Tale of Two Cities - Part IX

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31 March 2017

by Brexit task force - Cambre AssociatesNewington

 

On Wednesday 29 March 2017, 278 days after the UK voted to leave the European Union, Tim Barrow, the UK Ambassador to the EU, delivered a letter on behalf of the British Prime Minister notifying Donald Tusk, European Council President, that Britain is triggering Article 50. As the countdown to Brexit began, each side made its first moves in the negotiation game. Now, the EU and the UK have strictly two years (which, taking weekends, holidays and approval mechanisms into account, commentators have pointed out effectively boils down to less than a year of actual negotiation time) to agree on what is arguably the most momentous divorce settlement between states in Europe’s history. Unsurprisingly, the top priority for both parties will be to reach agreement on the big political issues (read money and citizens’ rights) and on a way to buy more time for the rest.

 

The view from London

Ready to start…?

Viewed from the UK, the letter from Theresa May set a conciliatory tone, describing the UK’s desire for the EU to continue to succeed and prosper, and for the UK to develop a “deep and special partnership” with the Union. In line with the Government’s position, the letter emphasised on no fewer than four occasions that discussions on the terms of the future partnership should take place in parallel with the exit negotiations. This is, as UK Brexit Secretary, David Davis conceded on Day One of the two years allocated to negotiate Brexit, “an area of argument”. A flurry of telephone calls from May to her fellow leaders revealed that there was little appetite from the EU27 side to budge on this issue.

From the UK negotiating team’s perspective, some factors can inflame the negotiations: how strongly the EU feels compelled to emphasise the differential benefits of being inside the gang to being outside (Tusk dismissing UK Foreign Secretary Boris Johnson’s ‘have our cake and eat it’ philosophy); the risk of the European Parliament flexing its muscles to disrupt the negotiations (the leader of the largest group in Parliament predicting “we are going to .. complain about almost everything”); and, crucially, the heightened risk to the strength of the Union between England, Scotland, Wales and Northern Ireland from the contentious issues that will be raised (Scotland’s First Minister Nicola Sturgeon calling Brexit “an act of self-harm on a scale barely understood”).

The other Union; the other letter

Indeed, negotiations to extricate the UK from the EU are only serving to stir up more questions over the strength of the United Kingdom itself. Nicola Sturgeon is a constant thorn in the Prime Minister’s side - calling for a second independence referendum for Scotland between autumn 2018 and spring 2019 once the Brexit negotiations are concluded but before the process is complete and ‘it is too late to choose a different path’. Despite May insisting that no such referendum could occur before the UK leaves the EU, this week Sturgeon succeeded in winning a vote of support for her plans in the Scottish Parliament, which put further pressure on the British Prime Minister. In quite a dramatic move which seeks at the least to enhance Edinburgh’s leverage in view of the Brexit negotiations, Sturgeon then sent a letter to May demanding that she allow the referendum.

All the while, instability continues in Northern Ireland with parties failing to form a power-sharing executive following an Assembly election earlier in the month. Friction is only increased following a leaked letter confirming the British Government would honour its commitment (in the Good Friday Agreement of 1998) that Northern Ireland could leave the UK and re-join the EU as part of the Republic of Ireland after Brexit if it voted to do so in a referendum.

Not so easy

Whilst the wheels are set in motion for negotiations in Brussels over the terms of the UK’s exit from the EU, there will be parallel activity taking place in Westminster. This will begin the process of the monumental legislative upheaval that will be necessary for the moment when powers are returned to Whitehall. This spring (probably May) the Queen’s Speech, laying out the Government’s legislative programme for the year ahead, will include a Great Repeal Bill, to bring all EU law onto the UK statute book and putting an end to EU law having authority in the UK.

According to a Whitehall White Paper on “Legislating for the United Kingdom’s withdrawal from the European Union” the bill will be accompanied by separate bills of primary law to amend existing rules on key areas that will be most affected by Brexit, as well as create powers to make secondary legislation and regulate the interaction with devolved administrations and overseas territories. However, as the bill may allow the modification of laws without parliamentary scrutiny, it remains to be seen whether and how the whole process will be digested by the legislature.

Such a mammoth legislative programme is unprecedented and will be a significant test for legislators – unsurprisingly opposition parties are already on high alert, with Lib Dem Leader Tim Farron pledging to ‘wage legislative war’ to ensure the Government is held to account and sufficient safeguards are put in place. The battle between the Commons and the Lords on the bill triggering Article 50 (whereby the Government-led Commons decisively overruled the concerns of the upper house) and the street demonstrations on the 60th anniversary of the EU highlighted how powerful opposition to Number Ten’s chosen Brexit course continues. Furthermore, David Davis’ admission that the “no deal scenario” had not been assessed – despite being threatened by London – and Chancellor Hammond’s U-turn over a Budget tax rise, show that the government does not have much leeway to take the hard choices that Brexit might require.

 

The view from Brussels

The Scarlett Letter

Brussels has been ready and waiting for this moment for a while. The notification was received with sobriety which combined a sense of resignation and fortitude: ‘nothing has changed; we are sorry but ready’ was the message. Commission President Jean-Claude Juncker was characteristically blunt, stating that the UK will regret this decision. Angela Merkel and Francois Hollande were quick to again reject the UK demand for parallel discussion of the divorce terms and any new trading relationship. European Council President Donald Tusk reiterated the official line that the “Union will act as one and preserve its interests”, namely minimising uncertainty and impact for EU citizens, businesses and member states.

This was quickly reinforced by the publication on 31 March of the Council’s draft negotiating guidelines for the Commission’s Chief Negotiator Barnier, which set out the following principles:

  1. Ensuring an orderly withdrawal which respects the rights of citizens is a priority;
  2. There will be no compromise on the unity of the Single Market and its four freedom (sectoral deals or partial participation are ruled out);
  3. The Union’s negotiating position will reflect unity (read this as a caution against ‘divide and rule’ tactics);
  4. The sequence of the negotiations will be withdrawal first and then talks on a new relationship. However, the EU is open to “preliminary and preparatory discussions” to “determine transitional arrangements” as legally possible and convenient for the EU, which would be clearly defined, limited in time” and require “existing regulatory, budgetary, supervisory and enforcement instruments and structures to apply.”

Meanwhile, the European Parliament, which has regularly warned that it might veto the deal if it is side-lined, also published a motion for resolution restating its usual tenets (worse out than in, unity of the four freedoms…) and setting limits to the talks (no trade deal before withdrawal and a three year limit on any interim agreements). The motion will be debated on Wednesday 5 April, but is already supported by all major parties – with the leader of the EPP already stating that the bloc will not go soft on the UK. Bolstering the EU’s position, even US President Trump’s Trade Representative acknowledged that the UK cannot sign trade deals until its EU withdrawal is complete.

Lessons learned…?

If May’s insistence on the UK’s desire for a “deep and special partnership” (repeated seven times in the letter) spoke of conciliation, what did not play well in Brussels was the trade-off foreshadowed in her letter between such an economic partnership and continuing security cooperation. Coming hot on the heels of a terrorist attack in London coinciding with the first anniversary of the Brussels attacks last 22 March, the EU – with EP Brexit Negotiator Guy Verhofstadt at the forefront – perceived this positioning as a cynical first thrust in the duel and a threat that jeopardises citizen’s safety on the altar of a better deal (for the UK).

Conversely, with pro-EU Presidential candidate Emmanuel Macron on the rise in France, former European Parliament President Schulz returning the upcoming elections in Germany to a race between the traditional centre-left and centre-right, and a win against Eurosceptic populism in the Dutch elections, optimism is rising on this side of the Channel. The forced confirmation of Tusk as European Council President and the signature of the Rome declaration including a reference to a two-speed EU even returned Eastern provocateurs to the ranks. The EU faces major challenges and choices ahead, but perhaps Brexit can be a lesson learned after all.

Just the beginning

Now that the clock is ticking EU stakeholders are gearing up for the negotiations. The Dutch Parliament called for close trading relationship with the UK, as did Hungary. CEPS defined the economic impact of Brexit on the EU as “virtually insignificant”. European consumers and trade unions put forward their positions, and European Ombudsman Emily O’Reilly recalled that citizen’s rights and transparency are an utmost priority. Conundrums remain – and not only about the Brexit bill: transitional arrangements would require accepting ECJ jurisdiction, a red line for the UK which will be hard to maintain; Frankfurt seems to be succeeding in drawing financial services that move to the Continent; Italy has earmarked budget and sent Ministers to London to secure the EMA for Milan; and Spain is propping up its representation in Brussels, as well as its firm territorial stances on Gibraltar and Scotland (read Catalonia). With analysts saying that France will take the lead in the Council, but Theresa May calling Merkel on the eve of the Article 50 letter, the usual Brussels political complexity is undiminished.

The EU timeline is set to get busy, starting with the need to square the political preferences of the 27. EU Ambassadors will meet in the coming days to discuss the draft Council guidelines, two Sherpa meetings will tweak them on 11 and 24 April and send them back to COREPER Ambassadors on 26 April, and the EU27 General Affairs Council on 27 March will ready them for final approval by an EU27 ad-hoc Summit on 29 April.

 

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Tale of two cities - Part IX (310.85 KB)

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