UK faces tough negotiation with the EU

Last week, almost nine months after British voters decided by a 52-48 margin in last June’s referendum to leave the European Union, the Parliament completed its consideration of a bill authorizing Prime Minister Theresa May to notify the EU of the United Kingdom’s intention to withdraw from the EU. She will do so on March 29.

In accord with Article 50 of the Treaty on European Union, the notification will start a two-year negotiation of a withdrawal agreement that takes into account the framework of the UK’s future relationship with the EU. At the end of the two-year period, the EU treaties will cease to apply to the UK unless a withdrawal agreement has been negotiated that takes effect on some date other than March 29, 2019 or, in the absence of an agreement, the European Council – the heads of state or government of the 27 other member states - agrees unanimously to extend the negotiation.

After the UK notifies the EU, the European Council will adopt guidelines defining the framework for the negotiation and invite the General Affairs Council (the ministers responsible for European affairs) to authorize the opening of the negotiation. The leaders of the EU 27 will do that on April 29.

The negotiation will be led on the EU side by Michel Barnier, who was appointed chief negotiator by Commission President Jean-Claude Juncker. Barnier has previously served as a member of the French National Assembly and Senate, a minister, secretary of state for European affairs, and foreign minister in several governments, and a member of the European Parliament and on two occasions a European Commissioner.

It is much too early to hazard a guess about the outcome of the negotiations. But one thing is clear: the UK faces a very tough negotiation. Article 50 gives the EU 27 a large advantage in the negotiation. The two-year ticking clock means the EU 27 can insist that the UK accept their terms or face the prospect of a very “hard Brexit” – a Brexit without an agreement about the UK’s future relationship with the EU – and let pressure on the UK government mount from British firms as they become increasingly fearful of that “cliff-edge” scenario.

The EU’s hand will be strengthened also by the fact that any agreement must have the consent of the European Parliament, which has its own negotiator – former Belgian Prime Minister Guy Verhofstadt – and must be approved by a “qualified majority” of the Council, consisting of at least 20 of the 27 member states comprising at least 65 per cent of the population.

In her Lancaster House address in late January, Prime Minister May said that, while the UK doesn’t want to retain membership in the EU’s Single Market, it seeks “the greatest possible access” to the Single Market through a new Free Trade Agreement – one that “may take in elements of current Single Market arrangements in certain areas – on the export of cars and lorries for example, or the freedom to provide financial services across national borders.”

Recognizing the difficulty of negotiating a Free Trade Agreement in two years – most trade experts think it could take a half-dozen years – the prime minister proposed a “phased process of implementation” during which the UK and EU 27 would prepare for the new post-Brexit relationship. It wouldn’t be, she said, “some form of unlimited transitional status” but would provide time to phase in the new arrangements for the many issues involved. Barnier’s response was short and to the point: “Exit first, then we’ll negotiate an FTA.”

The prime minister also noted at Lancaster House that, while the UK doesn’t want to retain full membership in the EU’s Customs Union, it nevertheless wants tariff-free trade with Europe and cross-border trade that is as frictionless as possible: “I do want us to have a customs agreement with the EU. Whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived notion.”

There’s no reason to think the EU 27 will allow the UK to enjoy “elements of the current Single Market” for the export of motor vehicles and provision of financial services and tariff-free trade under a new or amended customs agreement. Both Barnier and Verhofstadt have made it clear that the UK won’t be able to “cherry pick” elements of the Single Market and Customs Union.

Barnier underscored that position Wednesday in his first major speech on the subject. Speaking to the European Committee of the Regions in Brussels, he said that before there could be any talks about the UK’s future trade relationship with the EU, there would have to be agreement on an “orderly exit.” That would require the UK to agree to meet its financial responsibilities to the EU for its share of the debt, pensions, expenditures and investment incurred while it was a member – an amount Brussels estimates at €55-60 billion.

An “orderly exit” would also require the UK to agree to secure the rights of EU citizens in the UK and UK citizens in the EU and maintain the unimpeded cross-border trade and travel that now exists between Northern Ireland and the Republic because of the Single Market and UK-Ireland Common Travel Area, as well as the full force of the 1998 Good Friday Agreement.

Barnier also made it clear that, having chosen to leave the internal market and customs union, the UK won’t be able to participate “à la carte” in the single market and customs union. And he made it clear once again that a Free Trade Agreement won’t be negotiated in the two years following the March 29 notification and prior to the exit.

He did suggest that, once the exit issues and framework of the future relationship are agreed, it might be possible to discuss a transitional arrangement during which a free trade agreement might be negotiated. But that transitional period would be limited in duration, the UK wouldn’t be able to participate “à la carte” in the Single Market during the transition, and it would have to respect the jurisdiction of the European Court of Justice during the transition. And he made it clear that, although the withdrawal agreement requires the approval of only a “qualified majority of the EU 27 member states, any subsequent Free Trade Agreement will require the approval of all 27 member states and their parliaments.

It’s much too soon to hazard a guess about the outcome of the negotiation. But one thing is clear:  It will be a very tough negotiation for the UK.

David R. Cameron is a professor of political science at Yale and director of the program on European Union studies in the MacMillan Center.