Insight
Theresa May and her six-pack of difficult deals by Charles Grant 28 July 2016
Britain’s exit from the EU will require not just a single deal, but at least six interlocking sets of negotiations. If the British government wants the talks to run smoothly, it will need to earn the goodwill not only of the countries in the EU, but also of those in the World Trade Organisation (WTO). The Brexit negotiations will take much longer and be far more complicated than many British politicians realise. One set of talks will cover Britain’s legal separation from the EU, the second a free trade agreement (FTA) with the EU, the third interim cover for the UK between its departure from the EU and the entry into force of the FTA, the fourth accession to full membership of the WTO, the fifth new FTAs to replace those that currently link the EU and 53 other countries, and the sixth co-operation on foreign, defence and security policies. The first deal, the divorce settlement prescribed by Article 50 of the Treaty on European Union, will divide up the properties, institutions and pension rights, and deal with budget payments. It will also cover the rights of UK citizens in the EU and vice versa. The treaty sets out a two-year period for this negotiation, extendable by unanimity. The 27 want Britain out before the June 2019 European elections, and before talks on the EU’s next seven-year budget cycle get underway (the current cycle ends in 2020), so will not extend the two years. Article 50 was designed to put the departing country at a disadvantage: once the two-year clock starts ticking it is under pressure to strike a bargain, lest it leave the EU without the protection of any new legal framework. The second deal will be some sort of FTA, probably similar in scope to that recently negotiated by Canada and the EU. The much-discussed ‘Norwegian model’ is not viable: Norway, as part of the European Economic Area (EEA), participates in the single market, but pays into the EU budget and has to accept free movement. The latter condition, and perhaps the former, would be unacceptable to the British Parliament. Although most MPs supported Remain, many of them now believe that the referendum result means that free movement must be restricted. But even a Canadian-style FTA will require the British government to make painful trade-offs. The FTA may well eliminate tariffs on manufactured goods – but only if the UK agrees to comply with CER INSIGHT: Theresa May and her six-pack of difficult deals 28 July 2016
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