Tale of Two Cities – Part XIII

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14 September 2017

The view from London

No man’s land

The UK Government is showing a stiff upper lip but the lack of progress made during the August round of EU negotiations came as a disappointment to ministers and officials as their hopes of catalysing talks through the publication of a swathe of ‘detailed’ position papers failed to break the stalemate caused by incompatible negotiating strategies.

Frustrated by the EU’s insistence on agreeing ‘divorce terms’ before talks broaden, Brexit Secretary David Davis called for negotiators to ‘get on with it’ and to adopt bigger picture thinking.

The news on Wednesday that this month’s round of negotiations will be delayed, by mutual agreement, to 25 September to allow for further ‘consultation’ suggests that hopes of speeding up the negotiating process may be in vain, particularly when it is now understood that the Treasury is beginning to work on contingency plans for a no-deal scenario.

However, Theresa May is expected to use a speech scheduled to be given on 22 September to try to break the deadlock by setting out her vision for a potential transition period for EU membership (something that has slowly been accepted across her Cabinet as necessary). Rumours are also circulating that the prime minister will use the speech to outline the need for some payments to continue to the EU, which could go some way in allowing officials to make headway in any divorce fee debate.

The Withdrawal Bill and a domestic agenda

Meanwhile, the second reading of the EU Withdrawal Bill passed with less controversy than expected by 326 to 290 votes, although turbulence is likely during the bill’s legislative passage with amendments and rebellions expected from both the opposition and the Conservatives. As of Tuesday, more than 130 amendments had been tabled and nine Conservatives, including former ministers Ken Clarke, Anna Soubry, Nicky Morgan and Dominic Grieve, are backing a series of changes that include requiring a final deal with the EU to be approved by the UK Parliament. While the nine MPs would not be enough to overturn the Conservative’s majority, it is reported that even staunch Brexit MPs are likely to back certain amendments, meaning the Government will be forced to make concessions.

This week the Government successfully passed a motion that will allow the party to have the majority share of members sitting on bill committees, a move which will make passing legislation easier. The 2017 general election result had previously meant the Government’s working majority in the Commons had not applied to parliamentary committees (as the supporting DUP party did not win enough votes to secure seats on the committees). While the Government said the motion was vital for translating the EU referendum into reality, opposition members called the executive a ‘power grab’ and ‘constitutional outrage’.

Domestic policy will be grabbing the UK headlines during the party conference season this month. Labour has been better organising itself following the party’s unexpected success in the 2017 general election and has become a more effective opposition party. While clear inner-party conflict remains (nine Labour MPs rebelled against the party whip to vote with the Government during the EU Withdrawal Bill’s second reading), there have been policy successes for Labour this week as the Government climbed down from its public sector pay cap position. In the coming week the official opposition will maintain pressure on the domestic agenda, including forcing the Government into an embarrassing vote to implement an increase in tuition fees.

It is understood that Theresa May is impatient to build a legacy beyond Brexit, but with rebellion building in her party and trouble brewing in the form of a more emboldened opposition, the prime minister will need to spend her energies surmounting one challenge at a time.

 

The view from Brussels

Tenacious or stubborn?

The last round of Brexit negotiations, which ended with August, was a déjà vu. The EU stood firmly behind its original priorities. London continued to delay answers and solutions for the divorce terms. Brussels, baffled, watched the UK Government provide papers with abstract concepts on the future relationship and wishful thinking about how 'flexibility and imagination' can deliver a good result for both sides.

Citizens' rights, the role of the European Court of Justice, and above all money, remain stumbling blocks. On the Brexit bill, EU Chief Negotiator Michel Barnier was candid, saying that 'after this week it is clear that the UK does not feel legally obliged to honour its obligations after departure' – neither with EU businesses and regions nor with third countries.

The bunch of papers that the UK Government had published added little clarity to the various issues tackled. European Commission President Jean-Claude Juncker said none of them was even 'satisfactory', whilst it was clear they mostly failed to address the exit terms in significant detail. Meanwhile, the line of the EU remains the same: we must negotiate the divorce terms first, and cherry-picking is simply not possible.

Fading red lines

Little by little, the British position evolved, however, sparking hopes in Brussels that London was finally using the little time left to deal with reality. Prime Minister Theresa May conceded EU law will have a role in the UK long after Brexit. And Foreign Minister Boris Johnson and Brexit Minister David Davis said the UK will pay what it owes to the EU.

Indeed the need for a deal of some sort seems the sole main agreement reached by the parties. This is especially true as regards the Ireland-Northern Ireland border and protecting the Good Friday peace agreement, for which Barnier's deputy Sabine Weyand and the UK Department for Exiting the EU's Permanent Secretary, Oliver Robbins, have been specifically tasked. This is also true, if as rumoured the UK is planning to put forward an offer of EUR 50 billion to pay for the Brexit bill and intensify negotiations to a weekly basis.

But this might still be not enough, and perhaps too late. As British red lines fade further, so does European patience, and finding common grounds is ever more hard and urgent. Too many irritants remain on both sides: Wales and Scotland accusing London of power grab; a stronger Labour opposition now calling for a ‘remain’ (in the single market) option; European fears that the UK might force trade talks through the delicate issue of the Northern Irish border, jeopardising the Good Friday agreement; no clarity about the divorce bill and EU citizens’ rights – as deportation letter recently sent ‘by error’ confirmed; and the deadline for achieving 'significant progress' only six weeks away.

Moreover, as clearly stated in this year’s State of the EU annual speech by the Commission President, the EU now has bigger fish to fry and more important tasks to get on with.

Wasting time and a closer pitfall...

The current deadlock confirms that both sides are wasting money, time and reputational capital. Barnier’s satisfaction for the slight progress on Northern Ireland and citizens’ rights was overshadowed by his demand to the counterpart to 'get serious'. May’s hope of copy-pasting EU deals as UK ones, expressed during her trip to Japan, was deferred until when the UK-EU relationship will be clearer. As Juncker observed during his State of the EU address, both sides may eventually regret this separation.

EU officials are increasingly baffled at what they see as a lack of preparation and ultimately understanding of the EU on the British side. European business is worried too, as shown by the joint call by the Association of German Chambers of Commerce and its counterpart at the British Chambers of Commerce for clarity on exit terms. This is not playing well for the British diplomatic tradition either, as dissatisfaction with the UK Government mounts in Brussels corridors.

In the lead-up to the German elections on 24 September, the crunch European Council in October and the Conservative Party congress in November, the future of Brexit looks less and less certain.

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