Brexit, British Government, Michel Barnier, Negotiating, Theresa May

After #Brexit #FlorenceSpeech: Has Anything Changed?

This piece was written on September 24, 2017

857546_1UK Prime Minister Theresa May’s speech in Florence last Friday was designed to unlock the stalled Brexit negotiations between the European Union (EU) and the UK over an agreement on the departure of the UK from the EU. In her speech May said essentially four things:

1. She repeated that the UK would leave the EU at midnight on March 29th, 2019. On March 30th the UK will no longer be a member of the EU, the Single Market and the Customs Union.

As we have said before, this is a decision that can only be reversed by a vote in the House of Commons and agreed to by the European Union, though as we have also noted the EU would be unlikely to allow the UK to simply cancel its exit notice and return to the status quo ante. New conditions for continued membership would be required.

2. However, for two years, there or thereabouts, after that date the UK wanted a transition arrangement during which it would continue to behave as if it were still a member of the Single Market and the Customs Union, as it readied itself to fully leave the EU. During the transition the UK would continue to abide by all EU laws and procedures, including the principle of free move and it would continue to accept the jurisdiction of the Court of Justice of the European Union (CJEU).

3. The UK would meet its financial obligations to the EU, though she declined to put a figure on the amount involved.

Further, Mrs. May failed to indicate if the money involved simply covered accrued obligations or was also intended to “buy” future access to the EU Single Market.

4. She gave new assurances on the rights of EU citizens living in the UK and on the legal mechanisms through which those rights would be protected, though no direct role for the CJEU was mentioned.

By contrast, Mrs. May failed to say anything of substance about the Irish issue, which revolves around the need to avoid a hard or economic border between the Republic of Ireland and Northern Ireland, something that is impossible to achieve if the UK insists on taking Northern Ireland out of the EU Customs Union.

For the future the UK wants a “bespoke” trade agreement with the EU that would be better than either the European Economic Area (EEA) status of Norway or the trade agreement, CETA, between Canada and the EU, that has just come into force.

Reaction from the EU and EU member states was lukewarm, with a reemphasis on the need for the UK to first finalise negotiations on the three Article 50 (A50) issues that the EU has identified as key to an exit agreement – the rights of EU/UK citizens living in the UK/EU respectively, matters relating to Ireland, and the UK’s financial obligations to the EU.

Now it is no secret that Mrs. May’s Conservative Party is deeply divided over Brexit. The “business friendly wing” wants as long a transition as possible and thereafter, what might be called “Brexit in Name Only”, so as to keep to an absolute minimum any disruption to trade between the UK and the EU. The other wing, the sovereignty wing, isn’t much bother about trade disruptions with the EU as long as the UK has full and unfettered control over its borders, immigration, law making and the freedom to do trade deals with far-flung places.

The Florence speech represented an uneasy truce between the two factions. It didn’t last long. By my calculation from 15:00 on Friday afternoon to late Saturday night when the early editions of the UK’s Sunday papers carried stories that UK Foreign Secretary, Boris Johnson, was letting it be known that he would not agree to any new EU laws adopted during the transition being implemented in the UK and that he wanted the UK to be free to negotiate and sign trade deals with other countries as well. He also opposes paying into the EU for Single Market access at the end of the transition period. In this he was echoing the already stated views of other hard Brexiteers.

Responding to May’s Florence speech, Michael Barnier, the EU’s Brexit negotiator, said:

“Prime Minister May’s statements are a step forward but they must now be translated into a precise negotiating position of the UK government.”

He also reminded the UK that during any transition period that

“…existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures (continue) to apply.”

In light of Johnson’s latest remarks what “precise negotiating position” is David Davis, the UK’s Brexit negotiator, supposed to outline to Barnier on Monday morning when they meet for the next round of negotiations? Who speaks now for the UK: Johnson or Davis? How can the EU do any sort of deal with the UK when senior government members appear to openly contradict the Prime Minister with impunity?

The EU has been consistent in its position since the UK voted for Brexit. An A50 agreement must first be finalised. That agreement must cover, as noted earlier:

• The rights of EU/UK citizens living in the UK/EU respectively.

• Issues relating to Ireland

• A full financial settlement covering accrued UK financial obligations, which have been identified as somewhere between €60 and €100B.

Once sufficient progress is made on these issues the discussion can proceed to scope out the framework for future UK relationship with the Union, i.e., what sort of arrangement does the UK want with the EU when the Brexit process is completed. While the UK has failed to say, to date, what it wants, it seems clear that what it wants is a “common commercial space” agreement with the EU that would mimic the Single Market and the Customs Union i.e., frictionless trade between the two, but with the UK freed from the jurisdiction of the CJEU, able to restrict free movement and free to negotiate trade deals with third countries. No such cake and eat it deal will be on offer from the EU. And even if it were, it would come with a price tag at which the UK would baulk.

From the tenor of Mrs. May speech it seems that the UK sees itself as being on a par with the EU, negotiating a future partnership of equals. This overlooks the fact that the EU27 is 5 times bigger than the UK and in any negotiation the bigger and stronger party generally is the one that sets the terms of the deal. Overestimating your leverage in any negotiation can be fatal, even more so in a divorce negotiation when you are the one that has walked out.

Once the long-term future relationship is identified only then can a transition agreement be discussed. You have to know where you are going before can you build a bridge to get you there, if a bridge is required. At the moment talk of transition by the UK government looks very much like a “bridge over a troubled cabinet” rather than a bridge to a new relationship.

Even if, very, very big ifs, all of the above could be done, only once the UK becomes a “third country” after it leaves the EU in March 2019 can discussion on the substance of a future relationship begin. It is not going to happen beforehand. Which means that the UK Parliament will not be able to vote on the future UK/EU relationship before the UK leaves the EU in 2019 because the details of that relationship simply will not be known. I’m not sure that this has yet dawned on the majority of members of parliament.

But it is unlikely ever to get to that.

Because, as of today, Sunday, September 24, given the divisions in the UK cabinet, I can see little hope that an Article 50 agreement can be concluded between the EU and the UK that will allow the talks to move on to scoping the future relationship between the two. To get to an agreement it would require a major backing down on the part of the UK. The EU has been crystal clear in its position from the start. It is not going to change. Why should it? It is the UK that is leaving the EU. Not the EU that is leaving the UK. The problems that Brexit creates for the UK are of the UK’s making.

We will know a great deal more about the direction of travel after next week’s round of negotiations between the EU and the UK.

A week is a long time in Brexit.

But a caveat. The above “no deal” scenario is premised on the current Conservative government staying in office. Given the divisions with the cabinet and the Conservative Party there can be no guarantee of that.

It is a long way from here to March 2019. Anything can happen.

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