The Cicero Brexit Insights team is producing regular updates, comment and insight on both the broad themes and the technical detail of Brexit. We aim to give readers a clear view of the issues and challenges as they are seen in Brussels, London and Member States. This week, the EU team analyses the level of convergence between the EU and the UK as the Brexit negotiations kick off and the UK team looks at media reaction following the Article 50 trigger.

 

In the past week, the main protagonists in the negotiations have set out their opening positions. The most striking observation is that there is an evident gap between the rhetoric observed in politics and the media on both sides of the channel, and the more measured positions developed by those who will actually be negotiating the deal. It is possible to see convergence on where the two sides would like to get to, and how.

Both sides would like to see a bold and ambitious future trade deal. The UK has recognised that this excludes ‘cherry-picking’ access to the Single Market but would like a future free trade agreement to go beyond those previously negotiated with other countries. Both sides recognise that a transition period is likely. The UK has acknowledged that it must settle its obligations on leaving the EU while the EU has said that the actual figure can be agreed towards the end – not at the start – of the negotiation.

If there is cause for optimism, a dose of realism is also required. Agreeing the destination is easy part, getting there is difficult. As our overview of the early positions shows, some fundamental points of contention have emerged. Moreover, anyone who has been involved in working on an EU legislative file will know that high level statements count for little if the technical detail does not match.

To give an example from financial services where EU legislation is developed in a multi-stage process. The initial ‘level 1’ law sets out the legal rules but it rarely provides sufficient detail for firms to act on. This is provided by ‘level 2’ technical standards that contain the detailed rules that apply more practically to what firms actually do. ‘Level 3’ provides technical clarifications and guidance. The level of granularity that firms need about their future trading relationships is all but impossible to provide in a constrained negotiating period, no matter how much goodwill exists. At best, high level principles will be agreed with the finer detail left to trade negotiations.

It is difficult therefore to see a scenario that avoids significant disruption to firms that trade extensively in the EU. The first moves by the two sides show that the negotiation will be conducted between grown-ups. But this should not downplay the enormity of the task that lies ahead.

James Hughes
Account Director 

 

With Article 50 now triggered, attention has turned to the EU as it formalises its negotiating guidelines. In the meantime senior ministers in the UK have taken advantage of the House of Commons being in recess to push the global trade agenda, with the Prime Minister visiting Jordan and Saudi Arabia, the Chancellor spending time in India and Trade Secretary Liam Fox heading over to Malaysia, the Philippines and Indonesia.

However, a quieter week on the UK side doesn’t necessarily mean an easier week. Following a difficult weekend where tensions over Gibraltar rose to fever pitch, with former Conservative leader Michael Howard comparing the situation to the Falklands, Theresa May has had to work hard to calm the situation.

With the world watching every comment made – or in this case not made – by the Prime Minister, we can expect more moments like this throughout the next 18 months, particularly on the more controversial aspects of the deal. However, when there is little else concrete to focus on, such comments are easily escalated with alarmist headlines and round-the-clock media coverage. May will hope that senior figures within her own party will choose their words more carefully throughout this process, rather than hinting at a willingness to go to war with other Member States.

This week we have also seen remarks made by May whilst in Saudi Arabia interpreted as an indication that free movement might continue in a transition period after the UK leaves the EU in March 2019, with headlines telling us we are now heading towards a softer Brexit than previously anticipated.

But delve a little deeper and this isn’t actually a change of stance from the Government. May has consistently said that Brexit will mean immigration is controlled, the jurisdiction of the ECJ will end and the UK will no longer pay into the EU budget. However, she has also said that she wants to agree on an “implementation period” to allow businesses and citizens time to adjust. During the long negotiations ahead, it would be wise to keep a cool head, rather than interpreting every new remark the Prime Minister makes as a potential change of direction.

 
Charlotte Adamson
Senior Account Executive

 

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