After Florence: a Step Forward, but Whose Turn to Go Next?

So where do matters stand with the UK-EU negotiations for an orderly separation or withdrawal agreement?

Three major events – the Lancaster House speech in January, followed by the Article 50 notification letter in March, and the Florence speech last week – have served to set out the British wish list and their ambitious aspirations for a future deep and special partnership with the EU.

An unexpected General Election was held in June which failed to deliver the stronger mandate for a hard exit that the Prime Minister had apparently hoped to get.

A fourth round of direct discussions between the two sides ended in late September with reports of a better tone to the exchanges but without ‘sufficient progress’ being made for the Commission to recommend to the EU leaders that discussion of the future relationship could begin. In other words, the issues that arise in the three areas of policy that the EU had designated as priority matters, are still well short of resolution.

How have things come to this? Given a lack of information on the detailed exchanges we can only make a speculative guess.

On one of the priority issues, how to manage the Northern Ireland border, it is pretty clear that there are three sides to the debate but that no one has yet identified the way forward.

On a second issue, which has been dubbed the ‘divorce bill’, there has been from the start a view among the leavers that nothing is owed at all, and that annual budget payments to the EU should just end. This incomprehension for the arguments that the EU has put forward is slowly evolving, to the point where the PM said in Florence that “the UK is ready to meet its financial obligations arising from decisions taken while it is still a member” – but without mentioning any specific figure (a point which has immediately been misrepresented by British media).

There has in fact been some confusion in the media between payments for the divorce and budget payments during a transition period, which would perhaps continue.

On the third issue, guaranteeing the citizens’ rights of EU nationals living in the UK and of UK nationals in the EU, the UK side has explained how they intend to create new rights of equivalent effect under British law, but there still seem to be areas which are not fully satisfactory to the EU – for family members for example who have accompanied workers that have moved. Questions of how jurisdiction is to be managed in cases of dispute over the implementation of an agreement – only too likely when sensitive personal matters arise – are also causing problems.

One new development from the Florence speech is the statement that the UK is ready to contemplate a transition period (or implementation period) beyond the Article 50 end date as part of a new partnership with the EU. The language suggests that it “would be in our mutual interest” in order to avoid a cliff-edge adjustment from one day to the next and give time for industries to adjust. During such an implementation period “access to one another’s markets should continue on current terms” and Britain also should continue to take part in existing security measures.

Continuity in the relationship is clearly a fundamental British objective, but continued access on current terms is a rather different matter. The speech refers to using the mechanics of Art. 50 to secure a delay beyond March 2019, suggesting that the exit date would simply be extended by unanimity; and that in turn implies that the same rules and obligations of membership – and the same benefits – would continue to exist, perhaps in a legal sense, perhaps in a pragmatic manner.

As for other chapters, this leaves a number of important questions open in terms of trade policy. We do not know exactly what kind of transition the EU might be willing to offer, and whether this would depend on the state of the negotiations in 2019. Time for reaching a final agreement is one thing, time for adjustment in implementation is another. We do not know exactly the form of such a transition and how far it might diverge from current membership conditions.

The UK side has said that it is important for business to have to make only one set of changes, rather than having to adapt first to a transitional arrangement and then again, at a later date, to the final scenario. This might be taken as meaning that the UK would remain in the existing customs union and the single market during the transition.

What would that mean for UK trade policy? Possibly, the UK would not be able to conclude its own trade deals during the transition. Equally, it might not be able to establish its own, individual WTO commitments or be able to function as a separate WTO member.

These possibilities would be anathema to Brexit proponents in the UK. They would presumably seek a looser form of transition which would permit the UK to operate independently on the international trade stage as from end March 2019.

There is therefore still a lot to play for in terms of hammering out the details of a transitional arrangement. As with many other issues, the battleground is initially within the UK Government which will need to propose a coherent plan. The reaction of the EU 27 cannot be taken for granted.