Even as the UK press has gone into triumphalism over Theresa May having gotten the European Commission to recommend to the European Council that the UK be allowed to progress to the next phase of negotiations, bits of reality are already intruding on this phase of Brexit delusion.
We’ll limit ourselves to three topics: Foreign Minister being quickly forced into a “this isn’t binding” defense when asked too many tough questions on the BBC; some bad news for the UK in the terse draft European Council statement; and a debate over what the “joint report” really says about Ireland.
David Davis’ Rapid BBC Backpedal on the “Joint Report”
As we indicated in our short note when the Brexit “breakthrough” was announced last Friday, the significance of the agreement on Friday was political. Arlene Foster of the DUP had temporarily withdrawn her coalition’s objections to the draft pact, allowing Jean-Claude Juncker and Michel Barnier to give it a seal of approval and tell the European Council that they thought the UK had made sufficient progress so as to be allowed to proceed to Phase 2 of the negotiations. In other words, what mattered was being (presumably) waived past a big procedural hurdle. As we wrote:
This is not a deal. Nothing is final. This is the UK having presented what is at best a letter of intent on the three issues that the EU had deemed necessary for the UK to have demonstrated “sufficient progress” to be allowed to talk trade.
In fact, even that reading turned out to be generous, since as we will see shortly, the UK and the EU will not discuss a trade pact in the second phase, but merely a transition deal.
The opening section of the so-called Joint Report From the Negotiators of the European Union and the United Kingdom Government on Progress During Phase 1 Negotiations Under Article 50 TEU of the United Kingdom’s Orderly Withdrawal From the European Union has lots of phrases that make clear the document is not binding. For instance:
“This report….records the progress made…”
“…agreement in principle”
“…nothing is agreed until everything is agreed…
“…does not prejudge any adaptations that might be made..”
“…is without prejudice to discussions on the framework of the future relationship..”
When you combine that with the elephant-the-room internal contractions on Ireland (no hard border anywhere, yet the UK is supposedly still leaving the Single Market and the Customs Union), it’s not hard to agree with Richard North when he wrote:
Mrs May has not so much kicked the can down the road as the whole cannery. But it is still there, looming on the horizon, ready to dominate phase two. In so doing, the parties have set themselves up for a fall – apparent commitments that aren’t actually commitments and which cannot be implemented.
Secretary of State for Exiting the European Union David Davis let the “this is not really a deal” cat out of the bag on the Andrew Marr show on BBC yesterday. From the transcript:
DD: No, it is conditional on an outcome. No, I’m afraid that wasn’t quite right. I mean it is conditional. It’s conditional on getting an implementation period, and conditional on a trade outcome.
AM: Let me put this very bluntly –
DD: Before I finish that, I’ve left something out. I said the trade outcome, but also the other elements of the treaty we’ll strike with them which will be security, foreign affairs, and other things.
AM: Okay. So in the unhappy possibility, but it’s a possibility that we get onto the trade side of the negotiations, phase 2 and the EU really, really take us to pieces on that, they don’t give us what we want, they’re not at all helpful when it comes to the City or commerce generally and they really have us over a barrel and we hate it and we say we’re not having any of that. In those circumstances are we committed to the regulatory convergence? Are you committed to paying the money?
DD: Well, no deal is no deal. Now – let me finish, you want the answer, otherwise you’ll be coming back to me later saying you only said this, didn’t say the second half. So number one. No deal means that we won’t be paying the money. Some of these areas –
AM: Okay, so the Chancellor is wrong about that?
DD: That’s – it’s been made clear by Number 10 already, so that’s not actually new. The second element about this is the other areas. Now look, one of the things we have had as a major objective, a major negotiating objective for the British government and we don’t normally lay our red lines out in public, that’s one of the things I’ve always said, is we want to protect the peace process and we also want to protect Ireland from the impact of Brexit for them. So we – you know – this was a statement of intent more than anything else. It was much more a statement of intent than it was a legally enforceable thing.
The government of the Republic of Ireland was not pleased to hear that. From RTÉ (hat tip Carolyn F):
A spokesman for Taoiseach Leo Varadkar has said both Ireland and the EU will be holding the UK to the Phase 1 agreement reached this week.
It comes as Britain’s Brexit minister David Davis described the UK government’s pledge to prevent any return to a hard border with Ireland after Britain leaves the EU as “a statement of intent” rather than a legally binding move…
Speaking on RTÉ’s This Week programme, the Government Chief Whip Joe McHugh said while the UK and the EU explored possible trade deals in the next phase of Brexit talks, the Irish position would be protected by Friday’s agreement which was binding in principle.
Asked how that could be reconciled with Mr Davis’ remarks, Mr McHugh questioned what was the point of the UK signing up to an agreement if it was not going to uphold it.
I assume the Irish officials are being obtuse out of political necessity. Agreements in principle are typically not legally binding yet parties agree to them all the time. They are a forcing device to make sure both sides are on the same page before they invest the considerable time and energy it takes to try to reach a definitive agreement.
Bad News for the UK in Draft European Council Statement
I’ve embedded the draft European Council statement at the end of this post. Unlike the flabby Joint Report, this document has the feel of a well made car, where the doors close with a satisfying “clunk”….or a steel trap snapping shut.
The document has a remarkable number of statements with major implications in a mere two pages. Starting with Item 1:
The European Council…calls on the Union negotiator and the United Kingdom to complete the work on the issues pertaining to the first phase, to consolidate the results obtained thus far…the second phase can only progress as long as all commitments undertaken during the first phase are respected in full and translated faithfully in legal terms as quickly as possible.
Translation: Don’t think we don’t recognize that you’ve still got a ton to do to complete the first phase.
…the European Council notes the proposal put forward by the United Kingdom for a transition period of around two years, and agrees to negotiate a transition period covering the whole of the EU acquis, while the United Kingdom, as a third country, will no longer participate in or nominate or elect members of the EU institutions…All existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures will also apply.
Translation: As long as you are in our house, you follow our rules. We shouldn’t have to say this but since your ultras like to put their fingers in their ears, this means the ECJ too.
While an agreement on a future relationship can only be finalised and concluded once the United Kingdom has become a third country…
Translation: We won’t negotiate a trade deal in any meaningful detail until you are out of the EU.
Note that this humble blog had identified this as a big stumbling block as soon as the Brexit vote was in. The EU made its position clear then, but as so often happens, no one in an official position in the UK appeared to be listening. From July 1, 2016 post, Brexit: Huge Spanner in the Works – Negotiation of New UK Trade Deals Verboten Till Exit Complete:
But the BBC interview with the EU’s most senior trade official reveals it’s even worse than that. The negotiations of the UK’s departure from the EU and new EU trade arrangements cannot take place in parallel. They must be sequential. No new deal talks with the EU until the exit is completed.
And the EU Trade Commissioner, Cecilia Malmstrom, also said the closest analogue was the negotiations with Canada (and recall that Canada is held out as one of the models for a post-Brexit relationship), took seven years to negotiate and will take an additional one or two years to ratify.
From the BBC (emphasis ours):
The European Union’s top trade official says the UK cannot begin negotiating terms for doing business with the bloc until after it has left.
“First you exit then you negotiate,” Cecilia Malmstrom told BBC Newsnight.
After Brexit, the UK would become a “third country” in EU terms, she said – meaning trade would be carried out based on World Trade Organisation rules until a new deal was complete…
WTO rules restrict the circumstances in which countries discriminate in favour of each other in trade. Otherwise, they must apply to each other the tariffs they apply against the rest of the world….
There is concern in the City that having to do business for years under WTO rules could be disastrous for the UK’s service industries.
As an aside, there is no default to WTO rules. The WTO Director-General made that point several times prior to the Brexit vote. However, I have yet to see anyone explain what needs to happen. If any reader can fill in the blanks, I would be grateful. For instance, from a May 25, 2016 article in the Financial Times:
Britain would face tortuous negotiations to fix the terms of its membership of the World Trade Organisation if it votes to leave the EU, its director-general has warned…
Britain joined the WTO under the auspices of the EU and its terms of membership have been shaped by two decades of negotiations led by Brussels. If Britain voted to leave the EU it would not be allowed to simply “cut and paste” those terms, Mr [Robert] Azevêdo said.
Britain would have to strike a deal on everything from the thousands of tariff lines covering its entire trade portfolio to quotas on agricultural exports, subsidies to British farmers and the access to other markets that banks and other UK services companies now enjoy.
“Pretty much all of the UK’s trade [with the world] would somehow have to be negotiated,” he said.
And from a June 26 2016 post, quoting the Financial Times:
…“no [World Trade Organisation] member can unilaterally decide what its rights and obligations are”, said Robert Azevêdo, the WTO’s director-general. In other words, unilaterally falling back on WTO rules is not as quick and simple as some have suggested and would still require agreement from the other 161 member countries.
From the comment section of Richard North’s blog: