The most likely outcome is a soft exit says a former Assistant Director at the Department for International Tradeby David Henig / June 28, 2018 / Leave a comment
Prime Minister Theresa May greets President of the European Council Donald Tusk. Photo: Rick Findler/PA Wire/PA Images In recent days the smoke has cleared from the Brexit negotiations, and we can now see with reasonable clarity the options for the UK’s withdrawal from the European Union. There will either be a border, in the Irish Sea or on the island of Ireland, or there will be a very close relationship at minimum committing the UK to following EU goods regulations sufficient to ensure no border. This fundamental truth will operate through any implementation period, backstop, and future economic partnership, at least until many years in the future when technology can do away with borders. Thus we approach what trade negotiators refer to as the end game, the point where the real choices have to be made, by both sides. The point where red lines are tested intensively to see what is real and what is not, and where different interests are traded off. There is always the option that both sides agree that this cannot be completed and the negotiations are extended. But let’s assume that doesn’t happen and the UK leaves the EU at the end of March 2019. What has to happen for the negotiation to be completed? First and most obviously the UK government has to finally reach a decision on a realistic approach to Brexit. It doesn’t have to exactly match what the EU is offering, but close enough. Forget Max Fac and Customs Partnerships, this means changing the current position where all of a close relationship with the EU, a border in the Irish Sea, and a border on the island of Ireland have been rejected. Given a decision could lead to cabinet resignations and a leadership election in the Conservative Party it would be good to have this decision sooner, but realistically it could take until the last couple of months of the year to finally decide in favour of the close relationship rather than a border, which seems the likely ultimate outcome. The EU, led by the Commission, is likely to have choices of its own to make, about what concessions it is prepared to give in order to prevent the border on the island of Ireland that is the default setting in the event of a no-deal Brexit. If we assume that one of the hardest UK red lines is no effective EU border in the Irish Sea, then can the EU offer anything short of the full Norway European Economic Area plus a customs union? Could it—as recent articles have proposed—just offer the single market for goods, or does freedom of movement have to be included? At this stage “no compromise” is the clear signal, from the Commission, member states, and the European Parliament. But does that unity hold if the Commission continues with an uncompromising approach against a UK happy to compromise? Then there are the negotiating dynamics of how the two sides choreograph the journey towards an agreement. Assuming that both sides have to compromise to reach a deal without borders, how do they do so in a way that means one side or other doesn’t just pocket the compromise and carry on. The impression the UK government gives at the moment is that it believes the EU position is wrong and that member states will ensure this is changed. Therefore the UK side should not compromise. The EU knows the UK thinks this, and also therefore can’t compromise as this would be seen by the UK as evidence. Getting this right in a negotiation can often be a tricky business indeed, requiring a high level of trust between the two negotiating teams, trust that doesn’t appear to be present. “This is the point where red lines are tested intensively to see what is real and what is not” It’s worth noting as well that this is just for the framework. If there is a deal then below the headline level there are numerous issues that will need to be resolved. Do we maintain the current deadlines of implementation period until December 2020 followed by either future arrangement or if not yet negotiated a backstop, or is there an option to extend the implementation period? How closely do we need to define the backstop with regard to any UK involvement in the single market? What is the UK’s role in EU trade agreements that are agreed but not yet implemented, such as that with Japan? Serious time will be needed to resolve all of the issues, not just in trade but also in terms of security, justice, people, and so on. It will probably take more time than there is available to have anything other than a skeleton agreement in place in March 2019. While negotiating with the EU the UK government also needs to be putting in place its own plans for the post-EU landscape. That starts with the structure of departments around Whitehall, such as the future of the Department for Exiting the EU and Department for International Trade. More important is how we seek to influence the EU once we are no longer members, as we surely will wish to do across so many areas. This is likely to involve significant boosts to UK government resources serving in Brussels and across EU member states. Then there is future UK trade policy, which currently assumes only a limited ongoing relationship between the UK and EU. It will need fundamentally different thinking if this assumption is incorrect, losing the always fanciful notion of huge gains through new trade agreements around the world, and focusing much more on trade diplomacy, multilateral bodies, and areas of regulatory autonomy. This all has to be done while repairing the relationship with business that has been fractured by government indecision and secrecy. Let’s finish on an optimistic note. Both the UK and EU want a deal, and at the end of the process that remains the most likely reason why there will be a deal. The tensions and issues there have been within the UK government and opposition, between the UK government and stakeholders, and with the EU, are unlikely to be forgotten, but can be addressed given goodwill, openness and a desire to move onto the next phase. The final outcome may not end up fully satisfying anyone, but could be one most people see as fair and reasonable. At the very least, that should be what all sides are aiming for.