal allowing Britain’s financial institutions unfettered access to the continent. And he is threatening a tariff war with the EU, warning that if no satisfactory trade deal is struck by year’s end, Britain will impose high tariffs on goods from the continent, such as cars, cheese and wine.

In an open letter published in The Times newspaper on Saturday, French President Emmanuel Macron emphasized that Johnson’s demands won’t be accepted.

"Ease of access to the European market will depend on the degree to which the European Union’s rules are accepted,” he wrote.

Few observers believe anything but a bare-bones trade agreement will be negotiated by year’s end, leaving both Britain and the EU with economic damage.

Britain would be worse off, and the gloomiest forecasts have as much as 8% of its GDP lost as a result of a no-trade Brexit deal. A Canada-style deal could shrink the British economy by nearly 5% by 2035, according to the British government’s own analysis.

But the impact is also going to be painful for the EU.

A study last year by the University of Leuven in the Netherlands suggested close to 2 million jobs could be lost on the continent because of tariffs and trade barriers, if there is just a bare-bones deal. The EU risks a 1.5 percent fall in its collective GDP.

For Europe, the economic pain would be spread across member states, although four countries would suffer the most.

FILE - A projection appears on a wall in Ramsgate, southern England, on Brexit Day, Jan. 31, 2020.

Nearly 14% of Ireland’s exports, mainly dairy and meat, go directly to Britain. Germany exports a wide variety of industrial products to Britain, including pharmaceuticals, chemical and petroleum products, and almost 800,000 cars a year. The Netherlands also enjoys significant trade with Britain. Meanwhile, France could see around 140,000 jobs lost with the country’s fishing industry hit hard, if French trawlers are blocked from British waters.

An economic hit would be most unwelcome on the continent, where economic growth has already slowed almost to zero. The prospect of further economic disruption isn’t going to help in forthcoming haggling over the EU’s institutional budget. Brexit means the EU has to make up an estimated $12 billion shortfall in lost British contributions, and some cash-strapped governments are unhappy with the money they already have to contribute and want curbs on EU spending.

Austria, Denmark, the Netherlands and Sweden, nicknamed the Frugal Four, are all pressing for a reduced EU budget. Berlin is determined to see that German taxpayers aren’t forced to take on the financial burden created by Brexit’s impact on the EU budget.

And there’s growing alarm among member states that Britain’s departure will embolden EU federalists, who want to accelerate the bloc’s political integration. Britain had long been an opponent of a deeper political union.

With Britain gone, Macron has already served notice of his plans for greater federalism, saying the EU “must understand the reasons” for Brexit “and learn lessons from it.”

“It is a historic alarm signal which must resound in each of our countries, be heard by all of Europe and make us think,” Macron said.

The lesson he draws is that “Europe needs new momentum.” His recipe is "more Europe, not less."

Macron is also championing a defense union separate from NATO.

Later this year, the EU will hold a "Future of Europe" conference where divisions, as much as unity, could be on display, with central European states and Italy, which are already clashing with Brussels on migration policy and rule of law issues, resisting the "more Europe" formula.

"Many EU member governments are wary of anything that might weaken NATO,” said Giles Merritt of the Friends of Europe research group, and author of "Slippery Slope: Brexit and Europe's Troubled Future."“

Poland and the three other "Visegrad" countries of central Europe, along with the three Baltic republics, have ineradicable memories of their treatment at the hands of the Kremlin during the Cold War,” he said.

Besides Poland, Visegrad countries include the Czech Republic, Hungary and Slovakia. Estonia, Latvia and Lithuania comprise the Baltics.