We’ve only just begun: UK must roll up its sleeves for next round
THE Joint Report issued by UK and EU negotiators is essentially a list of what has been agreed in the first phase of the two-year Brexit negotiations.
As the EU demanded, it addresses three housekeeping issues – the Brexit bill, citizens’ rights and the Northern Ireland question – and thus opens to the door to the next stage.
Even though it took 18 months, officials on both sides warn that this was the easy part and that only now does tough talking begin that will shape the future of our relationship with the EU.
What emerges from that discussion remains highly fluid and depends upon the kind of Brexit – hard and nonaligned, or soft and convergent – that the UK Government decides to try to negotiate. Where Mrs May places Britain on that spectrum will define the outcome in three key areas:
Freedom of movement
The right for the UK to control immigration was at the heart of the EU referendum, following David Cameron’s failure to achieve a migration brake in his 2016 attempt to renegotiate Britain’s membership of the EU.
Mrs May has made clear that the UK is determined to “take back control” of immigration policy. The EU has recognised this, but warns the UK that rejecting one of its four core “freedoms” will have consequences for the UK’S future trading relationship.
It is clear that the EU will require that the UK retains free movement not only up to Brexit Day in March 2019, but for the duration of the so-called transition or implementation period.
The European Commission set out this view yesterday in a formal response to the Joint Report. It made clear that the specified date when the Withdrawal Agreement comes into force is, in fact, the end of the transition period and that citizens would need to be “fully entitled to their rights to free movement” during that period. The UK appears to have accepted that a transition period will require accepting free movement. So if that transition drags on, as many in the EU believe it could, freedom of movement will, too.
Amber Rudd, the Home Secretary, has indicated that the UK would like to require EU nationals coming to the UK during the transition to register. This might be viewed as discriminatory against EU citizens given that, unlike in some EU countries, home citizens are not required to register.
If the UK were to win that argument, Mrs May could say this makes good on her pledge to end freedom of movement in March 2019, but in practice officials concede that flows of EU nationals to the UK, which have been slowing since Brexit, will not change. Red line: Living up to the spirit, not the letter, of her July 2017 pledge that “free movement will end in March 2019”.
Transition
Chief among Mrs May’s reasons for making so many concessions was to open talks on a transition deal, or an implementation period, as she continues to insist on calling it.
The EU says any transition period should be strictly limited and the British side agrees. Mrs May has not fixed the period of time, but has said a transi- tion period will be in the region of two years, and is vital to end uncertainty and reduce the number of Britishbased businesses relocating to the EU.
The EU is clear that during any transition, the UK will have to accept the jurisdiction of the European Court of Justice, apply all new EU rules and pay into the EU, but lose its seat at the table on all EU decision-making bodies.
Mrs May has already conceded the UK will pay up and remain under the EU legal umbrella, but she may push for the UK to begin to leave parts of the EU umbrella, something the EU will resist. The problem for Mrs May is that the more she seeks in any transition deal, the longer it will take and consequently the less valuable it will be in reducing business uncertainty. Some nations, such as France, may even drag their feet on the transition deal in order to force more businesses to move.
Mrs May will also push for the UK to be free to negotiate, and possible even sign, trade deals with third party countries during a transition period. Here, she may have more success.
EU officials chose their words carefully yesterday, noting that “trade negotiations can only be finalised and negotiated once the UK is a third country” but explicitly not saying they would try to stop Liam Fox making deals during a transition.
The key is that such deals could not legally come into force until the UK leaves the EU because as part of EU membership the power to negotiate trade deals resides in Brussels. The UK could therefore negotiate and sign, but not implement, deals.
Red line: Keeping the transition to not more than two years and turning it into an implementation phase, not years of de facto EU membership.
Trade
The second phase of the Article 50 divorce deal is not the start of a trade negotiation. This can only properly begin once the UK has left the EU. However, Article 50 does say that the divorce deal must take account of the framework of a departing member’s future relationship with the EU. Defining the scope of what this means could be the flashpoint of the next phase of talks.
Mrs May has repeatedly made clear that she wants the full outline of a trade deal to be agreed in order to turn the transition phase into an implementation phase that sees the UK’S future trade and security relationship take shape rapidly after March 2019.
The EU takes a different view. Mr Tusk in his suggested guidelines to EU capitals spoke only of holding “preliminary and preparatory” discussions on the future relationship. Which side wins this tussle will define how long the transition period lasts. If the EU gets its way and forces the UK to negotiate a classic Free Trade Agreement from scratch it could easily take five to eight years, according to experts.
The EU has said the answer will in part depend on whether Mrs May seeks a high alignment model – in which the UK agrees to stay very close to EU rules and regulations – or opts to embrace an independent trade policy for the UK.
Noting the UK’S determination to leave the EU single market and customs union, Mr Tusk warned that the EU will calibrate its approach, reducing UK access in proportion to its divergence from EU rules and regulations.
If the UK diverges, the EU will offer only a basic trade deal similar to Canada’s, with minimal access for services on which the UK economy depends.
Mrs May’s challenge will be to convince the EU to be flexible while simultaneously retaining the freedom to cut trade deals abroad. This will not be easy for, as the EU never tires of repeating, it is determined there will be “no cherry-picking” for Britain.
Red line: Keeping to her red lines on immigration and the European Court of Justice while achieving the “deep and special partnership” with the EU that she promised in her Florence speech in September.
‘The second phase of the Article 50 divorce deal is not the start of a trade negotiation’