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Brexit: separation deferred

2017-12-13 07:28:01

It was in November, after the close of the sixth round of the negotiations, when I wrote that it was going to take a miracle for the [European] Council to give the go-ahead in December for the move to phase two.

With the Council scheduled to make its pronouncement this Friday, that miracle has yet to happen and, by all accounts, it isn't going to happen. Despite Mrs May's Friday "dawn patrol" and a promise that the talks could move on, the actual outcome looks to be something very different to that which we originally anticipated.

In the beginning, of course, there was phase one and for a long time there was only phase one. As this took on a definitive shape, it followed logically that there would be a phase two. Then, as time passed, this phase two started to take on magical properties which eventually represented the height of UK aspirations.

But there was nothing ever to say that phase two was the entire game. In fact, I do not ever recall any formal definition ever being published which told us what it was. To an extent, it was always something of a moveable feast, especially as it started off dealing only with the single issue of the framework of the relationship between the UK and the EU.

It was largely the UK, however, that fixed on the assumption that this second phase would include trade talks, despite an early warning from trade commissioner Cecilia Malmstrom that there could be no negotiations on trade until the UK had left the EU and become a "third country".

As time went on, and more and more people began to understand the difficulties involved, the idea of a transitional period started to take shape, emerging in Mrs May's Florence speech as a UK proposal and formally recognised by Michel Barnier in his closing statement to the European Parliament on 3 October 2017.

By 20 October, it had taken on a more concrete form in the European Council conclusions when decided to allow "internal preparatory discussions" on transitional arrangements as a special concession to the UK, after the first application for a move to phase two had failed.

By then, in the minds of British politicians and much of the UK media, phase two had become a composite, comprising three parts: the framework relationship, the transition arrangements and trade talks. And, to this day, Mrs May remains convinced that a trade deal will be finalised by the time we leave, hence her insistence on calling the transition the "implementation period".

Despite contra-indications from innumerable sources, Mrs May and her Brexit team have convinced themselves that trade is on the agenda for phase two, with a firm expectation that the three issues would be handled simultaneously. Then we got the Joint Report, which more or less reaffirmed that assumption.

However, the signs of reality re-asserting itself started creeping in with the draft guidelines for this now legendary phase. Brutally, it defined phase two only in terms of transition and the framework for the future relationship. Trade is hardly mentioned.  

And as if this minimalist approach is not bad enough (for the UK team), it now seems as if David Davis's weekend interventions on the binding nature (not) of the Joint Report has had a damaging effect on UK aspirations. At the general affairs council in Luxembourg yesterday, which was to approve the draft guidelines, we see reports that the ministers have toughened their stance.

Rather than allow talks on transition and the framework, they have decided to knock back the timing on the framework discussions, leaving it until March before any talks can begin. This was, in any event, hinted at in the Commission Communication, with only preparations being made for EU negotiating guidelines on the transitional arrangements, but it has now been firmed up.

The joint report, however, makes a number of references to the need for further discussions and agreements on the phase one issues. These have not been resolved. The notional phase two talks are being allowed on the basis of "sufficient progress" rather then full agreement on the phase one issues.

Taking the cue from Mrs May's report to Parliament on her interventions and the draft guidelines - there is still considerable ground to cover and a long way to go before the Irish border question can be resolved if at all with some tidying up to do on the citizens' rights and the financial settlement.

A substantial part of this next phase of the talks, therefore, is still going to be devoted to phase one issues and, of the three areas of discussion pencilled-in (by the UK) for phase two, only one of those has survived the cut.

On that basis, it can hardly be argued that we are moving to phase two at all certainly not in terms of meeting UK expectations. With so much cut, and so much of phase one remaining to be settled, it would be more accurate to call this next stage, "phase two-minus" or, if you prefer, "phase one-plus" the "plus" being the transition talks.

Now, given the almost euphoric treatment of Mrs May's intervention by her parliamentary party, it is clear that the EU's proposed terms for the transition have not registered yet. To repeat them from the draft guidelines, the EU is saying:
In order to ensure a level playing field based on the same rules applying throughout the Single Market, changes to the acquis adopted by EU institutions and bodies will have to apply both in the United Kingdom and the EU. All existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will also apply. As the United Kingdom will remain a member of the Customs Union and the Single Market (with all four freedoms) during the transition, it will have to continue to apply and collect EU customs tariffs and ensure all EU checks are being performed on the border vis--vis other third countries.
If the UK is prepared to accept these terms unchanged, then it buys two years of continued frictionless trading, albeit at huge cost. But, even though we are not yet seeing a political reaction in the UK, I remain of the view that we are headed for a major spat with the EU. I just cannot see that these terms will be acceptable.

Given the amount of time taken to negotiate but not settle the three phase one issues, and given the complexity of a full-blown transitional agreement, it seems unlikely that all the phase one-plus issues can be resolved by March of next year. At the present rate of progress, getting an agreement by the October looks more than a little optimistic.

Furthermore, we are seeing statements from Brussels to the effect that: "Negotiations in the second phase can only progress as long as all commitments undertaken during the first phase are respected in full and translated faithfully in legal terms as quickly as possible". This phrasing, apparently, is to be included in the European Council conclusions on Friday, after being spelled out by Barnier after the general affairs council.

Since Mrs May's offerings for the Irish question are, to say the very least, delusional, a significant hurdle looms, in trying to give legal precision to her fantasy solutions. Therefore, we can see the supposed phase two negotiations being dominated entirely by phase one issues.

When the European Council convenes on Friday to consider Brexit matters, it may well have to ask itself not whether there has been "sufficient progress" in the negotiations so far, but whether there has been any progress at all in the area that matters the make-or-break issue of the Irish border.

Taking everything in hand, one must then conclude that, if the talks do continue, there will then be time enough only for settling the transitional arrangements and setting out the framework for a new relationship only in the very broadest of terms.

As to trade talks, there is "no possibility" that Britain and the European Union can conclude a free trade agreement by the time Britain leaves in March 2019, says Michel Barnier

Asked about David Davis's claim that a future trade treaty could be signed on 30 March 2019, Barnier said he expected the EU and UK to sign "a political declaration" on the future relationship. "But it cannot be anything else. In technical, legal terms it simply is not possible to do anything else. And David Davis knows that full well", he added. 

Brexit day, therefore, will most likely be Brexit deferred, with the parties only then setting out on the long and tortuous path to a trade agreement, with many years of negotiation in prospect. Not just a trade deal but even full separation by the end of March 2019 looks increasingly unlikely, with talks set to become a running sore.