5 things to expect from the second phase of Brexit negotiations

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Brexit negotiations are due to move onto ‘Phase 2’ in the next few weeks, after EU leaders finally signed off on a painful first round on the 15th December 2017. Here are five things we expect to see in the second round: 

*Ding ding ding.*

Obfuscation

“They say it takes two to tango,’ said British Chancellor Philip Hammond to the BBC in January. “Both sides need to be clear about what they want.”

Which is exactly what the other side is asking for (clarity, not doing the tango with Phil). “The first big step is for the U.K. to say very clearly what it wants in clear terms,” stated Maltese Prime Minister Joseph Muscat at the EU summit in December. A sentiment echoed by Michel Barnier: “There must be a precise negotiating position of the U.K. government.”

Unfortunately, neither side is dancing in reality. During Phase One, the EU repeatedly told the U.K. to clarify its position on citizens’ rights, the divorce bill and the Northern Irish border. The bloc remained united, and eventually the U.K. yielded, agreeing to a bill of up to €39 billion, a fairly weak citizens’ rights agreement, and a seamless and frictionless” Irish border.

Now that those issues have (at least partly) been put to bed, the real misunderstandings can begin. The first round, as difficult as it was, was at least centred around three tangible issues. The second-round focuses on a much vaguer outcome: the framework of the future relationship.

All these factors are going to make Phase Two extremely difficult. In comparison, Phase One will look like negotiating the sale of a second-hand Volkswagen, or a timeshare in Skiathos.

Already disagreements have emerged over the wording: the EU wishes to focus on the ‘framework’ whereas the U.K. accentuates the ‘future relationship’.

It’s no secret that Theresa May wants a transition deal to be agreed quickly: uncertainty is bad for business. But Michel Barnier has set a deadline of October 2018 to negotiate a transition deal, which is far later than the U.K.’s preferred deadline of March 2018. This transition deal will require the approval of the European Parliament, which will have its own requirements for the second phase of talks.

Not only will they need to agree on a transitional deal, but also a framework for future EU-U.K. trade. Again, this will require approval from European leaders, who will each have differing opinions on how quickly to advance trade talks.

All these factors are going to make Phase Two extremely difficult. In comparison, Phase One will look like negotiating the sale of second-hand Volkswagen, or a timeshare in Skiathos. How do you negotiate a trade deal with someone you’re already trading with? Until 2019, the U.K. it is still a full member of the EU. Politico reported that a senior EU official stated: “We cannot officially negotiate with the U.K. on a trade deal as long as they are a member state.”

Essentially, the U.K invoked Article 50, and will returned to third-country status under Article 218, whilst trying to agree a deal on trade. Good thing Poland is busy logging away their forests – a lot of paperwork is going to be needed.

A lot of talk about trade

Trade is going to feature heavily in Phase Two, because both sides want to know how much cash is at stake.

Expect disagreements here too. Brussels has repeatedly stated that the trade deal will consist of two options: Norway-style, or a Canada-style. Conversely, the UK wants a tailored deal, which would include “ongoing access to the EU market, the freedom to diverge from the bloc on certain rules, and ongoing cooperation with some EU agencies, such as Europol.”

Talks will need to cover all the main sectors of trade: financial services, pharmaceuticals, automobiles, aerospace, agriculture… These industries are massive and complex, each with their own subset of legalities. To date, businesses have largely been left in the dark, with the various captains of industry becoming increasingly agitated. In a joint statement, leaders of five U.K business groups stated: “the transition period must now be agreed as soon as possible…further delays to discussions on an EU-UK trade deal could have damaging consequences for business investment and trade”.

Two fractured sides of the table

Brexit has created its own political dividing lines, and Left and Right continue to find themselves, perhaps unwittingly, on the same side.

…a far-right coalition in Austria, a leaderless Germany and a recalcitrant Hungary and Poland, one thing is for certain: realpolitik is alive and well in the minds of European leaders.

Resultantly, the UK government – in particular the cabinet – is anything but united. Tango Master/Chancellor Philip Hammond represents a faction fighting for a soft-Brexit, placing him in opposition to the Foreign Secretary Boris Johnson, who seems to want to bring back the 18th century swashbuckling Britannia of old. Throw some Tory rebels into the mix and you have yourself a collection of fiefdoms, in disagreement over everything from the length of the transition period to the retention of single market membership.

The disunity isn’t limited to the UK, mind you. French President Emmanuel Macron has warned against the EU 27 acting in their own interests in the next phase: “That’s what the prisoner’s dilemma is all about,’ he said. ‘Everyone can have an interest in negotiation on their own and think they can negotiate better than their neighbour.” These comments were echoed by Donald Tusk, who said he had “no doubt that the real test of our unity will be the second phase of the Brexit talks.”

With Norway threatening to rip up their current deal with the EU, a crisis in Catalonia, an election looming in Italy, a far-right coalition in Austria, a leaderless Germany and a recalcitrant Hungary and Poland, one thing is for certain: realpolitik is alive and well in the minds of European leaders.

Come back, wayward son

The European Union will continue to tell the UK it can re-join the club at any point before Brexit happens.  

Donald Tusk and Jean-Claude Juncker have both expressed their desire to retain Britain as a member of the EU. The former even said that Britain could reapply for EU membership post-Brexit, which will most likely turn British politics into one, never ending discussion about EU membership. Think M.C Escher.

A new government White Paper depicting the current state of negotiations.

The spectre of citizens’ rights

Lingering issues about citizens’ rights will crop up in the second round of negotiations. Several citizens’ rights groups – such as the 3million and Bremain in Spain – have made their dissatisfaction clear, and will continue to lobby against the loss of freedom of movement. Even small groups of expats have started to take legal action: British citizens living in Holland went to court earlier this year in a bid to retain freedom of movement.

We believe there are still a number of questions about citizens’ rights to which neither the EU Commission or UK parliament have provided a satisfactory answer. Certainly, trade will dominate the discussions, and it is vital that grass-roots movements and individuals maintain the pressure for greater clarity over citizens’ rights.

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by Max Caskie