EU, UK, V4
Clouds on the Horizon

With the possibility of a no-deal Brexit increasing, the V4 countries need to remain united

Balazs Szent-Ivanyi
7 sierpnia 2018

The British government is having a difficult time coming up with a realistic vision of post-Brexit relations with the EU. A long awaited government white paper, published in July and supposedly reflecting a consensus view within the cabinet, led to the resignation of two key ministers. Hard-line Brexiters in the governing Conservative Party argued that the proposal would lead to the UK becoming a vassal state of the EU. Pro-European politicians, on the other hand, did not think that the proposal went far enough in ensuring that the negative impacts of Brexit are minimized. The white paper also received a lukewarm response from the EU, and Brussels officials informally indicated that many of its proposals may be infeasible.

Far from solving the divisions within the Conservative Party, the white paper exacerbated them. Parliamentary and media battles following its publication made it clear that there will be no majority in Parliament for any Brexit deal the government negotiates. If Parliament does not approve the final deal, the UK is likely to crash out of the EU without any kind of agreement. Subsequently, a campaign for having a second referendum, run by grassroots groups and opposition politicians, has intensified.

The Central European angle

What does all this mean for the Visegrad countries? In order to answer this question, it makes sense to look at the interests the V4 have towards the EU-UK Brexit deal in general.

The two most crucial issues for the V4, the rights of their citizens living in the UK and the UK’s financial obligations, were settled in the first phase of the negotiations in December 2017. All four countries have expressed satisfaction with the outcome. Their citizens will be allowed to stay in the UK after Brexit, and Britain will meet its obligations for the EU’s current budgetary cycle, which ends in 2020.

The second phase of negotiations, currently ongoing, focuses on the future trade relationship between the UK and the EU. Access to the British market is of varying importance for the V4, but generally all consider the UK an important trading partner. The UK is the second most important export destination for goods for Poland after Germany, and is in the top five for Czechia and Slovakia, while only being the ninth for Hungary. Nevertheless, all V4 countries have a substantial trade surplus with the UK.

While the value of trade in services is lower than that of goods, the UK is the third most important partner for all V4 with the exception of Slovakia, for whom it does not figure in the top ten. Ensuring access to the British market for both goods and services is therefore important for the V4, and thus keeping the UK in the EU’s single market would be their preferred option.

The British government’s white paper proposes a customs union and regulatory alignment with the EU for merchandise trade, which would mean that little would change for the V4 in terms of market access.

Access for services however would become much more difficult, as the UK would keep more regulatory freedom in that area. Hungary would especially be hit hard, as around eight per cent of its service exports go to the UK, including large volumes of business services.

The EU has taken the position that the UK must choose from its existing models for relations with third countries. It has made it clear that no new special partnership will be developed for the UK which would involve “cherry-picking”: the obligations and rules of the single market come in one package, and the UK cannot pick the ones it sees beneficial. There are indications that Brussels sees elements of the new white paper as cherry-picking.

Standing tall

The V4 countries have thus far not broken away from the EU’s common position, and the EU has remained united. The British government however has made efforts to break this unity by engaging bilaterally with individual member states.

The UK government seemed especially optimistic about its chances in getting Poland and Hungary, both perceived as trouble makers within the EU, on its side. It even signed a bilateral defence cooperation treaty with Poland in December 2017 (France is the only other European country with which it has such an agreement).

So far, however, these efforts have proved unsuccessful: the V4 countries have clearly learnt from the first phase of negotiations that unity pays off. Also, perhaps with the negotiations on the EU’s post-2020 budgetary cycle in mind, Hungary and Poland may be unwilling to antagonize the EU and net contributor members like Germany further, for fear of losing structural funding. The UK has relatively little to offer in exchange for any change in position for these Central European countries.

The frosty side

The coming months, however, may test the EU’s unity even further. The possibility of a no-deal Brexit has intensified, and the UK government is seeing it as its last potential negotiating card, albeit a suicidal one.

The V4 countries have considerable interest in averting a no-deal Brexit. There are hints that the UK may not honour the agreement on citizen’s rights and financial contributions made in the first phase of negotiations in case of a no-deal Brexit.

V4 citizens would therefore lose their right to stay in the UK, and the EU’s current budget will also need to be renegotiated. While some of the V4 are experiencing skills shortages and politicians have stated that they would welcome their citizens back home, their mass exodus would cause huge upheaval and distress. Poland has been especially vocal on the topic and prioritized the rights of citizens more than the other V4 as around one million Poles live in the UK.

At this stage, it is unclear how far the V4 will go to protect their citizen’s rights, and they are not the only countries affected. The V4 however should continue to support the EU’s common negotiating position. Giving the UK a special deal may have disastrous consequences on the future of the EU as other states, members and non-members alike, may start referring to it as precedent.

The UK is in a weaker position as a no-deal Brexit will damage it much more than it will the EU. Perhaps being more flexible with timing and deadlines is the only area where the V4 and the EU could be more open.

The UK government clearly needs more time to sort out its position on Brexit. Perhaps new elections, or a second referendum are needed in order for the country to achieve a more consensual position. Either of these would be difficult with the current timeline, under which the UK’s EU membership will automatically cease on 29 March 2019.

The upside

Finally, there are reasons why the V4 should, from an economic perspective at least, be perhaps less concerned about the impact Brexit will have on them. Most of their trade with the UK happens in the framework of global value chains. After Brexit, these value chains will adapt, and some of their activities will be moved away from Britain to countries like Ireland, France, or even the V4 members. The overall volume of V4 exports therefore may remain unchanged; they will just go to countries other than the UK.

Balazs Szent-Ivanyi is a Senior Lecturer at the Aston Centre for Europe, Aston University, Birmingham, UK.

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