Trade

5 potential bust-ups in Brexit transition talks

Agreeing on terms for a Brexit transition is meant to be the easy bit — but it may not be so simple.

EU ministers on Monday will approve a set of directives allowing their chief Brexit negotiator, Michel Barnier, to broker a transition arrangement with the U.K. to prevent a so-called cliff-edge scenario.

Many aspects of a transition — or what U.K. Prime Minister Theresa May insists on calling an “implementation period” — are actually not negotiable, and both sides know that. The EU27 have long made clear, for instance, that the U.K. will have to abide by all EU laws and rules but will lose all voting rights and decision-making power from the moment it officially leaves the bloc on March 29, 2019.

But some key points are very much in flux, and could become the subject of tough bargaining in the coming weeks. Here are five points of contention:

End date

When May first acknowledged the need for a transition period in her Florence speech last September, she said it should last “about two years.” Her Brexit secretary last week told MPs it could last between 21 and 27 months.

The EU27 directives will call for ending the transition on December 31, 2020, meaning a transition period of 21 months. From a technical standpoint, using that date as an end point makes sense, as it coincides with the conclusion of the EU’s current long-term budget plan, which the U.K. has agreed to continue paying into up to the end. If a transition lasts beyond that, the U.K. would have to keep paying, but under the new budget period. How much would likely become a matter of serious contention.

Nonetheless, it appears that 21 months may not be enough time and some EU countries proposed adding flexibility on the date. Top officials in Brussels and London, however, seem inclined to sidestep the issue at the moment, knowing that they could always extend the transition at a later date once the need becomes impossible to ignore. That said, the U.K. could insist on language (not currently in the draft directives) that specifically allows an extension if necessary. In return, the EU27 could demand to set a price in advance. The British side, if it wants to be creative, could also propose a provision that would allow London to end the transition early in the unlikely event that the U.K. is ready to leave sooner than expected.

Bust-up potential: ? ?

Trade and other international agreements

The EU directives would require the U.K. to continue fulfilling all obligations of treaties, free-trade agreements and other accords between the bloc and so-called third countries. These include not only the mega trade deals between the EU and countries like Canada, Japan and South Korea, but a long laundry list of other agreements covering a vast array of policy areas including aviation, energy, agriculture and more.

Adjustments in draft language of the directives had suggested the EU is prepared to allow Britain to continue benefiting from these agreements throughout the transition, but ultimately that seems to be a matter for the upcoming negotiations. What the EU seems to be insisting on is that the U.K. cannot violate the terms of any of those agreements, nor adopt and implement any replacement deals until the transition is over.

London’s position is similar but not identical. In a speech on Friday, David Davis said: “Participating in a customs union should not and will not preclude us from formally negotiating — and indeed signing — independent trade agreements.” He conceded that those deals wouldn’t come into effect until the end of a transition.

The extent to which Britain can continue benefiting may also depend on the third countries. If those countries object, diplomats say, it will be up to London to convince them otherwise. Brussels is not going to exert much energy on Britain’s behalf. On that point, Davis stated confidently in his speech that maintaining the status quo was “also in the interests of those countries.” That remains to be seen.

Bust-up potential: ? ?

Citizens’ rights

The Phase 1 agreement gives EU citizens living in the U.K. and British citizens living in the EU27 special protections until the official withdrawal date of March 29, 2019. In a move that effectively reopens the “Joint Agreement” that was signed with great fanfare before Christmas, the EU is now pushing to extend those protections until the end of the transition period. That’s unlikely to go down well with the U.K.

Theoretically, it would be possible to maintain the freedom of movement required for participation in the single market until the end of transition, while still ending the special guarantees of citizens’ rights on the Brexit date. Citizens arriving to live or work in the U.K. after the withdrawal date would have to comply with any new immigration regime adopted by the U.K.

Britain also wants to register citizens from the EU27 arriving during a transition period — something that has raised objections among MEPs.

Bust-up potential: ? ? ?

UK observer status

After Brexit, the U.K. will no longer have any voting rights or decision-making power in the EU, but will be required to comply with all EU laws and regulations, including any changes made without London’s approval or participation. In some cases, however, the EU27 have said it will be useful, or even necessary, to consult the U.K., and the draft directives make clear that it will be necessary to negotiate how those consultations will take place.

“During the transition period, as a general rule, the U.K. will not attend meetings of committees … or Commission expert groups and other similar entities or of the agencies, offices or bodies where member states are represented.” But it also notes, “exceptionally on a case-by-case basis, the United Kingdom could be invited to attend without voting rights such meetings.”

The draft also notes the need for “specific consultations … with regard to the fixing of fishing opportunities.” The EU position so far is that the U.K. should be permitted as an observer when it is “in the interest of the Union.”

This is unlikely to be enough for the U.K. In his Friday speech on the British position on transition, Davis said: “We will have to agree a way of resolving concerns if laws are deemed to run contrary to our interests and we have not had our say and we will agree an appropriate process for this temporary period … It’s very, very important. If there are new laws that affect us, we have the means to resolve any issues during that period.”

Davis may be playing up for a domestic audience to prove that the U.K. will not be a “vassal state” during a transition but whether saber-rattling or not, expect tense negotiations on this point.

Bust-up potential: ? ? ? ?

Divorce deal or nothing

It’s important to remember that the terms of the transition period will be written into the overall withdrawal treaty between the EU and the U.K., meaning that if the two sides fail to reach an agreement on an overall divorce deal, there will be no transition period. Put another way, the transition is not a safety net that can buy more time for negotiators if they fail to get a withdrawal treaty signed and ratified.

Officials have said they expect the transition terms to be agreed in eight weeks or less. If they succeed in that timeframe, it will leave just about six months to finish the overall withdrawal treaty, which negotiators have said must be completed by October 2018 to have any hope of ratification before March 29, 2019.

Both sides adhere to the “nothing is agreed until everything is agreed” mantra, so this isn’t a point of contention — but it will be very much in the minds of both negotiating teams.

Bust-up potential: ?

Original Article

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