21 Mar 2018

Transition Time. The spectrum of uncertainty about Brexit is narrowing

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The media appetite for Brexit material would appear, on recent evidence, to be abating. Despite the fact that there is an EU Council meeting tomorrow and Friday, and this represented an explicit target for the UK and the EU-27 to reach a transition/implementation agreement, there was little coverage of any of this over the weekend.

By contrast, media exposure for anything and everything to do with the Salisbury Nerve Agent incident and whether or not Jeremy Corbyn is an active accomplice of the Russian regime or merely a naïve tool of it was enormous. On the morning that Michel Barnier and David Davis were scheduled to meet in Brussels, the BBC News website had their encounter ranking below “Ant McPartlin ‘arrested on suspicion of drunk driving’ on Sunday”. In a disturbing indication of priorities in certain newsrooms, two hours after it was clear that Messers Barnier and Davis had reached an accord, the ITV Lunchtime News still chose to lead on Mr McPartlin’s alleged behaviour.

Which is all somewhat unfortunate, really. For the agreement on the legal text for the transition - and a substantial narrowing of the divide in translating the political settlement over the UK’s leaving the EU into the necessary legal language too - does actually constitute very significant progress.

There are also important clues as to the ultimate ‘end state’ for the UK-EU relationship in what has been secured so far. It was barely five months ago, after all, when virtually the whole of Brussels was briefing that the entire attempt at a negotiated solution was doomed to failure with the UK set to ‘crash out’ of the European Union on 29 March 2019 as a consequence. While such a doomsday scenario is theoretically possible, it is increasingly unlikely. The narrative is thus becoming rather dull which might explain why Putin and poison or the antics of Ant are deemed more lively.

What was agreed on Monday is almost certain to be endorsed by the rest of the EU very shortly. The transition arrangement represents something of a compromise. The UK will move into a ‘standstill’ relationship with the EU between March 29 2019 and 31 December 2020. It will not be part of the formal political apparatus of the EU but will trade freely with it and also obey its rules as part of the bargain. It is, strictly speaking, within the ambit of any new EU regulations and directives adopted in that period, although there will be the creation of a Joint Committee as a forum to which the UK can appeal if it dislikes any new obligations which emerge in this timetable.

While this is weaker than a ‘right of reservation’, which exists for members of the European Economic Area, in reality the short transition combined with the fact that it typically takes two years for any new EU rule to come in to force, and high probability that not much will be done in the coming last year of the EU Commission and European Parliament, means that areas of contention here will be extremely limited. The UK has secured the right to negotiate and to sign free trade agreements elsewhere before December 2020 but they cannot come in to effect until January 2021. Free movement will continue until the full exit.

This is not a package that truly enthrals anyone, but equally it is not totally unacceptable either. That the main controversy when the text was revealed concerned the Scottish fishing industry is telling. In truth, while there will be an element of huff and puff in the hard Brexit camp, and some mutterings about the UK still at risk of serving as an EU ‘vassal state’ for 19 months, no one in the current Cabinet is likely to bolt to the backbenches on this deal, resigning ‘on principle’ in order to put themselves at the head of a revolt within the Parliamentary Conservative Party. Absent such a move, Theresa May can be confident that this arrangement will stick and, while Labour will (and has) protest that matters could have been handled better, such complaints do not matter much. Her chances of surviving in 10 Downing Street until at least the aftermath of the political Brexit itself are looking much more promising. Her handling of the Salisbury saga has reinforced her position further.

Why was this stage of the negotiations process less contentious than the first instalment?

In part, it was always destined to be because both sides accepted the desirability of a transition and the Prime Minister had already made many of the concessions required to secure it in her Florence address last September. Despite that, matters could have been more contentious than they were in terms of the atmospherics surrounding the talks and, like last year, sticking to the original schedule was far from certain. The truth is that lessons were learned during phase one that eased phase two.

What were those lessons? The first was not to draw too many lines in the sand at the outset which would only have to be scrubbed away later. This was a process with less posturing than the first one. Allied to this, rather than continue to hold monthly meetings which would inevitably be portrayed in ‘gladiatorial’ or ‘zero sum’ terms, M. Barnier and Mr Davis met publicly once to start matters off and then again right at the end to sign them off. This depersonalised and depoliticised the dialogue and allow technical practicalities to take centre stage and be dealt with relatively discreetly. Finally, particularly on the UK side, there was a deliberate strategy of media silence, unlike the briefings to favoured (usually pro-Leave) newspapers in an attempt to project an image of a later-day Churchill. It is reasonable to hope that this lowering of the temperature and the volume will be continued.

Won’t the Irish border issue bring matters back to a shuddering halt later on this year?

It is right to identify the Irish border question as the most politically sensitive matter remaining in the Withdrawal Agreement. Almost every other complexity relating to the mutual rights of EU and UK citizens and the financial settlement appear to have been settled. There will be intense haggling over what the ‘backstop’ option is to avoid a hard border between north and south if either of the preferred solutions via a sweeping free trade agreement on a technology-led scheme fail to arrive. One suspects that a small number of officials will spend their summer months scouring dictionaries to find a word which means something stronger than “compatible” but weaker than “alignment”.

Yet the blunt truth is that if both sides want a deal (which they do) then they can find one. The EU has a long history of innovation and turning a blind eye if it deems it convenient to do so. The most prominent example of this is Cyprus. The map of the EU shows the whole of the island of Cyprus as an EU member. This is reinforced by the fact that in its budget calculations the whole population of Cyprus is taken as the base point and the same applies in discerning the number of MEPs that it is entitled to in the European Parliament. Which is fine, except that one-third of the territory of Cyprus and more than a fifth of its people are in northern Cyprus and are not inside the EU at all. Compared with this charade, pretending that tech on the Irish border works better than it does would be easy.

So where is the ‘end state’ heading then?

Kiev. Or, more specifically, it is becoming increasingly probable, as BVCA Insight has asserted over the past few months, that the working model for the future EU-UK relationship will be a variation of the ‘Reverse Ukraine’ thesis, rooted in the Deep and Comprehensive Free Trade Agreement struck between the EU and the Ukrainian Government as the alternative to membership. This allows for a wide-ranging free trade deal in goods and an essentially sectoral outcome in services, in which those within Ukraine who want close to unfettered access to the single market agree to be ‘rule takers’ in order to achieve that outlook. As the UK is far richer than Ukraine, some financial contribution to EU coffers is also likely. Put Canada, Norway and Switzerland to one side. Ukraine is the end state.

Tim Hames
Director General, BVCA


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