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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.