Brexit: no cash, no agreement

23/05/2017

You can tell that yesterday's General Affairs Council was really important. The rows of empty seats at the press conference (pictured) gave adequate testimony to that.

It was only, after all, a Council meeting that - according to the press release - adopted a decision authorising the opening of Brexit negotiations with the UK and formally nominated the Commission as EU negotiator. The Council also adopted the  negotiating directives for the first phase of the talks.

There were only two questions from reporters, one from The Times and the other from The Guardian, both addressed in English to Michel Barnier. Pointedly, he replied in French, telling the near-empty room that "no deal" was "not my option".

In an implied rebuke to David Davis, he suggested that those who were prepared to entertain a "no deal" option should explain what the consequences would be, then reminding the audience that it had been the UK's choice the leave the EU. His team was merely responding to the UK request to organise an orderly withdrawal.

Earlier, as indicated, the Council had adopted unanimously the decision authorising negotiations and the accompanying annex.

The latter has been formalised as the negotiating directives, running to 46 numbered paragraphs and 18 pages of text. Apparently unchanged from the original annex, these set out in detail the objectives of the withdrawal agreement and related matters, effectively drawing up the battle lines for the forthcoming talks.

Given less prominence than it merited when it was originally published as a result of the intervention by Mrs May accusing Brussels of trying to sabotage her election campaign, the republished document is also being glossed over. In a sign of things to come, the directives are being treated as "technical steps and therefore of little interest to the general readership.

This begins to mirror the experience of negotiators in the UK entry talks of 1970-1972, where journalists became "so thoroughly bored with the multiplicity of highly technical subjects" that they were "ready to be content with fairly superficial information".

Forty-five years later, the threshold of boredom is considerably lower, to the extent that only where personality politics briefly intrude is there any coverage at all. This even applies to the fabulous Financial Times, which considers itself the fount of all knowledge when it comes to things EU.

Thus, the actual importance of a document cannot be measured by the media coverage afforded to it, and never more so than with these negotiating directives. They will dominate the first few months of the talks and may well decide whether or not they are successful. They are of the highest importance imaginable.

Crucially, the directives open with the statement that "the main objective of the Agreement is to ensure an orderly withdrawal of the United Kingdom from the European Union and from the European Atomic Energy Community".

Tying this in with Barnier's statements, what seems to comes over is that the "colleagues" are making the best of a bad job. They have nothing to gain from Brexit – they didn't ask for it and they don't want it. Yet they are prepared to work with the UK towards the common objective of an "orderly withdrawal".

Here, we have to recognise that an important part of the art of negotiation is empathy – understanding the other side's point of view and appreciating what they need to take from the talks. And, whether we agree or not, the EU sees itself as the injured party and nurses something of a sense of grievance. On that basis, to set out as their primary objective the task of organising an orderly withdrawal could be cast as a considerable concession.

Obviously, the EU throughout these talks needs to protect its own position, but it is also suggesting that it is prepared to be flexible. The negotiating directives, the "colleagues" say, may be amended and supplemented as necessary throughout the negotiations, in particular to reflect the European Council guidelines as they evolve. On the face of it, that does not strike one as a dogmatic position, suggesting that there is scope for negotiation.  

Moving on to paragraph 8, we see the withdrawal date set "at the latest" on 30 March 2019 at 00:00 Brussels time, unless the European Council, in agreement with the United Kingdom, unanimously decides to extend this period. It then notes, as a matter of fact that: "The United Kingdom will become a third country from the withdrawal date".

This sets the parameters for the outcome and in that simple phrase, "a third country", the status of this country's position is clearly defined. Short of the UK completely changing its own position, and deciding to seek continued participation in the EEA, this is an unalterable status.

Elsewhere, we see many references to the UK simply joining with all the other non-EU countries in the world to become a third country, with the assertion that these other countries manage their own relations with the EU from that stance. The UK should, therefore, have no great difficulties.

What none of these critics acknowledge, though, is that the EU's other trading partners have had decades to establish and stabilise their arrangements with Brussels. The UK is tearing up the rule book and must start again from scratch. It starting point will be that it must carve out its own unique relationship, or trade barriers will proliferate and our economy will suffer.

However, the negotiating directives make it perfectly clear that, first, they must "settle the disentanglement of the United Kingdom from the Union and from all the rights and obligations the United Kingdom derives from commitments undertaken as a Member State".

This is the EU's main priority and appears to be not unreasonable. That, after all, it the purpose of the Brexit process and as much in the interests of the UK as the EU.

And that, of course, brings us to the crunch point. The present set of directives is intended only for the first phase of the negotiations – effectively the clear-up phase. In with this, the European Council has prioritised the issues with which we are now so familiar. Other matters not covered by this set of negotiating directives, such as services, will be part of subsequent sets of negotiating directives.

As to those priorities, details are given of the financial settlement. It will include issues resulting from the MFF (the RAL) as well as those related to the European Investment Bank (EIB), the European Development Fund (EDF) and the European Central Bank (ECB). This, says the directives, should ensure that both the Union and the United Kingdom respect the obligations resulting from the whole period of the United Kingdom membership in the Union.

Here, things start to tighten up. The settlement will not only cover obligations resulting from the MFFs, but "liabilities including pensions and contingent liabilities and any other obligations deriving from a basic act within the meaning of Article 54 of the Financial Regulation .

Now one starts to get the sense that the EU is in "kitchen sink" territory, seeking to extract every last penny (or cent) it can milk from the process. And such a sense is strengthened by the assertion "that the United Kingdom should fully cover the specific costs related to the withdrawal process such as the relocation of the agencies or other Union bodies".

The flexibility we have seen earlier has now dissipated, and the UK seems to be over a barrel. Paragraph 30 states – with no room for equivocation – that the Article 50 agreement should contain a calculation of all obligations that the UK has to honour in order to settle its financial obligations toward the Union budget, all institutions or bodies established by the Treaties, and other issues with a financial impact.