Henry Newman is Director of Open Europe.
Reports in the Daily Telegraph and elsewhere suggest the Brexit negotiations are in danger of stalling again, with the EU insisting that new solutions must be offered for the Irish border, and arguing that trade talks “will not start properly” until after March 2019. It’s still clear that both sides want to reach agreement on the withdrawal aspects of Brexit – the ‘divorce’ bits – well before the end of Article 50. But the EU now seems keen to defer the more detailed ‘future’ aspects of the negotiations into the transition, which as I’ve long argued, will be an extension of the negotiation period, albeit with the UK outside the EU.
Last week, Michel Barnier told a collection of European reporters that the EU would be prepared to respond to a change in the UK’s red lines – on leaving the Single Market and Customs Union – even during the transition. What this means is that the EU is open to a radical re-think on the nature of the UK-EU future partnership, even if that comes after formal exit negotiations conclude in March 2019. The EU has been consistently pressing the UK to soften its Brexit position and this is a further step in that direction. To my mind, this shift makes it more likely that the UK leaves the EU on track at the end of the two-year Article 50 period, but raises the stakes for the Government on crucial upcoming votes on a Customs Union.
David Davis has been keen to accelerate progress in the negotiations. He remains bullish that the vast majority of the UK’s future relationship with the EU can be locked down within the Article 50 period. In part, it’s his job to push ahead. But it’s also because he believes the UK’s hand weakens once we start handing over money, paying the so-called divorce bill. Roughly half of that money, according to the OBR will fall due before the end of 2020, and once that’s paid the UK’s leverage will inevitably diminish.
Davis is right to seek to get a move on. The longer the talks drag out, the greater the uncertainty for business. The Government should also press to agree as much as possible during Jean-Claude Juncker’s term as President of the European Commission which will end in late 2019. Of course these negotiations are highly complex, with much detail yet to be resolved. But it’s worth noting that the EU’s current negotiating mandate starts from the position of a zero-tariff, zero-quota trade deal. In most trade talks, the abolition of tariff and quota lines are the first significant hurdle which has to be cleared.
In Brussels last week, I found the mood was far from bleak, with UK officials quietly confident that a reasonable compromise agreement can eventually be reached. As Lord Lamont pointed out at an Open Europe event in that city last Tuesday, the talks have actually progressed remarkably smoothly so far – with no serious breakdowns or walk outs…yet. At the same event the CDU’s Elmar Brok, who chairs the European Parliament’s Foreign Affairs Committee, told the audience that the unity shown between the European Parliament, Council and Commission was unprecedented in his career – and he’s been an MEP since 1980. It’s certainly true that Brexit has brought much of the EU27 together.
Predictions that the German car industry would speak out to demand a particular Brexit deal have so far proved wide of the mark. Various north-European countries, which relied on the UK as a member to block EU reforms or policies which would have threatened their interests, offer warm words to Brits in private but little public support. Dutch Prime Minister Rutte even preceded a recent speech on the need for EU reforms by taking a pop at the UK and Theresa May for Brexit. Ireland, which promised to be Britain’s closest ally during the second phase of the talks, is engaged in a tense stand off over its border.
Some expect Germany to sweep in and offer some sort of a grand compromise. But, as my colleague Leopold Traugott explained, Germany has failed to respond effectively to many of President Macron’s plans for European reform. If Angela Merkel can’t sort out the Eurozone’s issues, will she really be able to ‘solve’ Brexit? David Cameron learned the hard way that waiting for Merkel to deliver is not always a winning strategy. And since then her hand has been weakened by her electoral setback. She’s no longer quite the figure she was. Meanwhile, new research from our sister organisation in Berlin finds that 65 per cent of Germans back the EU taking a no compromise position during the negotiations.
But that shouldn’t mean that the UK gives up. We need to keep making the case for a flexible, pragmatic trade arrangement with the UK and the EU that can work for both sides and be sustainable in the long-term. We need to keep pointing out that the EU itself has shown a remarkable flexibility in its existing arrangements – with Canada, the Ukraine, Switzerland and so on. There is no single model for third-country relationships. This case needs to be made in Brussels but also directly with individual member states. Our diplomats are busy doing just this.
And it’s not true that the EU has been perfectly united, nor that its negotiating positions have remained static. We have seen some openings, for example on the question of financial services. Earlier in the year, Gentiloni, the Italian Prime Minister, broke ranks and argued that the future deal must include financial services. Brussels initially tried to insist that the UK could only choose between a relationship like Norway or like Canada, but then Charles Michel, the Belgian Prime Minister, called for “Canada plus plus” and Emmanuel Macron told Andrew Marr that the UK could have something between the “full access [of the Single Market] and a trade agreement”.
If Merkel may not have the capacity or inclination to deliver a compromise, another European leader might. While most leaders seem more interested in the legal complexities and the technical details of Brexit, Macron seems instinctively to understand that Brexit – or the question of Britain’s place in Europe – is first and foremost about politics and diplomacy. Interestingly the French are starting to look outside of the framework of the EU as they formulate a new European military crisis force. It’s true of course that France sees opportunities from Brexit, not least for Paris as a financial or digital hub. And many French officials are hard-line about ‘protecting’ the Single Market. But it’s also true that Macron recognises the strategic importance of the UK. Might he just decide that its worth brokering a way through?