Brexit Negotiations: A new milestone is reached

Following the meeting of EU heads of Government (Prime Ministers and the odd President) last week a clear milestone has been reached in the Brexit negotiations:

  1. They received a draft legal text transforming everything that has been agreed so far (citizens’ rights, financial settlement, transition period etc) into the final form it will need to be for the formal Withdrawal Treaty. This contains 112 pages of substantive text. Of these, 74 pages are shaded totally green (I.e. full agreement between both parties’ negotiators). None are completely yellow (objective agreed but drafting changes or clarifications still required). 4 pages are completely white (text proposed by the EU on which negotiations are ongoing). There are no sections marked red – failure to agree. Agreed paragraphs on the transition period include confirmation of the end date at 31st December 2020 and the fact that UK and EU citizens will continue to enjoy full freedom of movement and settlement rights up until that date.

 

  1. They adopted negotiating guidelines for the future trade relationship between the UK and the EU after Brexit. Tariff-free trade in goods seems to be the only thing firmly on offer (and that subject to ‘rules of origin’ restrictions which would exclude goods with substantial non-UK components and the UK keeping its fishing waters open to EU vessels). What is on offer in relation to trade in services is not so clear. Reference is made to ‘host state rules’ applying which is likely to mean a need to re-register your trading entity in any EU state you want to do business with and be subject to their national rules, whereas at present you only need to be registered in one EU country to trade freely with them all. The Guidelines also call for ‘ambitious provisions’ on the movement of natural persons – ie as near as possible to ongoing freedom of movement for EU citizens to come to the UK and vice versa!

This offer from the EU has been constrained to fit within the UK Government’s ‘red lines’ of what they are not prepared to include in any future relationship, such as continued membership of the EU the single market (like Norway), the EU customs union (like Turkey) or the jurisdiction of the European Court of Justice. This is graphically illustrated in the chart shown to the heads by EU lead negotiator Michel Barnier. For each of the existing models for a close relationship with the EU short of membership it gives the UK Government red lines which rule it out. The only exceptions being the current arrangements that the EU has with Canada and South Korea.

But these new Guidelines are keen to point out that if there is any flexibility from the UK side on these ‘red lines’ then more could be offered – ‘The approach outlined…reflects the levels of rights and obligations compatible with the positions stated by the UK. If these positions were to evolve, the Union will be prepared to reconsider its offer’ (para 6).

The Guidelines also reference, in their opening paragraph, the importance of progress being made on the key unfinished business from the previous rounds of negotiation, specifically the Irish border and ‘issues relating to the territorial application of the Withdrawal Agreement, notably as regards Gibraltar.’ Later in the document it is pointed out that because of regulatory divergence free trade does not mean frictionless trade. Leaving the customs union and the single market will inevitably make checks and controls ‘to uphold the integrity of the single market’ necessary. (para 4)

This document represents a considerable hardening of tone compared with earlier more general guidelines. This may reflect a degree of impatience and frustration on the part of the EU negotiating side and a clear intention to play hardball now that time is running out. They are sending a strong reminder that the EU is a rules-based club and therefore the closeness of the UK’s future relationship depends on the degree to which it is willing to abide by the rules that are mandatory for club members, even tough it will no longer have any say in how they are made. There may be a fear that to give the UK anything approaching the benefits that full club members enjoy will lead to questions being asked amongst the remaining 27 members of the club as to whether it is still worth keeping the rules if the same trade advantages can be gained by other means. The document therefore calls for ‘robust guarantees which ensure a level playing field’ to ‘prevent unfair competitive advantage.. through undercutting the levels of protection with respect to, inter alia, competition and state aid, tax, social, environment and regulatory measures and practices.’ (para 12)

As well as trade the Guidelines call for close co-operation to be maintained between the UK and the EU after the transition period is over in a number of other areas including:

  • The fight against terrorism & international crime (paras 3 & 13(i))
  • security, defence & foreign policy (paras 3 & 13(i))
  • Climate change, sustainable development, cross-border pollution (para 9)
  • Coordination of social security & mutual recognition of professional qualifications (para 10)
  • Judicial cooperation on matrimonial, parental responsibility and related matters (para 10)
  • Continued transport connectivity (para 11(i))
  • Participation in EU research & innovation, education & culture programmes (para 11(ii))

Now that these Guidelines have been issued, negotiations can commence on the UK’s future trading relationship with the EU. The target is still to have the full text of the Withdrawal Agreement concluded by this October in order to allow for its ratification by all EU Member States and the European Parliament before Brexit Day on 29th March 2019. Effectively this means that substantive negotiations must conclude before the summer break to give time for detailed text drafting and legal checks, it will also have to be translated into the 23 official EU languages.

Whilst the topics covered in earlier rounds of negotiation have to be fully dealt with in the Withdrawal Agreement, it is acknowledged that the future trade relationship can only be concluded in detail once the UK has become a third country for EU purposes. Before Brexit only a ‘political agreement’ has to be reached setting out agreed principles and strategy which will be appended to the Withdrawal Agreement.

Note well: I must as before give a strong health warning.  EU Treaty negotiations work on the principle that ‘nothing is finally agreed until everything is agreed’ – so if we do end up with a ‘no deal’ scenario these agreed terms cannot be relied upon. 

 

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