Prospects for the EU negotiations

This is the second part of a series Brexit is a luxury for the few. The EU is a necessity for the many. Part 1 can be found here.

The negotiations with EU27 are the point at which Brexit fantasies meet reality. Allegations that the EU needs us more than we need them have been exposed as false as the Government jettisons previously trumpeted ‘red lines’. The Phase 1 joint report of the UK and EU negotiators  shows the Government has given into virtually every EU demand.

This should be no surprise as the negotiations were never going to be one of equals. Instead of ‘winning’ 97% of votes in the EU Council, we now find ourselves alone pitted against a group 11 times our economic size. Past EU accession negotiations were similarly asymmetrical. Candidate countries wishing to join the EU had to accept some 80,000 pages of the aquis communautaire (the EU’s accumulated legislation and judicial rulings) virtually in toto. The best candidates might reasonably hope to secure were minor derogations and some longer transitional periods. Leaving the EU is the accession process in reverse.

Forecasting is a fool’s game but we can be fairly sure the UK will continue to be outgunned. There are any number of outcomes from the negotiations but arguably the leading current alternatives are extremes: Norway Plus or no deal. The EU has offered the UK either the Norwegian model (essentially Single Market including payments to the EU Budget and following EU rules but no participation in the Common Agricultural Policy and Common Fisheries Policy) or the Canadian model (virtually no goods tariffs and limited services access but no payments to EU budget and no jurisdiction by the European Court of Justice (ECJ) in areas of EU competence).

The May Government has ruled out remaining in the Single Market and Customs Union. Replicating the Canada-EU deal is problematic given services constitute 80% of our economy. So David Davis concocted a have your cake and eat it too Canada Plus Plus Plus option. For the EU, this is unacceptable as the free movement of services, capital, goods and workers are indivisible.

The Council guidelines provide the framework for the next phase of negotiations. By Easter, it is possible a transitional (or implementation) period will be agreed to the end of 2020 (when the EU’s current multiyear financial framework ends). This is slightly less than the two years the UK Government is requesting. Accepting all current EU rules and payments during the transitional period will, it is believed, be enough to prevent (at least temporarily) the exodus of more corporate operations from the UK. However, any agreed transitional period does not mean the end of the economic and regulatory cliff edge – it merely delays it if the UK opts for anything less integrative than the Norwegian model.  

The UK cannot conclude new trading arrangements before our envisaged departure in late March 2019, and in practice they could not be in place at the earliest in January 2021 (assuming a transitional agreement is agreed). Trade Secretary Fox argues inter alia the UK already complies with EU regulations so an agreement should be the “easiest ever in human history”. However, this misses the point – what matters which regulatory regime the UK hopes to adopt in the future and how lengthy ratification processes in EU member states might be (the EU-Canada deal took 7 years). Furthermore, it will take years to create the border infrastructure, train staff and elaborate practical procedures (on both sides).

Commissioner Barnier is seeking to convert the Phase 1 joint agreement into a legal text for the withdrawal treaty by October 2018. Although nothing is agreed until everything is agreed, if either party reneges on commitments already made, trust would evaporate and the negotiations could stall, even collapse.

Ultimately the Canada Plus Plus Plus aspiration will prove inconsistent with its commitment in the Phase 1 joint agreement to no hard Irish border. Paragraphs 49 to 51 of the UK-EU December joint report commit the UK to ‘full alignment’ of Northern Ireland to the Single Market and Customs Union. An argument over the meaning of ‘full alignment’ is likely.

Avoiding a hard Irish border could however push the Government into accepting a relatively easy off the shelf Norway Plus arrangement (with the entire UK remaining in the Single Market and Customs Union). Reconciling the conflicting demands of ideological Brexiters, the EU27 and Democratic Unionist Party (DUP) could prove impossible. Although the DUP will not accept an internal UK border in the Irish Sea, they could come to accept the UK staying in the Single Market and Customs Union as the only way to retain the coherence of the UK internal market and to avoid an unpopular hard Irish border. However, Brexiters may very well not. So either the Brexiters acquiesce, or there is no deal.

In the absence of a deal, any previously agreed transitional period could become the default modus vivendi. There are precedents for transitional deals with the EU assuming a more permanent status, e.g. Liechtenstein. In other words, we leave the EU, but continue to stay in the Single Market and Customs Union, continue to contribute to the EU budget, be subject to the ECJ and remain outside the Eurozone and most of the Schengen system. So all Brexit will have effectively achieved is losing our seat at the EU table and not having a say on EU legislation.

Alternatively, as the Brexit ideologues wish, we crash out and refuse to pay the departure bill and not be subject to any EU rules, resulting in the complete disruption of our trade, economy and good relations with our EU neighbours, and the wider world (with which we have some 60 trade agreements through EU-based agreements).

In the next two posts, I shall look at mobilising public opinion and cross-party co-operation against Brexit, the prospects for a referendum on the terms and an early General Election.

 

* Nick Hopkinson is chair of the Liberal Democrat European Group (LDEG) and former Director, Wilton Park, Foreign and Commonwealth Office.

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6 Comments

  • John Marriott 14th Jan '18 - 10:52am

    What happened to my original Comment?

  • Laurence Cox 14th Jan '18 - 1:23pm

    Corbyn on Peston this morning repeated his position of No to the Single Market and No to the Customs Union, so his position is only fractionally different from May’s. We have to keep hammering away at Labour as Leavers; there can be no cross-party collaboration with them until they change their position.

  • David Franks 15th Jan '18 - 12:34pm

    Understand Laurence Cox position but there are people, including some MPs, in the Labour Party with whom we certainly could work on Brexit issues.

  • Arnold Kiel 15th Jan '18 - 5:18pm

    It is clear that no tangible negotiation result will emerge in time for a substantive referendum on the facts to happen well ahead of March 2019. Perpetuating transition is not an option, as only EU-membership or a ratified trade-deal permits longer-term deviation from WTO-rules.

  • Peter Hirst 16th Jan '18 - 2:35pm

    It’s a rum negotiation with political considerations being paramount, what we want being confused with what we can get and both altering as the process proceeds and scant regard for the long-term prospects of the UK.

  • Richard Underhill 25th Jan '18 - 11:51am

    Liam Fox MP has played down hopes for a UK trade deal with the USA. He did not need to point to President Trump saying “America First”. He did say that the economies are very similar, implying that there are few areas in which the UK has a technical advantage over US competitors. Former Trade Minister, ex CBI chief, Digby Jones is more optimistic, but why? He is chairman of several companies, so are they major exporters? in what fields? to which markets? He presumably knows, for instance, that after Rolls Royce was nationalised by a Conservative government, the car division Rolls Royce Motors was floated on the London Stock Exchange, was bought by the Volkswagen-Audi Group except for the brand name, which was sold to BMW, who needed to compete with Mercedes at the top of the market.

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