The United Kingdom (UK)’s departure from the European Union (EU) represents a unique instance of disintegration with far-reaching implications for differentiation within the EU, and between the EU and third countries, not least since the UK was a member state with considerable economic and political weight. It has been characterised as “a living experiment in the transition from internal to external differentiation in the EU” (Laffan 2021).

Long before Brexit, differentiation was established as a vital feature of European integration and has been in academic discussion especially since the early 1990s (Gänzle et al. 2020), and reliance on differentiated forms of integration has been in the forefront in the last decades as a consequence of the enlargement process (Martill 2021). The examples of Schengen and the Eurozone prove that differentiated integration is “an established practice” (Wessels and Gerards 2018) that also played an important role in the Brexit vote as it was “one of the major issues of the UK renegotiation process” (Chopin and Lequesne 2016, 544). Brexit has had a significant impact on the EU’s role at the centre of a European ecosystem of differentiated modes of integration. Broadly speaking, in pre-Brexit Europe, countries related to European integration as: a third country; a (potential) candidate country; or an EU member state. These modes vary in the level of integration, possibilities for influence and permanency.

The relationship between Brexit and differentiation, defined as “any modality of integration or cooperation that allows states (members and non-members) and sub-state entities to work together in non-homogeneous, flexible ways”,¹ is contested and complex (Burk and Leuffen 2019). While Brexit fuelled scholarly debates about new forms of EU-third country collaboration (Martill 2021) acknowledging that none of the existing models of external differentiated relations suited the new EU-UK relationship, it also triggered fears of a domino effect that might unravel the European project. The debate of whether Brexit will lead to a higher or lower level of European differentiation is still ongoing (Martill 2021), despite the dangers that can occur from opting out. On the one hand, various scholars maintain that Brexit will be the driving force of a more differentiated Europe (Burk and Leuffen 2019), whereas others claim that Brexit will not affect the status quo of differentiation since the UK’s exit removed a reluctant member with a considerable number of opt-outs (Bickerton 2019). While Brexit is an ongoing process, it cannot be fully assessed whether it will lead to new forms of external differentiation or to faster and more coherent internal integration in certain policy areas (Lord 2015).

However, it is important to underline that this new political reality cautioned the EU against setting the precedent of a preferential partnership. These considerations played a role in informing the EU and UK’s red lines, which subsequently defined the withdrawal process as well as the future partnership negotiations, leading to the conclusion of the Trade and Cooperation Agreement (TCA). Whilst there was palpable relief about having pulled back from the brink of a no-deal cliff edge in December 2020 (Wachowiak and Zuleeg 2021a), the new relationship is far more distant and conflictual than originally intended. This poses questions about whether the TCA will be an effective, sustainable and legitimate model to govern EU-UK relations, and what its implications are for both the internal and external differentiation.

In this article, the Brexit process and the nature of the deal reached between the EU and the UK will be described in order to bring greater clarity regarding the unique features of this unprecedented European disintegration and the consequences for future cooperation and/or conflict. The implications of Brexit for differentiated integration will also be examined, contrasting the pre-Brexit modes of interaction of the EU with third countries with the new modes emerging in the wake of Brexit.

Three conceptual characteristics of the Brexit differentiation process are discussed – effectiveness, sustainability and legitimacy – as they provide a consistent link to the analytical question of what sets the EU-UK relationship apart from previous external differentiation arrangements. Concluding, the EU-UK relationship differs from ‘traditional’ differentiated integration as it concerns the emergence of differentiated disintegration, “a process of unequal reduction in the level, scope, or membership of the EU” resulting in downward divergence costs rather than integration or convergence benefits (Schimmelfennig 2018, 1156).

This contribution is based on a qualitative approach, incorporating contextual understanding from being closely involved in the Brexit process,² and including interviews, observations and critical analysis of its impact on differentiation. Specifically for this article, five structured interviews³ were conducted with analysts and officials in order to provide an analytical framework of the post-Brexit state of differentiation as well as the implications that arose. They provided insightful examples and inputs regarding the sustainability of the TCA and whether it can lead to closer cooperation or wider divergence.

The article is structured as follows: the first section analyses the Brexit process and the unique features of the deal that was reached between the EU and the UK. It is divided into two sub-sections, examining effectiveness, and sustainability and legitimacy of the TCA respectively; this lays the foundations of this article’s argumentation regarding the implications of Brexit on differentiation. It also creates a solid basis to answer the questions of what sets the EU-UK relationship apart from the previous forms of differentiation and how this affects the notion of differentiation in Europe. Following the background and features of the Brexit process, the next section delves into the implications of Brexit for differentiation, focusing on the changes that Brexit has implied for external differentiation and the potential future consequences for both external and internal differentiation. In light of these findings, the last section draws conclusions and provides avenues for further research.

The Brexit process: measuring the effectiveness-sustainability-legitimacy of the TCA

The EU and the UK concluded negotiations on the TCA on Christmas Eve of 2020 (Wachowiak and Zuleeg 2021a). It was provisionally applied before formally entering into force on 1 May 2021. The Agreement is thin and precarious in nature and was significantly shaped by the structural and procedural features of the UK’s withdrawal and future relationship negotiations (Wachowiak and Zuleeg 2021b). Structurally, there was a clear power asymmetry between the two sides in terms of market size, interdependency and experience in negotiating trade deals; this implied an uneven distribution of costs and benefits, as well as limited leverage for the UK, which also lacked negotiating experience compared to the EU (Wachowiak and Zuleeg 2021a). In addition, the switch from member to non-member considerably weakened the UK’s institutional bargaining power. During its membership, the UK often defended the status quo against further integration, giving it power particularly in areas that require unanimity. In the Brexit negotiations, the UK lost “the power that EU rules of treaty change confer upon status quo defenders” (Schimmelfennig 2018, 1160), with the EU27 now defending the status quo of what it meant to be a member, and the UK seeking revision and privileged access (Beaumont 2019). Furthermore, the principal-agent structure on the EU side worked to its advantage. The decision to delegate the conduct of the negotiations to the European Commission, a supranational institution with an interest in defending the status quo against disintegrative forces, reassured smaller member states that bilateralism would be kept at bay and collective interests put front and centre. By maintaining these institutional structures throughout the entire process, as well Michel Barnier as the sole chief negotiator, the EU’s position demonstrated focus and coherence, enabling it to shape the process to its advantage (Schimmelfennig 2018).

The UK, on the other side, struggled with the referendum’s domestic repercussions, as reflected in changing UK chief negotiators and prime ministers, as well as divisions between and within the political parties. The lack of focus and strategy on the UK side is exemplified by the first round of withdrawal negotiations in June 2017, which – as in the words of Raoul Ruparel, Special Advisor to the Secretary of State for the Department for Exiting the EU from October 2016 to July 2018 and Special Advisor to the Prime Minister on Europe from August 2018 to July 2019 – the UK entered without “a particularly clear policy on anything” and realising the “whole debate about sequencing had been settled while the [UK general] election was going on without DD [David Davis, UK Brexit Secretary at the time] really being involved in it” (Ruparel 2020, 13). Procedurally, the EU’s decision to take a sequenced approach, that is, to negotiate the withdrawal first and the future partnership second, significantly increased the EU’s bargaining power in both phases. It enabled the EU to settle some of its fundamental goals early on, particularly on citizens’ rights and Northern Ireland, as a pre-condition to move to the next stage. It also diminished UK leverage by dealing with the financial settlement separately from the future relationship (Patel 2018).

While similar structural and procedural factors also play into most EU-third country negotiations,⁴ there are some features that are unique to Brexit: the unusually short negotiating period, the prevalence of politics over economics, the no-deal threat, negotiating down rather than up after 47 years of common rules and the EU’s united response when faced with an existential threat. The short negotiating period made it more difficult to build rapport between negotiating teams and left no time for businesses and/or other actors to familiarise with the new rules. This was made more acute by the Covid-19 pandemic, which took political bandwidth away from Brexit, with many arguing that it should have resulted in an extension of the transition period (Lock et al. 2020). In addition to both sides’ firm red lines,⁵ the immense time pressure limited the ambition of the deal from the outset.

That is not to say that the relationship’s depth and breadth were predetermined. The evolution of the UK’s Brexit policy as outlined in Prime Minister Theresa May’s speeches – Lancaster, Florence and Mansion House (Schimmelfennig 2018) – culminated in the Chequers plan in July 2018, proposing a common rulebook for goods: her vision of the future relationship included “ongoing harmonisation with EU rules on goods” (HM Government 2018, 1), which was far away from her successor Boris Johnson’s red lines. Equally, under May’s Northern Ireland “backstop”, the entire UK would have been part of a customs union with the EU. Her successor Boris Johnson instead rejected the backstop as “inconsistent with the UK’s desired final destination” (Johnson 2019, 2). As the price for a more distant relationship, Johnson agreed to an effective trade border down the Irish Sea. He also set the UK on the trajectory for a thin and precarious deal, by rejecting the previously signed vision in the Political Declaration⁶ threatening to renege on the Withdrawal Agreement⁷ and giving precedence to sovereignty (that is, no alignment with EU rules) over market access (Ibid.). On the UK side, Boris Johnson utilised this to create a “this deal or no-deal” narrative that allowed him to push through a last-minute deal with little domestic scrutiny (Brunner 2019). On the EU side, Number 10’s flirtation with no-deal and its apparent willingness to renege on what it had agreed to in the Withdrawal Agreement caused long-term damage to trust that outlasts the immediate negotiations. It thus introduced an element of precariousness, which led to the EU’s insistence on a robust governance framework, and made external differentiation introduced by the Brexit process different from previous models.

Trading partners usually negotiate up rather than down; that is, they aim for closer ties to everyone’s benefit. With Brexit, this was turned upside down: the EU and the UK negotiated a more distanced settlement after having been bound by common rights and obligations, the EU acquis, for 47 years. Hence, neither the EU nor the UK gained economically compared to the status quo of British EU membership. The EU saw the relationship as “scalable”,⁸ with the possibility of decreasing or increasing access (and consequently economic cost) proportionate to the level of obligations. However, the UK government decided to prioritise political considerations over economic concerns, driven by ideological views, as well as considerations of internal party management and retention of power. As a result, negotiators designed a more distant relationship to manage downward divergence over time. The EU side also showed remarkable unity throughout the entire process, which complemented its structural and procedural bargaining power (Greubel 2019). The Commission’s EU-UK task force, led by Michel Barnier, pursued a strategy based on transparency and continuous consultation with the member states and EU institutions (Gostyńska-Jakubowska and von Ondarza 2020; Greubel 2019). This enabled Barnier to effectively defend the EU’s collective interests, while ensuring political buy-in from all relevant EU actors.

Faced with the prospect of an economic heavyweight on its doorstep, the EU aimed to safeguard its material interests, including settling the financial obligations undertaken during the UK’s membership, which was resolved with the Withdrawal Agreement in the first phase of negotiation (Schimmelfennig 2018). The EU was also seeking an agreement on fisheries upholding the pre-Brexit status quo of reciprocal access conditions and quota shares, as well as robust commitments to prevent unfair competitive advantages for the UK. The TCA fulfils the overall negotiating objectives set by the European Council (2018). It secures a single overarching framework, an agreement on fisheries (albeit unable to satisfy maximalist demands) and robust commitments that ensure a level playing field (LPF). The latter are particularly significant and could become a template for future trade deals.⁹

Beyond the Union’s material interests, the TCA also broadly secures its strategic objectives. The EU had three main goals in the wider process of the UK’s exit: peace and stability in Ireland/Northern Ireland, the integrity of the Single Market and good relations with the UK.¹⁰ Each of these objectives alludes to something bigger. First, there is the importance of solidarity, which is the idea that when one member state’s – in this case, Ireland’s – fundamental interests are at stake, these interests become a collective priority, which is especially significant for the smaller member states. Second, there has to be a difference between being in or out, with the integrity of the Single Market and the indivisibility of the four freedoms assuming an economic as well as political significance (Schimmelfennig 2018). Lastly, the objective of a good relationship explicitly expressed in “the Union’s determination to have as close as possible a partnership with the UK in the future” (European Council 2018) acknowledges that – regardless of Brexit – there will be a relationship between the EU and UK as next-door neighbours that share values and interests across borders.

While these objectives have been broadly met, the TCA establishes a relationship that is more distant and less comprehensive than the Union envisioned (Wachowiak and Zuleeg 2021a). This is the case compared to other forms of partnership, particularly participation in the Single Market, but more significantly also in relation to the ambitions set out by the Political Declaration. In order to measure the effectiveness of a policy, it is vital to take a causal approach, that is, “developing a counterfactual scenario on how a policy area would have evolved in the absence of the differentiated institution but with all other factors equal” (Lavenex and Križić 2019, 10). Therefore, effectiveness can be measured based on the output, outcome and impact of the TCA (Gutner and Thompson 2010). The questions that arise and will be addressed in the next sub-sections are how effective the TCA is as a model of differentiation and whether it can sustain a stable relation between the EU and the UK.

Implications for EU differentiation

The reality of Brexit acts as a negative incentive, suggesting a more hard-line approach towards non-EU members. The four-and-a-half-years debate about what it means to be ‘in or out’ consolidated the principles underpinning EU-third country relations. The EU’s unified core message to EU member states and third countries is that membership matters, and divergence comes at a cost. Relations need to be governed by an overarching institutional framework, with linkages between specific areas of cooperation. As seen in the example of EFTA countries, the relationship that has been built is highly dynamic. Similar to the EU-EFTA relationship,²⁴ it might imply a situation as one between policy-maker and policy-taker (Vahl and Grolimund 2006). Pre-Brexit, these models created a permanent relationship below the threshold of membership. They are dynamic with the intention of maintaining alignment, not of managing downward divergence over time, and they fully respected the four freedoms of the Single Market (EEA 2013, 1). In addition, there is a correlation between geographic proximity, size and interdependence and the balance of rights and obligations that can be struck.²⁵ While these principles also applied before Brexit, they are now irrefutable in the EU’s approach to its neighbours if they are to be closely integrated in the Single Market.

Free movement of people remains a contentious issue in the EU-UK relationship. A free movement agreement between the EU and the UK is unrealistic for the moment, “as it was one of the central elements of the Brexit campaign, which presented immigration to the UK as ‘out of control’” (Acosta 2021, 4). This implies that there are inevitable consequences for the UK’s integration in the Single Market. The differentiated approach to free movement of people can be illustrated by contrasting Switzerland and Ukraine. The Agreement on the Free Movement of Persons (AFMP) between Switzerland and the EU places Swiss nationals on a similar position with EU citizens regarding the rights to enter, work and remain in a member state (Ibid.). In the case of the agreement between the EU-Ukraine, the latter enjoys the elimination of tariffs and the “internal market treatment” (Oppenheim 2018), but there are still restrictions on some domains such as freedom of movement. In case of further integration, derogation periods for free movement of people would most probably be sought by the EU, but if a fear of in-migration to the EU is predominant, it could act as a barrier to further integration into the Single Market.

Regarding the EU relations with (potential) candidate countries, they are characterised by their long-term wish to become part of the club. Upon accession, they are expected to be fully aligned with the EU acquis with, at most, transitional arrangements for certain areas, provided full compliance over time can be ensured (European Commission 2021a). Given the destination of ever-closer partnership, the EU offers trade concessions, economic and financial assistance, and assistance for reconstruction, development and stabilisation, but there is no room for significant divergence; rather it is intended to be a process of gradually deepening alignment. The EU also has distinct externally differentiated relations with the 16 countries of the European Neighbourhood Policy (ENP), which creates a framework for third countries that are not considered potential candidate countries for the foreseeable future. These relations can go beyond traditional free trade agreements, for example those with Ukraine, Georgia and Moldova, which require alignment with a large proportion of the EU acquis, but are not as comprehensive as relations with EFTA countries (Gstöhl 2015).

In the post-Brexit period, however, it seems that the above-described scenario has changed with the introduction of differentiated disintegration in Europe (Gänzle et al. 2020), which has created a new mode, that is, a former member state with no intention of future membership. Therefore, the question that is raised is, what are the implications of Brexit for existing differentiation within the EU, and between the EU and third countries? The UK becoming a third country – albeit with a unique type of relationship – reinforces the notion of ‘perma-outs’, with implications for the relationship with these countries, while the TCA’s in-built dynamism explicitly allows for divergence over time (but at a cost). More concretely, the new EU-UK partnership does not follow the same logic as the EU’s existing patterns of European external relations (Lavenex 2011). The TCA establishes a distant relationship with limited economic integration between immediate neighbours and, given the primacy of sovereignty concerns for the UK, it does not even cover all areas of EU-UK economic relations, let alone cooperation in other spheres (Justice and Home Affairs, foreign policy). The sovereignty doctrine also hints at the future direction of travel as, from this myopic perspective, there is no real ‘punishment’ associated with having no voice in the EU. However, while UK sovereignty concerns trump both geography and functionality, the UK does not escape its geography as proximity, size and interconnectedness will still play an important role in determining the scope and nature of UK adherence to EU conditions.

A concrete example of Brexit’s implications for existing forms of differentiation is the new Framework Agreement that the EU and Switzerland have tried to conclude since 2014, intending to address the lack of an overarching framework governing the Swiss participation in the Single Market. The Swiss decision on 26 May 2021 not to sign the agreement was met with regret by the EU side, but also with a firm warning that the bilateral relationship will grow increasingly outdated (European Commission 2021b). For example, the EU-Switzerland Mutual Recognition Agreement for Medical Devices ceased to apply on the same day (26 May). The EU has been clear that an update cannot be considered absent a Framework Agreement (European Commission 2021c). However, the impact of Brexit on the EU’s relations with (potential) candidate countries is less obvious and/or it is too early to tell. Possibly, it may set the bar to get in even higher, as well as acting as an incentive for the EU to offer less beforehand in terms of access or temporary derogations. At the same time, it might well be possible that, if and only if, a candidate country is willing to fulfil the conditions, the EU could respond by making it clear that fast and straightforward accession is feasible and desirable. In a post-Brexit world, the EU is likely to draw a clearer distinction between being in or out, aiming to prevent an accidental model of associate membership giving privileged access without the corresponding obligations. But if it is very clear that a country will eventually join, this could create an incentive to move faster, as an enlarged EU would also demonstrate that it is an attractive and relevant actor with critical mass in Europe as well as globally.

After Brexit, the EU is indeed likely to place even greater importance on demonstrating that membership matters, implying that the scope for differentiation is limited. But it also implies that the EU acts as a relevant and effective actor in addressing cross-border problems. Pre-Brexit, four member states – the UK, Ireland, Denmark and Poland – held opt-outs. Nonetheless, given its size, the UK’s opt-outs carried particular weight, for example, as the largest non-Euro country. The UK was also the member with the greatest proportion of opt-outs, making the EU more homogenous after its exit (Martill 2021, 9). Arguably, allowing for British opt-outs enabled the EU to integrate further but this came at a cost, as the possibility of opting out increasingly dominated the UK’s thinking. British governments spent more and more intellectual and institutional capital on exploring where and how to disengage, thereby creating an increasingly negative vision of their place in the EU.²⁶ This psychological effect may also play out in other Eurosceptical governments (Webber 2019), implying that granting opt-outs could lead to further distancing over time. It would however be too simplistic to conclude from Brexit that opt-outs either pave the way for disintegration or do not go far enough in accommodating individual preferences. It is crucial to understand that the UK has always been a reluctant member state, giving its membership a sui generis character.²⁷

Brexit reinforces the view that “you have to be fully in to avail from the opt-outs”.²⁸ It is likely that flexibility remains possible, but unless it is designed and policed carefully, it could well lead to a similar distancing as we have seen with the UK. Crucially, if the EU grants opt-outs from its core principles, including the role of the Court, the Single Market and the indivisibility of the four freedoms, it would undermine the foundations of European integration. Another area where there can be no exemptions is the EU’s founding values as laid out in Article 2 of the Treaty on European Union.²⁹ In some areas, such as migration and the rule of law, the EU faces the problem of informal (or unilateral) opt-outs with some member states refusing to abide by. This form of internal divergence poses a difficult challenge and cannot be addressed through traditional routes of differentiated integration. It also shows that ex-ante conditionality does not guarantee ex-post compliance, as it involves Central and Eastern European countries.

With a view to greater cooperation, the UK’s exit has had an enabling effect, including the unified response throughout the Brexit process (Schimmelfennig 2018). Rather than incentivising differentiated cooperation, in some policy fields, for example security and defence, integration has been advanced in response to Brexit. The decision on the Recovery Fund and budget would most likely not have been possible with the UK at the table.³⁰ But the enabling effect of Brexit should not be overstated (Webber 2019). Overall, Brexit does not remove internal obstacles to deeper integration. The UK certainly was not the only reluctant force, and some medium-sized and smaller member states used to rely on British opposition. Nonetheless, the member states that traditionally would have sided with the UK can now be isolated more easily. To be sure, some mid-sized members might attempt to take on a leadership role on traditional UK causes: for example, the Dutch government emerged as the leader of a ‘frugal’ coalition with Finland, Sweden and Denmark during the negotiations on the budget and Recovery Fund. However, so far this approach has not been effective.

Conclusion

The foregoing analysis revealed that the TCA is a sui generis agreement suited to the specific needs of the EU-UK relationship, particularly their geographic proximity, size and interdependence. Resulting from both sides’ red lines, the deal is the basis for a thin and precarious relationship. The first lesson learned from the Brexit process is its fundamental difference from any existing model of differentiated integration, given its highly politicised character and focus on disintegration and managing downward divergence (Schimmelfennig 2018). Nonetheless, the EU-UK agreement has wider implications for the EU itself and for its externally differentiated relations.

In the Brexit process, the EU proved its ability to keep a united front (Patel 2018), and is continuing some of the structures of inter-institutional and member state governance, such as the Service for the EU-UK Agreements³¹ and the Brexit Working Party, to ensure coordination and exchange of information with the EU27. Member states have already started to speak with the UK on bilateral issues that matter to them, for example, Spain on social security cooperation.³² While this can be seen as legitimate and normal, there have also been concerns about potentially divisive bilateralism and EU cohesion. Without inter-institutional and member state coordination, differentiated relations could cause internal divisions. What also needs to be further investigated is whether/how the lessons from the Barnier method can be further applied to other negotiations and whether/how the use of transparency as a tool to build trust, as well as strategic coordination of and consultation with the member states and EU institutions, enhances collective discipline (Greubel 2019).

Another conclusion drawn with respect to the TCA is that a more distant relationship has been established, raising doubts regarding the TCA’s effectiveness, sustainability and legitimacy, with political trajectories pointing to growing estrangement and divergence over time. Based on our analysis, concluding a deal does not mean easing tensions; even though the EU and the UK share the same interests in some domains, their perceptions on joint governance structures differ widely, creating a ‘partnership quagmire’ that can have implications for the capacity of the EU and the UK to effectively pursue joint global goals. An area of future investigation is whether avenues such as bilateral agreements can, for example, facilitate cross-border mobility between the EU-UK (Acosta 2021), even in the context of a diverging and conflictual relationship.

In order for the TCA to be sustainable, it must combine effectiveness and legitimacy. However, the loss of trust over the four years of negotiations has affected all levels of the relationship (Wachowiak and Zuleeg 2021b), leading to an unstable Agreement. Regarding legitimacy and sustainability, a question arises about the different treatment of the Northern Ireland Protocol, and its separate but linked nature as part of the Withdrawal Agreement. Since Brexit is an ongoing process, the lack of consensus in the Northern Irish community³³ can affect the legitimacy and the future of EU-UK relations.

While differentiation has become an established feature of the EU, Brexit shows that divergence comes at a cost, and membership matters. The emergence of a new type of external differentiation has created a distant relationship between the EU-UK with limited economic integration that reinforces ‘perma-outs’. The impact of Brexit on the relationship with, for example, the EFTA countries is an interesting area of future research. In future, the EU is likely to seek to re-emphasise core principles of EU membership, but the perception of Brexit through time is of high importance for the stability of European integration. The scenario of the UK escaping a political reckoning could appeal to other Eurosceptic leaders, leading to a domino effect (Wachowiak and Zuleeg 2021b).

Overall, the Brexit process has proven that exiting the EU is no longer a theoretical treaty provision, but a living possibility,³⁴ reaffirming that EU membership is voluntary. The integration process is highly politicised, and “differentiated integration is a deeply political process […] with winners and losers” (Fossum 2015). The EU-UK relationship is closer to divergence than to differentiated integration and impacts internally and externally the future of differentiated integration. Therefore, evolving perceptions of Brexit and the sustainability, legitimacy and effectiveness of the TCA will impact not only on the future EU-UK relationship but also on the EU’s relationship with other third countries and, indeed, on the future of differentiated integration within the Union itself.