ISSN 2330-717X

Draft Brexit Agreement Important Stage In Procedure For UK’s Disengagement From EU – Analysis


The leaders of the EU countries approved the guidelines on the framework for a future relationship with the UK after Brexit at the EU summit, which ended in Brussels on March 23.

“Decision: EU27 has adopted guidelines for the future EU–UK relations after Brexit,” European Council President Donald Tusk announced on Twitter.

Earlier London and Brussels have agreed large part of the agreement that will lead to the UK withdrawal from the EU.

“We confirmed the agreement on future citizens’ rights. We agreed that British citizens and European citizens of the 27 who arrive during that transition period will receive the same rights and guarantees […], although it remains to agree on pension provision issues. We confirmed the agreement on the financial problem [reached in December 2017, according to which the UK will continue to pay contributions to the EU budget until the end of 2020]. We agreed on the terms of the transit period. […] We have made a big step forward, but we need to understand that we are talking about the preparation of an international agreement in which the full legal accuracy of the wording should be achieved,” the Commission’s chief negotiator, Michel Barnier said during a joint press conference with British representative David Davis in Brussels on the results of the next round of talks on March 19.

In addition, the parties determined that the transition period after Brexit will end in December 2020.

“We agreed that the transit period will be limited in time and will take 21 months from 30 March 2019 when Great Britain leaves the EU. During this period, Britain will be able to enjoy all the rights of the EU member, remaining a member of the single market, but will not be able to participate in the decision-making process in the European Union,” Michel Barnier explained.

Business representatives positively assessed these agreements, getting the opportunity to build development strategies for almost two years ahead. Nevertheless, a number of unresolved issues between the European Union and Britain, including the Irish border problem, can significantly complicate further discussions.

Commenting on the negotiation process between the UK and the EU, Craig Erlam, Senior Market Analyst, OANDA, called the draft agreement on the transition a very important and decisive step, stressing however that most of the work is yet to come.

“Both sides have had to concede on certain issues but ultimately, the most important aspect of this two year negotiation will take place over the next six to nine months. This will determine how successful Brexit will be,” he said.

“Whether the negotiators will or not will reach an agreement depend on how much appetite there is for one from both sides, which includes the willingness to concede on certain issues, likely including previously stated red lines. The risk of a ‘no deal’ outcome is real but benefits no one and I therefore believe it will be avoided,” Craig Erlam said.

In his opinion, a solution to the border problem is likely to be extremely complex.

“It will depend on the final relationship and how tightly aligned the UK and EU is from a regulatory standpoint. There will need to be concessions though as the absence of a hard border will require a border of some kind between Northern Ireland and the rest of the UK,” the expert explained.

According to him, Belfast will remain more aligned to the EU than the rest of the UK.

“However I believe agreements will be made to ensure it is not cut off from the rest of the UK,” Craig Erlam stressed.

Meanwhile, European politics expert Simon Usherwood, University of Surrey, shared the opinion that Ireland remains the biggest concern for the process.

“There has been no real movement from the Joint Report of December last year, and while the UK says it doesn’t like the backstop arrangements in the draft agreement, it has also not been able to produce viable alternative models,” the analyst said.

However, according to him, reached agreements became an important step in getting to a final agreement in time for the UK’s departure.

“It demonstrates the extent of agreement between the two sides and confirms the goodwill to resolve the remaining points. While largely on the EU’s terms, the draft does acknowledge various priorities for the UK, as well as providing a basis for getting to a new relationship in the longer term,” Simon Usherwood said.

At the same time, he believes that the “period to December 2020 looks still to be very tight to negotiate and ratify a comprehensive trading relationship.”

“The chances of a deal being in place in time for the UK’s withdrawal from the EU in March 2019 are now higher than they have been at any point in the Article 50 process. If the UK continues to make concessions in the way it has, then a final text should be agreed in October,” the expert suggested.

In turn, Georgina Wright, Researcher on the Europe Program at Chatham House, drew attention to the fact that the parties discussed an agreement about the UK’s withdrawal from the EU on 29 March 2019 and the terms of the transition period until December 2020, which does not cover the future trade agreement between the UK and the EU.

“It is currently unclear whether the transition period will be long enough to negotiate the future [trade] deal; let alone get it signed and ratified by member states and their parliaments. But at least it has reduced the risk of a no deal outcome, as the transition will grant the EU and the UK more time for negotiations,” the analyst said.

However, according to her, there are still some outstanding issues, such as the border between Northern Ireland and Ireland, which could delay talks about the future.

“Some suggestions [concerning the Irish border issue] have included setting up cameras at the border and investing in new technology – but this would still need to be developed, and it’s unclear whether this can be done in time, before the end of the transition in December 2020,” Georgina Wright explained.

Nevertheless, the European Council’s negotiating guidelines on the future relationship are encouraging, she said.

“They show that EU countries want an ambitious trade agreement, as well as strong partnerships in security, defence and law enforcement. Now, the UK must present its proposals for a future deal as well as resolve outstanding issues around the withdrawal. […] The Prime Minister is under pressure. The UK is currently split — the Cabinet, the Parliament and the country — so Prime Minister May will not only need to convince the EU, but also people at home that this is the best deal for the UK and the EU. That will be a challenge,” Chatham House expert said.

Meanwhile, Peter Taylor-Gooby, Professor of Social Policy at the University of Kent stressed that he does not consider the draft agreement as a breakthrough, because “the UK has given in on all counts.”

According to him, the prospect of a trade deal between the United Kingdom and the EU depends entirely on London’s willingness to give in yet again.

Analyzing the further development of events in the country, Peter Taylor-Gooby paid particular attention to the lack of consensus on Brexit and the conditions for its implementation within the UK.

“Big struggle over access of UK finance to EU exacerbates splits in Conservative party between pro- and anti-Brexit factions, as people realise that the Brexit they want will be damaging to UK ruling class. Labour has to jump one way or another, I think it will become anti-Brexit and win a snap election on the Brexit issue round about early 2020, but will have bitter internal struggles,” the expert said.

John Fender, Department of Economics, University of Birmingham, also noted that as far as Brexit goes, he’s not optimistic.

“Suppose that the final outcome is that the UK negotiates a free trade deal with the EU, does not participate in the EU’s preferential trade deals with other countries, but is free to negotiate its own trade deals with other countries. In this case there will need to be customs checks on goods being transported between the UK and the EU and firms will need to produce certificate of origin documentation. The reason is that if the UK has a preferential trade deal with a country which does not have a preferential trade deal with the EU, exporters from that country may try to send goods to the EU via the UK. In the absence of customs checks, they will be able to do this without paying the tariffs they should pay to the EU,” the analyst explained.

“In fact, in any plausible scenario, there would need to be customs checks on goods being transported between the UK and the EU. This would not be the case if the UK stayed within the Customs Union and participates in the EU’s preferential trade deals with other countries, but this is almost certainly not going to happen,” John Fender added.

In his opinion, it seems inevitable that there will need to be a ‘hard border’ between the UK and the EU after Brexit takes place.

“However, a commitment has been made to avoiding a hard border between Northern and southern Ireland. I see no way of solving this Northern Ireland border issue,” he said.

In turn, Neil MacKinnon, Global Macro Strategist at VTB Capital, stressed that he would not say that the transitional deal is “decisive” though it is a step forward to Brexit.

“My concerns are that a proper exit is delivered. In other words, the UK regains primacy of its law and regulation, control of its borders and has the ability unilaterally to negotiate its own trade deals. The problem with the transition period is that during the transition period we are subject to EU laws and regulations but without any say in the decision-making process. The good thing is that there is a definite end-date [of the transit period] otherwise the allegation that the UK had become a ‘vassal state’ which is clearly totally unsatisfactory,” the expert said.

He also reminded that the parties have to find solution to a number of complex issues.

“There are still outstanding issues over UK fishing rights. The Northern Irish border issue is also unresolved but the wish of the majority of the Northern Irish people is to remain within the UK and not part of the EU. There is no reason why the current state of affairs cannot be retained,” Neil MacKinnon said.

At the same time, he believes that a “no deal” outcome will not cause much damage to the UK.

“In fact, I support a ‘Clean Brexit’ as I am in favour of the UK taking back control. The UK is the 5th biggest economy in the world and it is already the world’s largest financial centre. Not one bank or financial institution will move “lock, stock and barrel” to Frankfurt and Paris. The fact is that EM economies account for half of the global economy and are the main source of growth and trade. The Eurozone economy by contrast is characterised by low growth and high unemployment and accounts for a declining percentage of world output and world trade,” the analyst explained.

“Brexit allows the UK to escape the protectionist EU which is designed to support EU farmers and big business, allows the UK to promote free trade and for the UK to reduce import tariffs to the benefit of UK consumers, as well as pursuing trading and investment opportunities elsewhere. Beijing, not Brussels, is where it’s at,” Neil MacKinnon concluded.


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