The wide open plains of Phase 2

© European Union

Today’s European Council ran late. Not because of anything to do with the Article 50 negotiations, but because the discussion on the eurozone ran over. In the European Union, the priorities now – as they have been ever since June 2016 – have focused on members’ needs, rather than those who would leave the organisation.

This was highlighted by the speed of the Article 50 section of discussion – just 30 minutes – and the production of conclusions that sat very much in line with previous reports. Indeed, the biggest surprise appears to have been the ‘light round of applause’ (in Taoiseach Leo Varadkar’s words) for Theresa May at last night’s dinner: enough of the others around that table have similarly difficult domestic situations to handle to feel a degree of sympathy for May’s recent battles to get this far on negotiations.

The conclusions themselves confirm the preliminary deal that was agreed last week between the UK and the Commission, as set out in their Joint Report. Following the concerns over David Davis’ comments last weekend, the conclusions insist on the need for all commitments to be “respected in full and translated faithfully into legal terms as quickly as possible”: there are reports that a draft treaty text will be produced by the Commission early in 2018, to tie this down.

Importantly, the conclusions make the point that is often missed in the UK, namely that Phase 2 is not about ‘trade talks’, but about the arrangements for the period in which trade talks take place, after the UK has left the EU. The EU has been clear from the start of the process that it wants to treat the creation of a new relationship with the UK on the same basis as any other third state agreement, which necessarily requires the UK to be a third state, i.e. not a member state.

This means the conclusions focus on two, related elements.

The first is the establishment of a framework for negotiations on the future relationship. Here, the European Council has been rather vague, beyond noting the desire for a ‘close partnership’ with the UK, and the need to protect the functioning of Union policies and practices in whatever arrangement is reached. The absence of a settled British position on the nature of the agreement makes it hard to say much more, but the thrust of the document here is that both sides need to work up their options and preferences in the coming months.

The second is the nature of the transitional period. Here more detail is set out.

Essentially, the EU is offering a ‘full monty’ approach: the UK will not participate in any EU bodies or decision-making, but will continue to apply all EU rules and regulation across the full range of activities. This has the advantage that it continues current arrangements, but the implication of continued budgetary payments, membership of the single market (including free movement of people), not to mention Common Agricultural and Fisheries policies, might strike some sections of British debate as a high price to pay.

The trade-off is the noting of British desires to time-limit the transition to two years, so the government is able to point to a definitive break-point. That word ‘notes’ will be crucial in the coming months, since negotiators will have to decide whether to lock that into their final text, or to retain flexibility.

This matters because all the signs are that two years will not be enough to negotiate and ratify an unprecedented agreement. While there will be clear advantages in the starting point being one of identical policy positions, the range and scope of EU competences, and the need to create new mechanisms for managing both alignment and divergence between the two suggests that more rather than less time will be needed. In particular, if the negotiations are to be comprehensive, then they will produce a mixed agreement, which will need unanimous approval by EU member states (including some sub-national assemblies), a process that be itself could easily take a year.

But for now, this is in the future. May will be happy to take home the message of ‘sufficient progress’ and the EU will have been comforted by May’s commitment to the process. The nagging fear for all will be that this was the easy part and now the really hard work begins.

By Dr Simon Usherwood, deputy director of The UK in a Changing Europe.

Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of the UK in a Changing Europe initiative.

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