Expert View

Theresa’s tough task to avoid the cliff edge

by Roderick Abbott | 05.05.2017

Roderick Abbott is a member of ECIPE’s Steering Committee and Advisory Board. He has done trade work with the British Government and European Commission, and was a Deputy Director General at the WTO in Geneva.

If the UK begins Brexit talks by opposing the EU’s declared structure and priorities, a rapid meltdown could be in prospect.  Since the EU is in the driving seat – Article 50 is clear about that – it is hard to see how Theresa May thinks she will persuade the EU’s negotiators and the remaining 27 member states to fall in with her wishes. No wonder that last week’s Downing Street dinner was so fraught.

In light of the war of words that the dinner has touched off, it’s instructive to look back at how the two sides came to be so far apart.

Six months ago London made it clear that it would want to discuss future trade arrangements in parallel with general Article 50 talks, but it became clear that the EU saw matters differently. It wanted a sequential process with future arrangements to be discussed only once the terms of withdrawal had been agreed. That being the case, the risk of Britain tumbling over a cliff edge after the two-year negotiating period became very real. The idea thus soon developed that a transitional period was needed to complete a trade pact or, in the phrase favoured by London, to phase in implementation of a deal.

In her Lancaster House speech in January, after ruling out “some form of unlimited transitional status, in which we find ourselves stuck forever in some kind of permanent political purgatory”, May said:

“The purpose is clear: we will seek to avoid a disruptive cliff edge, and we will do everything we can to phase in the new arrangements we require as Britain and the EU move towards our new partnership.”

The UK’s Article 50 letter delivered on March 29 provided further insights into the government’s thinking:

“We believe it is necessary to agree the terms of our future partnership alongside those of our withdrawal from  the EU. In order to avoid any cliff edge as we move from our current relationship to our future partnership, people and businesses in both the UK and the EU would benefit from implementation periods to adjust in a smooth and orderly way to new arrangements.”

Donald Tusk responded on March 31 by publishing draft EU guidelines for the negotiation that put Theresa May firmly in her place.

“…Article 50 TEU requires to take account of the framework for its future relationship with the Union in the arrangements for withdrawal. To this end, an overall understanding on the framework for the future relationship could be identified during a second phase of the negotiations under Article 50.”

The language is unambiguous and, pace the prime minister, definitively ends all argument about sequencing. And while a transition would be necessary, it would be on the EU’s terms. It “must be clearly defined, limited in time, and subject to effective enforcement mechanisms”, Tusk insisted.

The guidelines, swiftly endorsed on Saturday, address the “disentanglement” of the UK from the EU and then set out the core principles that the EU intends to follow, in a phased approach to minimise disruption. They leave the door open but give no guarantees that an easy transition arrangement will be reached. What’s more, it seems likely from the unanimous position staked out by the EU 27 that any deal providing good access to the single market for trade in services will entail the UK complying with conditions similar to those that apply at present. Would that be acceptable to Theresa May?

As the fallout from the Downing Street dinner illustrates, we need to be careful about what is said and in what tone of voice; but it looks as if the prime minister is ready to challenge not only the mooted size of the divorce bill but also the EU’s proposed approach to the negotiations. This is hardly the way to win friends and influence people.

It is clear, for example, that May has a different, narrower view of citizens’ rights than the Commission. Reciprocal rights of residence for work or leisure are core matters for EU and UK citizens; but Juncker has spoken of “a cortege of 25 different questions” which follow on behind.

One has the impression that concerns over a potential cliff edge, with major disruption to trade of goods and services across the Channel, are giving way to a darker scenario of no agreement at all. Are we again facing the question: is a bad deal better than no deal?

Edited by Alan Wheatley