Today’s breakthrough agreement in the Brexit negotiations provides some pointers to how the rest of the negotiations may pan out next year in relation to agreeing the UK’s future trade relations with the EU.
Northern Ireland: kicking the can down the road?
The crux of the agreed wording on Northern Ireland is concerned with cross border trade and movement of people. The text agreed today was enough to satisfy a wide range of parties – UK and Irish governments, Ulster unionists, Conservative back benchers, the European Commission and Parliament and other EU member states. This was a feat of word-smithing. It moves the negotiations along to the next stage. What it is not is a plan of action. The next stage is further technical negotiations to agree how the principles on Northern Ireland are put into practice. This may challenge the shaky agreement.
The statements agreed today on Northern Ireland may prove to be incompatible in practice as they include commitments to:
- an open border between Ireland and Northern Ireland. This means an open border between EU and UK.
- UK and Northern Ireland will leave the customs union.
- Northern Ireland and rest of UK will have the same regulatory rules
- The aim is for the open border to be achieved through a comprehensive EU-UK trade agreement. This would to all intents and purpose look like single market membership if it is to work....
- failing that (and any yet to be invented technology enabled solutions), the UK will have "regulatory alignment' with Ireland (and therefore with the EU on many of these) on all the areas covered by the Good Friday agreement. The UK won't be in the single market but we will have regulations near identical to them in many areas related to cross border trade.
The main conclusions I draw from this are:
- It will be difficult to continue to square this circle and this is an issue that could yet prevent a final Brexit deal next year.
- Precisely because it is all things to all people, both ‘hard brexiteers’ and ‘soft brexiteers’ will draw some comfort from the agreement: the UK government has ruled out membership of the customs union and yet it also suggests one solution is something that it almost identical to membership of the single market.
Transition: a low hanging fruit that can give business clarity?
The good news is that this moves the talks along to next phase. Phase 2 looks at two things: transition and future UK-EU relations. Transition should be straightforward. The EU has a "take it or leave it” offer on the table. Any transition is likely to be a two year period from March 2019 during which we will be in the EU ‘in all but name’: continued membership of single market, customs union and subject to ECJ but no voting rights in EU decision making. If this can be agreed – and quickly - it should give many businesses greater certainty for the short to medium term.
Future trade relations: time the cabinet talked about this
Future relations is the tricky bit. The EU is offering an off-the-shelf trade deal (along the lines of the EU-Canada trade agreement) or WTO. They would agree to EEA membership (the Norway model) but current UK government insistence on leaving the single market rules that out for now. The big negotiation on this is not with the EU - it is within the UK government. As Philip Hammond admitted this week, the cabinet has yet to discuss what it wants as for the future relationship with EU. The European Commission has latched onto this already – this afternoon they said that trade talks will not start until February 2018 at the earliest, on the basis that the UK government has yet to give the EU any indication of its approach.
That was the easy bit; now we start the difficult talks
Today we cleared one hurdle but there are plenty more to navigate before we have a clear, final deal. The EU and UK have just spent nine months agreeing a deal on three things; the rights of citizens (where they have agreed from day one); a financial settlement (where the final figure is half way between what the EU asked for and the UK offered); and an agreement to have further discussions on Northern Ireland.
That was the easy bit. Trade deals tend to take at least 7 years to negotiate. And the divisions within the government and parliament are far wider on the knotty issues of future relationship with the EU.
It remains the case that the best we can do is to follow the words of Benjamin Disraeli: “I am prepared for the worst but hope for the best".
The European Union should be ready to start negotiating details of a post-Brexit transition period with Britain early in the new year, a senior EU official said on Friday, but talks on future trade will take longer.