The UK government has recently confirmed its intention to leave the customs union with the EU as a result of Brexit. Instead, it wants to negotiate a new customs arrangement or partnership in order to establish new international trade deals whilst continuing to have frictionless trade with the EU. However, this assertion led to the EU’s chief negotiator, Michel Barnier, responding that such action would create ‘unavoidable’ trade barriers for goods and services. It has also caused some unease among opponents of Brexit, including some from within the government ranks, particularly concerning how this might affect the Irish border issue.
Given the comments by the UK government regarding the customs union, it appears that the UK’s position is leaning more towards a Canada-model free trade deal than a Norway-model involving closer cooperation. However, the UK has also hinted that it wants extra elements added to the final deal which incorporate assurances on the financial services sector. So far, this has received a cool response from the EU.
Mr Barnier has again stressed the importance of the UK government clarifying its intentions regarding a future trade deal as quickly as possible. The time to begin Phase 2 negotiations is almost upon us and initial positions must be set out in advance. A failure to do so, on the part of the UK, may lead the EU to begin drafting the deal unilaterally.
However, before discussions over the customs union and a future trading relationship can begin in earnest, a deal on transition is due to be finalised. Elements of this remain contentious, particularly with regard to citizens’ rights. The UK is insisting that EU nationals entering the UK during the transition period should not be granted the same rights as those already resident prior to Brexit. The EU opposes any dilution of citizens’ rights during transition. The UK also wants to have the right to object to new EU laws drafted during the transition period whilst retaining the right to opt in to new policies related to justice and home affairs until December 2020. Mr Barnier has warned that, unless agreement can be reached on these issues, the transition period, which is due to be confirmed at the European Council summit on 22nd March, could be in jeopardy.
The EU is scheduled to publish its draft withdrawal agreement at the end of February. This will set out the formal and legally binding terms of Brexit arrangements, dealing with the Phase 1 issues on which discussions concluded in December. The most challenging aspect remains the Irish border, a matter which almost derailed Phase 1 negotiations at the final hour. EU officials have suggested that the document will confirm that Northern Ireland will remain in the single market and customs union to avoid the creation of a hard border.
There isn’t long to wait before key decisions must be made and we will soon discover whether the pieces of the Brexit jigsaw begin to fall into place or are thrown into the air.
Article published: 20th February 2018
