EU agrees to negotiate U.K. trade deal
British Prime Minister Theresa May on Friday secured an agreement from the European Union to move on from discussing the divorce terms to mapping out a plan for a future trade relationship.
This is the crucial bridging phase that businesses want in order to smooth the change in trading conditions from EU membership rules to whatever new rules apply after the British officially exit from the EU.
May’s team has set out plans to abide by the rules of the EU single market and customs union during what she calls the “implementation phase” after the U.K. legally leaves the EU on March 29, 2019. This period, May said, will be strictly time limited and is likely to last for about two years.
The EU is offering Britain a temporary extension of the existing membership rules, without a say over how those rules operate or over any new ones that are written. On the face of it, there isn’t much to argue about. May wants a status quo transition period — and that’s what the EU is offering.
One potential battle during the negotiations will be role of the European Court of Justice. May says she’ll accept that it should have a role in the initial months of any transition but thinks its jurisdiction should be phased out as soon as a new dispute resolution regime is ready to take over.
What counts more than the details for May is the speed of
reaching a deal. A transition period is designed in part to stop businesses quitting the U.K. in search of a more stable home elsewhere in Europe. Many large companies are making those decisions about whether to leave now, and if so, for where.
If the transition deal isn’t reached in the next two or three months, it will be too late to be much use, according to May’s team. The EU seems to understand this and has indicated that transition talks will be the focus of the dialogue from now until March, when the agenda will move on to the future freetrade agreement that May wants.
Time is tight on this, too. While European Council President Donald Tusk said some exploratory talks on the future trade terms can start before March, detailed negotiations won’t begin until a year before the U.K. leaves the EU.
May pushed back against that, saying that trade talks will start “straight away.” A U.K. government official said May’s team will hold the EU to its earlier promise that discussions on the future relationship would start once the divorce issues were settled — which they now are. There’s no question of backsliding, and the U.K. won’t let parts of the European Commission use these guidelines as an excuse to freeze up the process, the official said.
Tusk said a deal by March 2019 is “still realistic and of course dramatically difficult. For sure, the second phase will be more demanding, more challenging than the first phase.”
EU Commission President Jean-Claude Juncker said he
expected “real negotiations” on trade to start in March, giving negotiators a little more than eight months to wrap up the deal, since the EU legislature and the EU member states will need to get the necessary approvals in time for exit day.
Despite disbelief in Europe, May and her team still publicly insist they can complete all the trade negotiations before March 29, 2019, and have a new trading relationship ready to sign into law the moment the country leaves the bloc. David Davis, secretary of state for exiting the EU, has admitted that he’ll be in a weak position trying to negotiate a trade deal when the U.K. is already outside the bloc.