Pieter Cleppe, head of Open Europe Brussels office:
No one will win, if Brexit divorce goes very nasty
The best kind of deal is the one that allows the trade to be as open as possible, and it will be very problematic if we see Customs again
Maria Koleva, Brussels
17 February, 2017
Close-up: Pieter Cleppe is the head of the Brussels office of Open Europe, an independent policy think-tank providing an intellectual framework for thinking about Britain’s new relationship with the European Union and its role in the world. He is a frequent contributor to the debates on the EU reform, the refugee crisis and the eurocrisis. A trained lawyer, Pieter Cleppe previously practiced law in Belgium, and has worked as cabinet adviser to the Belgian State Secretary for Administrative Reform. Prior to this he served as analyst at the Belgium’s Itinera Institute, which he helped to establish. He received his legal training at the Catholic University of Leuven, and also studied law and economics at the universities of Hamburg, Bologna and Vienna.- Mr Cleppe, why are many politicians in the EU feeling nervous about Mr Trump's stance towards Europe?- It is clear that Trump has a very different view on the EU than any other of his predecessors. I wouldn’t necessarily call it hostile to the EU, but he is certainly indifferent to it. He has given the impression that he really couldn’t care less if the EU collapsed. That’s of course a big change, given the fact how important the United States still are in any foreign policy and related issues in Europe.- Is it so bad to say ‘Europe first’ as some circles in Brussels stress?- I don’t think there is anything bad for countries putting their own interest first. First of all, it is what all of them do, regardless of what they say. Secondly, as long as they don’t harm the interest of other countries, it’s not a bad thing if they pursue their own interest. However, if you mean with ‘Europe first’ to concentrate power and money at the level of EU institutions, then I don’t think you are putting Europe’s interests first. I don’t think it would be good thing for Europe. I think the EU fundamentally is about scrapping trade barriers and this is on the one hand a very ambitious purpose but on the other hand it’s also limited. When the EU goes further than that and organises transfers, micromanages budget policy or migration policy, then typically things go wrong because Europe hasn’t got the democratic legitimacy for that. When Europe makes sure that companies as Ryanair or Wizz Air can operate across the continent so people can enjoy cheap flights, then Europe makes it much easier to trade across borders. That’s not only good for the European economy but it is also very good for peace in Europe because the more Europeans trade with each other the less likely they will go into conflict with each other. - As the time for triggering of article 50 is coming soon, are you expecting difficult Brexit negotiations and what would be the best Brexit deal?- I think the main difficulty is to do it all in such a short time span. To negotiate it within two years is very quick and this is the hardest part. The best kind of Brexit is one that allows trade between the UK and mainland Europe to remain as free as possible. It would be very problematic if we would see barriers popping up again. It would be very problematic if companies from mainland Europe would face obstacles to do business in Britain and if companies from Britain, for example from the City of London, would face hurdles to invest in mainland Europe. The City of London is the biggest financial centre of the world. It’s like a big pot of money lying next to the EU, so it would not be very intelligent to make it harder for that money to be invested on the continent, to build football stadiums, bridges, big projects, and to finance governments. So the best thing for financial stability, I think, is to make sure that financial trade in services and goods can continue with as little interruption as possible.- How can the UK keep its economy undamaged with the low-tax policy in the ‘Brexit package’ that the British PM recently presented?- Evidence shows that if you increase your taxes you will harm the economy. That is what we see in Greece with their very big tax hikes, for example. In Ireland, when politicians lowered the taxes, it was a good thing not only for the rich, but also for the poor who could then find better paid jobs. So if Britain would lower its taxation this would be very good for Britain but also for all countries that are trading with the UK. In that context, I find it a little unfortunate that the UK government has linked lowering taxation with the Brexit issue. The two things have nothing to do with each other. The UK government was already planning to lower corporate tax rates before the Brexit vote, and not only the UK, but also the US, the Netherlands, Belgium, and even Germany are planning to lower their corporate tax rate. So the reason why this is happening is international competition, the desire to attract companies to invest, and it has nothing to do with Brexit, so I think the UK government should not use this as an element in Brexit negotiations. Nevertheless, for the sake of the UK economy it’s a great idea to lower the UK corporate tax rate.- What will be at stake for Europe if the negotiations on Brexit are rather tough?- I think, if this turns into a nasty divorce, there will be no winners. Maybe Britain will lose more than the continent or maybe it will be the other way around, but there will be no winners. I don’t think politicians will win just because the other side loses more. For example, I don’t think Angela Merkel would get away with the fact that 50,000 jobs are lost in Germany’s car manufacturing industry because 100,000 jobs would be lost in Britain. Countries that would be hit worst from a nasty divorce are, on the one hand, the former British colonies – Ireland, Malta, Cyprus, and on the other - Northern Europe. The Benelux countries and Germany are exporting a lot of goods to the UK, it is a very important customer, and they have no interest whatsoever in this to go wrong. Of course, equally, Britain has no interest in this to go wrong as some financial service industries would lose access to mainland Europe to a certain extent and this would damage the City of London, jobs would be lost and as I already mentioned this will drive up the cost to invest in mainland Europe. The optimal deal would be to allow as much access to each other’s markets with as little impediments or conditions or requirements as possible. - Would it be as easy for the UK to negotiate free trade agreements with other countries?- On one hand, it is true that many countries would like to have trade deals with Britain, for example the United States, Australia, China. But on the other hand, in practice when you actually sit at the negotiating table, it will appear much harder because today markets everywhere are heavily regulated by governments so every time you want to scrap what is called non-tariff barriers, both sides need to figure out how all these regulatory requirements will apply and you will need all kinds of detailed agreements on this. It is not that simple and unfortunately it would take longer time than expected to conclude trade deals.- What will happen with the EU budget without Britain’s contribution?- I think the end of Britain’s contribution to the EU Budget is actually one of the great things as a result of Brexit because the EU budget is notoriously hugely wasteful. For years now, the European Court of Auditors has refused to sign off the EU budget, because it considers the rate of errors in spending unacceptably high. If you look into the kind of spending, the biggest spending post, in 2017, is still agriculture. More than €300 billion over 7 years goes to agriculture. Even worse, €270 billion actually goes to agricultural land owners – the Queen of England, major banks, some industrial companies, who just happen to own agricultural land. This enormous waste is hitting European taxpayer hard every day and it is wonderful thing that Britain will no longer contribute to it. I don’t say that the EU should not spend anything, as you probably need a bit of bureaucracy in Brussels to make sure national protectionist barriers are lifted but I don’t think we need the Common Agricultural Policy which is also very protectionist and has hurt the Third World so badly. I also don’t think we need all these regional subsidies which are vulnerable to corruption and have failed to contribute to convergence, according to most studies on the subject. - Does the UK need a strong Europe after parting with the Union?- I think Britain needs a stable EU which indeed is safe place to invest and which is helping countries to do business cross-border. If the EU is successful in it, it would be great thing for Britain. The UK has a great interest in a successful European Union.- In your view, can the ideas for a Union of different speeds save the EU construction or it would make it weaker?- This seems to be the new fashion. Mr Juncker and Mrs Merkel have spoken about the desirability of a two-speed and a multispeed Europe. We already have a multispeed Europe – some countries are in Schengen, some are not, some countries are in the euro, some are not. Some countries take part in certain cooperation frameworks, others don’t, and I think to have more flexibility is not bad at all. But what these people say is that as a result of Brexit, it would be more important than ever that the core EU Member States transfer more powers and money to the EU level, whereas countries that are not willing to do that should not take part in this. Of course, the second thing is great as countries will not be forced to transfer powers and money to Brussels while they don’t want to. But the first thing is a little bit na?ve as we see the sheer opposition to transfer more powers and money to Brussels in founding Member States like France, Germany and the Netherlands. You really wonder in what kind of world the policy makers who propose these things are living. If the EU wants to become more popular again, it has to just simply do what is popular and this is scrapping trade barriers: making sure people can use foreign airlines, that they can buy a car in another EU Member State. European citizens like this and every time there is anger towards the EU it’s not about the lack of trade barriers, it’s always about having to pay for financial transfers or having to respect the conditions linked to these transfers or undesired European mingling into very sensitive national policy areas such as budget policy or migration policy. Even in France, which is probably the most protectionist country in the EU, we don’t hear people saying “if only the government could reinstate the monopoly of Air France”. All these great minds who want to make the European Union popular again should actually look at making it easier to go by car cross-border, opening up the electricity markets further, telecom markets. Instead of regulating the price of roaming they should make sure that companies can actually be active on each other’s markets. The EU is not doing that enough, but instead it’s focusing its energy now on fairy tales like a European army. - Do you think the scheme of migrant mandatory quotas can become workable?- I think this proposal is dangerous and just a bad idea. First of all, it is not physically possible to stop people from moving within the passport-free Schengen zone. Countries already fail to spread refugees and migrants on their own territory. Logically, these people prefer to live in cities where they have their family and friends who can support them. You can not tell people where they have to live within the Schengen zone. Of course, you can try to lure them to stay somewhere through providing a bit of welfare but this has small influence. The people will go where the jobs are and that’s often in Germany and Britain. Apart from that, it’s also not an acceptable idea that unelected bureaucrats would decide which migrants should go to which country. It is already very controversial for elected national politicians to do this. Unelected officials in Brussels most certainly do not have any legitimacy for this. This decision to try to force countries to accept migrants has only boosted anti-EU sentiment in Eastern Europe, in countries that have no sufficient democratic tradition and which can easily fall back into the authoritarian sphere of influence of Russia. So, the European Commission was really irresponsible when it pushed for this, hoping to abuse the refugee crisis to gain more powers, while failing to realise that migration policy is very sensitive everywhere in the world and closely interlinked with national democracy.