From a No-Deal Brexit to a No Brexit Deal

Hans-Werner Sinn

Project Syndicate, January 30, 2019

The parliamentary defeat of British Prime Minister Theresa May's Brexit deal means that all options are on the table. By addressing Britain's longstanding concerns over intra-EU migration and its attendant costs, the European Union could both set the stage for a reversal of Brexit and shore up its own long-term stability.

With the recent signing of the Treaty of Aachen, French President Emmanuel Macron and German Chancellor Angela Merkel have renewed the Franco-German friendship pact and taken an important and necessary step forward for Europe. But the United Kingdom should not have been left out.

The UK is an integral part of Europe; as the European Union’s second-largest economy, its GDP equals that of the 19 smallest EU member states combined. Its exodus thus would shake Europe to its core and destroy the European post-war order.

Moreover, it is worth remembering that in 1963, the Bundestag prefaced the Élysée Treaty with a preamble stipulating that Germany hoped to bring Britain into the European Economic Community; in 1973, that is precisely what happened. A similar overture to Britain would be no less appropriate today.

As it happens, the leaders of Germany’s three largest political parties, as well as business leaders and members of the public, recently published an open letter inviting the British people to stay in the EU. Given this, it is not inconceivable that the Bundestag could adopt a resolution along the same lines.

Now that British Prime Minister Theresa May’s negotiated exit treaty has been soundly defeated in the House of Commons, all options are on the table. The looming tragedy of Brexit could still be averted at the last minute.

Lest we forget, a British withdrawal would endanger the EU’s fundamental position of openness to the world, particularly with respect to trade, from which everyone, not least Germany, has profited. It would also introduce a new security risk, as Europe would lose the unconditional protection of one of its two nuclear powers just when US President Donald Trump is undermining the cohesion of NATO.

For its part, the UK would lose either its national integrity or the framework for ensuring peace in Northern Ireland. There is no way around it: Brexit requires that Northern Ireland adopt a new border, either with the Republic of Ireland or with Great Britain. A border between Northern Ireland and the Republic would likely propel the Irish Republican Army back into action, threatening renewed civil conflict. But a border between Northern Ireland and Great Britain would augur the breakup of the UK, especially if Scotland renewed its own push for independence.

May’s exit treaty represents a second option, because it includes a “backstop” in the event that negotiations over the future EU-UK relationship fail. Pending a resolution, Northern Ireland would remain closely attached to the EU, and Great Britain would retain only its membership in the EU customs union. But this would mean that goods traveling from Northern Ireland to Great Britain – that is, within the national territory of the UK – would be subject to new checks. It is little wonder that a majority of British MPs rejected a deal that would allow for such an outcome.

Meanwhile, many EU politicians have been trying to figure out what it would take to convince Parliament to ratify May’s exit treaty after all. I find this annoying. Why focus on casting Britain out of the EU when you could be coming up with an offer to keep it in? Obviously, the latter scenario would be much better for Europe itself.

For example, the EU could offer a deal that picks up where it left off with former British Prime Minister David Cameron, before he called the Brexit referendum. Cameron’s main demand back in 2015-2016 was to reduce the appeal of intra-EU migration to the better-developed European welfare states. He had a point. If people come to a country to earn higher wages, the pie available for distribution gets bigger; but if they come for the social benefits, the pie gets smaller.

Given this, why not have a system in which host countries and countries of origin share the costs of social benefits for migrants? Host countries could assume the responsibility for administering benefits such as unemployment insurance, sick pay, and pensions. And countries of origin could continue to provide benefits not related to the employment relationship, such as allowances for children staying at home and services for migrants who are too old or sick to work when they arrive.

Such a change would create a win-win situation for the EU, because it would reduce the destructive appeal of welfare magnetism and give the British grounds to reconsider their exit decision with their heads held high.

Which is more important: insisting on the principle that host-countries pay for the provision of all social benefits, or maintaining the UK’s membership of the EU? For anyone who is genuinely committed to the European project, the answer should be obvious.

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