Ding, Ding, Round Six! Last Friday, David Davis and Michel Barnier emerged from their respective corners once again to resume Brexit negotiations.
Perhaps, on this occasion, the stakes were higher than at any previous juncture. The heat was on to finally nail down a deal on Phase 1 issues – (altogether now) citizens’ rights, the Irish border and, trickiest of all, the financial settlement.
The EU is demanding UK concessions on the financial settlement before it agrees to move onto Phase 2 talks about transition and a future trade deal. Given that UK-based businesses are increasingly desperate for certainty on Phase 2, the pressure on the UK government to achieve progress has intensified. Businesses want to know the transition plan by the end of the first quarter of 2018, at the very latest, in order to implement their investment strategies. If such a plan is not forthcoming, many businesses will consider relocating to the EU to avoid a ‘cliff edge’ Brexit.
Political uncertainty at Westminster is adding to the febrile atmosphere surrounding the talks and is feeding nervousness within the EU. The EU is concerned that the Prime Minister and UK negotiating team they are dealing with may change in a relatively short time period, resulting in a harder approach to Brexit being adopted by the UK.
Looking ahead to Phase 2, whenever it begins, the EU is focused on ensuring that any deal should maintain a level playing field so that the UK does not gain advantage by subsidising industry or operating with minimal environmental, labour and welfare standards. Ahead of ‘round six’, Michel Barnier called for the UK to make a choice between the model of regulation or the more relaxed US approach and reiterated: “There will be no close commercial relationship without a level playing-field.”
There is widespread scepticism in the EU that a trade deal will be agreed by the time the UK leaves in March 2019. If this is true, then Theresa May’s recent statement about ‘no deal, no transition’ becomes a very real prospect and, with it, the likelihood of a ‘cliff-edge’ exit.
This pessimism is fuelled by doubts that Phase 1 will be completed by December. Given the delay and deadlock involved in the process thus far, the chances of agreeing on the more complex Phase 2 matters by next October and ratified by March 2019 appear very slim indeed. However, the UK government remains confident of successfully meeting both deadlines. The key to resolving Phase 1 paralysis is to agree the financial settlement but, the final figure may be unpalatable to sections of the media and some MPs championing a ‘hard’ Brexit.
As the talks drew to a close, Mr Barnier said that the UK had offered “useful clarifications” on guaranteeing rights for EU citizens resident in the UK, but indicated that the rights of families and the exporting of benefit payments was yet to be resolved.
On the Irish border question, Mr Davis insisted that Northern Ireland could not remain in the customs union in order to avoid a ‘hard’ border with the Republic of Ireland being enforced but, equally, a ‘hard’ border was not an option.
Finally, on the financial settlement issue, Mr Barnier warned the UK that it has just two weeks left in which to indicate what it is willing pay for whilst not necessarily requiring a specific figure. The outcome of this issue could be crucial to the entire process.
Article published: 14th November 2017
