Update on Withdrawal negotiations after European Council meeting 23 March 2018

26.03.18

Last week, we issued an update on the tentative agreement reached on key elements of the UK’s withdrawal from the EU. The agreement is conditional on both sides agreeing a final withdrawal treaty, which is to be finalised this year. David Davis, the UK’s Secretary of State for Exiting the European Union, in his press statement on 19 March 2018, commented on the draft agreement being a “significant step” in Brexit negotiations. At last week’s European Council meeting (23 March 2018), the EU’s chief negotiator, Michel Barnier, updated the EU27 on the state of play of Brexit negotiations. The European Council then adopted guidelines on the framework for a future relationship with the UK after Brexit. The EU27 restated their willingness to have the closest possible partnership with the UK but also noted that the “repeatedly stated positions of the UK limit the depth of such a future partnership”. The guidelines will serve as a mandate for the EU negotiator to start discussing the framework for the future relationship. 


Ensuring a level playing field: no “cherry picking”


While the EU27 say they are ready to work towards a close relationship with post-Brexit UK they are also concerned that the UK’s current negotiating position may limit that future partnership: “Being outside the Customs Union and the Single Market will inevitably lead to frictions in trade.” The Council reiterated its view that this is bound to have negative economic consequences, especially for the UK. The position of the European Council “reflects the level of rights and obligations compatible with the positions of the UK.” Thus, it is not final and the EU “will be prepared to reconsider its position”. 


However, a key point is the need for a “level playing field” between the UK and the EU. The Council also made clear that a non-member of the EU “that does not live up to the same obligations as a member, cannot have the same rights and enjoy the same benefits as a member.” In particular it has emphasised that the four freedoms of the Single Market (free movement of goods, capital, services and labour) are indivisible and that there can be no “cherry picking” based on a sector-by-sector approach. One of the main concerns of the Council remains the “integrity and proper functioning of the Single Market”. 


Free trade agreement: “balanced, ambitious and wide-ranging”?


The European Council confirmed its readiness to work towards a “balanced, ambitious and wide-ranging” free trade agreement (FTA) as soon as the UK is no longer part of the EU. Such an agreement would address issues including trade of goods between the UK and the EU, maintenance of reciprocal access to fishing waters and resources, appropriate customs cooperation, trade in services including providing services under host state rules and the right to establishment in the UK and the remaining EU27 respectively. However, as much as the FTA is envisaged to be “ambitious”, it will not offer the benefits as EU Membership and will not amount to participation in the Single Market.


The future UK - EU partnership: “strong safeguards” 


As to the future relationship between the UK and the EU, the European Council expressed its aspiration that, first and foremost, such a relationship should address global challenges, in particular in areas of climate change and sustainable development, as well as cross-border pollution. The post-Brexit partnership, according to the Council guidelines, should include “ambitious provisions” for individual citizens, based on reciprocity and non-discrimination, and related areas such as the coordination of social security and the recognition of professional qualifications. However, UK-EU cooperation would require “strong safeguards” to ensure full respect of fundamental rights. In addition, the Council pointed out that such a partnership would only deliver “in a mutually satisfactory way” if it includes “robust guarantees” which ensure that level playing field. Another main concern of the European Council is to safeguard financial stability in the European Union throughout economic partnership with the UK. 


The EU has expressed its readiness to establish specific partnerships with the UK in other areas than trade and economic cooperation, notably law enforcement, judicial cooperation in criminal matters and in the fields of foreign, security and defence policy. According to the Council guidelines, the overall governance of the future partnership will require to take into account a range of factors including the role of the Court of Justice of the European Union. Especially, the UK’s adverse position on this last point is seen as an impediment to a strong future partnership between the UK and the EU.


Outlook


The European Council welcomed the agreement reached on parts of the legal text of the Withdrawal Agreement last week. As stated in a previous note, the agreement mainly covers the implementation (or transition) period until 31 December 2020, citizens’ rights and the financial settlement. However, the Council is aware of the other issues that still require agreement, including the question of the Irish border, and reiterated that “nothing is agreed until everything is agreed”. 


At the Council meeting last Friday, Theresa May welcomed a “new dynamic” in the Brexit negotiations: “I believe we are approaching this with a spirit of co-operation, a spirit of opportunity for the future as well.” Negotiations are continuing this week, focussing in particular on the remaining sticking points Gibraltar, reciprocal access to fishing waters and resources, and the Irish border.


The planning of the future economic and other relationship between the UK and the EU is a major undertaking and will have to include a wide range of topics as well as keeping the balance between the autonomy of the EU’s decision-making and appropriate mechanisms for dialogue, consultation, coordination and cooperation with post-Brexit UK. The European Council will meet again in June to discuss the remaining withdrawal issues and the framework of the future UK-EU relationship post-Brexit. Visit our Brexit hub for further updates.