As autumn looms and chilly weather returns to northern Europe, Brussels and London face a big question: where do the Brexit negotiations stand as they enter what should be their final few months?
Let us assume both that the legal deadline of 29 March 2019 is not extended by mutual agreement of all of today’s 28 EU countries, and that the first three months of 2019 will have to be devoted to Parliamentary and Governmental processing of an initialed agreement. The irresistible conclusion therefore is that negotiations must be wrapped up by the end of 2018.
Keats described autumn as the “season of mists and mellow fruitfulness”. Brexit has been shrouded in mist for too long. Will the next few months prove fruitful?
The British Government’s position hammered out in July at the Prime Minister's country retreat of Chequers, and explained in a subsequent white paper, is, to simplify, to seek a close relationship with the EU on customs and goods and a more arms’ length one on services. It remains to be seen whether this is acceptable to the Conservative Party, the Houses of Parliament or the European Union’s countries and institutions, but for now it is what the British say they want. Prime Minister May’s margin of maneuver must be considered to be limited, which could be both an advantage and a disadvantage in her negotiations with the European Commission.
Let us assume further that summer stories about the consequences of no deal were in large part intended to rally support for a deal and that the British position remains as described above.
Will the EU play ball? In reality the much-vaunted indivisibility of the single market is more an aspiration than a reality. EU law is studded with special rules, opt-ins and outs, protocols and derogations. The UK, as a member state, was offered a deal in 2016, agreed unanimously by all EU countries, acknowledging the various special arrangements from which it benefits and offering further concessions on free movement of people. Over the years, other member countries have secured deals to reflect their national interest. More generally, no fundamental freedom is unconditional, and none has exactly same scope; for example, liberalization of services has lagged behind free movement of goods, much to the chagrin of successive British governments.
As for foreign (“third” in EU jargon) countries, limiting the focus to the countries of the wider European continent, the EU has developed a creative myriad of relationships to accommodate countries of various sizes and political outlooks. There is the European Economic Area comprising the EU, Iceland, Liechtenstein and Norway; there are the dozens of agreements between the EU and Switzerland; there is the pre-enlargement relationship with those aspiring to join one day; there are special arrangements with those probably too small to cope with the administrative rigors of membership (Andorra, Monaco, San Marino), and there is the uniqueness of the Holy See.
Imagination, flexibility and creativity are no strangers to European politics and law. Nor are they to the United Kingdom’s own constitutional arrangements, which have accommodated major changes to the way the country is structured and governed in recent years. Of course, there are limits. On the EU side, allowing a country to have its cake and eat it could encourage others to follow similar paths and endanger the European integration project. The UK’s positions are circumscribed by exegesis of the referendum result and exigencies of national and regional politics.
Nevertheless, enlightened self-interest could drive both sides towards a deal.
If customs and goods are solved by regulatory alignment and administrative and judicial cooperation, it seems that services, ranging from transport to finance, data transfers to law, accountancy to consultancy, will have to take their chances in individual negotiations. The EU’s preferred mechanism known as equivalence, whereby market access is offered in return for a foreign country’s enactment and enforcement of regulations it (the EU) judges acceptable, is not to the UK’s liking. The fate of services often lies effectively in the hands of quasi-autonomous European agencies of various kinds. What binds them into the general European system is the rule of law under the aegis of the European Court of Justice. Oh look, foreign judges, another British red line. Hard negotiations lie ahead at every turn and time is running short.
Will this happen? Are my assumptions reasonable? If a deal is done, will tomorrow’s leaders stick to it? Will the EU’s 27 countries maintain their hitherto impressive unity? The next few months will be crucial. Businesses should look carefully at their corporate interests in possible outcomes and decide whether and, if so, how to speak up. Manufacturers seem to have had some success in persuading the British Government that European trade and supply chains will prosper better under a common system of rules. The service sector should be weighing up its choices too. After all, services flow in both directions across the Channel. We all know about the continental reach of the City of London and magic circle law firms. But that’s not all. I like to tell audiences that I have a flat in a European capital city where the electricity is supplied by Électricité de France, the rubbish is collected by Veolia and the red double decker bus outside the door bears the name of the RATP (Régie Autonome des Transports Parisiens) with the emblem of the Seine flowing through Paris. Welcome to London.
Cross-border services are not subject to customs controls. Whether and how they are provided from one country to another are determined by regulation and supervision. The European Union is an imperfect single market in respect of services, but it provides a platform for scale and efficiency, together with a common set of rules to protect consumers, investors, savers and other users. In the digital economy, data protection has emerged from Europe as a new fundamental right and a key regulatory constraint in new economy.
In the next few weeks, the Conservative Party’s annual conference, meetings of European leaders and numerous other relevant developments in Parliaments, coalitions, opposition parties will add to the drama surrounding the Brexit negotiations, in a world not short of tension and spectacle. History is about to be written.
Sir Jonathan Faull is a Brunswick Partner and Chairman of European Public Affairs, having been with the European Commission previously. Jonathan’s most recent roles at the Commission included Director-General Financial Stability, Financial Services and Capital Markets Union, as well as Director-General of the Task Force for strategic issues related to the UK Referendum. These notes are his personal views.
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