Lawrence Kettle

FOKUS | 7/2017

Brexit Negotiations: Phase One Completed?

Introduction more than 1 million UK citizens living in Citizens Rights the other 27 member states. What would Phase one of the negotiations was be their rights post-Brexit considering It has been agreed that there will be no concluded after the European Council that millions of EU citizens had decided to changes to the rights of either EU nationals agreed on the 15th December 2017 to exercise their right to live, work and study residing in the UK or UK nationals residing move onto the next crucial phase of the in another member state? in the other 27 EU member states.5 Further negotiations.1 After months of talks an discussion on the specific details of this agreement has been reached between The Irish Border topic will continue into phase two. the UK government and the (EU) on three key areas of a ‘divorce’ With the UK leaving the EU, the Single The Irish Border settlement: Three areas which the Union’s Market and the Customs Union the fear negotiators argued had to be addressed of a hard border returning to the island It has been agreed by both sides of the first before any movement was made caused many to raise serious concerns not negotiating table that no hard border toward discussions on trade and the future just about the economic impact, but also should return to the island of Ireland.6 How partnership between the UK and the EU. the societal impact, and the impact that this will be managed with regard to future These issues were the rights of EU and UK Brexit would have on the stability of the trade and the has citizens post-Brexit, the future status of island given that Northern Ireland leaving yet to be determined. the Irish border, and the financial settle- the Single Market would undermine the ment. Phase two will begin next year and Good Friday Agreement. The Good Friday The Financial Settlement will focus on the future relationship of Agreement would have to be revised given the UK with the bloc; however, the three that one of the parties would no longer be The UK government has said that it will issues of the divorce settlement have not a member of the EU and would therefore pay a financial settlement however this yet been enshrined into a legally binding make the current treaty invalid.3 exact figure still remains unclear; however, agreement. The political guarantees given media sources reported that this figure will over the three areas have enabled the The Financial Settlement be in the region of £35-£39 billion.7 The negotiations to move forward, but some exact figure will be finalized in phase two of the details remain inconclusive and The financial settlement was undoubtedly of the negotiations. illusive. These three issue areas will have a going to be the greatest sticking point in great bearing on how the issues in phase the negotiations and one that has caused The Negotiations of Phase Two two, especially regarding the future trade a great amount of anger from Pro-Brexit agreement, will be concluded. The subject British Members of Parliament (MPs). This Phase two of the agreement will begin of the negotiations in phase two also have financial settlement is what the UK owes next year and will focus on the future the capacity to extend the talks by months for various EU commitments and projects relationship between the EU and the UK. potentially years. made as a member state. The amount This will predominantly focus on the two owed has fluctuated a lot since the UK year transition period and ‘the framework The Negotiations of Phase One decided to leave the bloc however current for the future relationship’.8 To date, the estimations place the figure somewhere UK government has stated that it wants The negotiations in phase one of the talks between €30 billion - €60 billion.4 a deep and close relationship with the focused on the rights of EU citizens in EU and wants to begin discussing a trade the UK and UK citizens in the other 27 EU What Has Been Agreed in Phase One? agree­ment that closely mimics current member states; the border between the standing arrangements.9 However, Republic of Ireland and Northern Ireland; After negotiations dragged on and fears because the British government’s current and the financial settlement. that the UK government would miss an EU position is that it does not want to be in deadline on making progress on the three the Single Market or the Customs Union Citizens Rights issues in time for the European Council the EU’s chief Brexit negotiator Michel summit in December, the announcement Barnier has stated that the UK would get The status and rights of EU nationals in was made on the 15th December 2017 a Canadian-style trade agreement and the UK, and UK nationals in the EU was a that an agreement had been reached on that it would still take years to negotiate.10 matter of top priority for both sides.2 With the three key issues and that sufficient The freedom of movement principle is the UK leaving the bloc it posed the ques- progress had been made to help move the absolutely non-negotiable for the EU as tion of what would happen to more than negotiations onto the second phase. it is fundamental to the integrity of the 3 million EU citizens living in the UK, and Single Market. The UK would therefore

1 : Phase One Completed?

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either have to abide by the freedom of The Trade Deal “As regards transition, the European Coun- movement and be in the Single Market, cil notes the proposal put forward by the or have a Canadian-style trade agreement By far the greatest priority for the UK for a transition period of that would offer far less in comparison to government is the construction of the around two years, and agrees to negotiate what the UK currently enjoys. framework for the future relationship a transition period covering the whole of with the EU with regards to trade and this the EU acquis, while the United Kingdom, However, whilst the UK government is alone has the potential to delay negotia- as a third country, will no longer parti- currently of the position that it does not tions for months if not years. The British cipate in or nominate or elect members want to be in the Single Market, its posi- government has been given a deadline of of the EU institutions, nor participate in tion on the Irish border means the UK’s three months to finalize its vision of the the decision-making of the Union bodies, options are limited. In order to ensure future trade deal with the EU.16 In brief, offices and agencies.”19 that no border returns the prevailing opi- the British government ideally wants nion is that the easiest way to achieve this near to full access to the Single Market However, during this transition period the is to have regulatory alignment between without accepting the EU’s principle of free UK will have to abide by all EU laws and the Republic of Ireland and Northern movement or paying into the EU budget regulations during this limited period of Ireland; thereby avoiding a hard border.11 and having some regulatory freedom. This time. Under this scenario Northern Ireland policy however is impossible. The EU’s would effectively be in the Single Market chief negotiator has already “All existing Union regulatory, budgetary, whilst the rest of the UK would not be. stated that this is impossible and that the supervisory, judiciary and enforcement The ‘problem’, however, stems from the Single Market cannot be divided up in this instruments and structures will also apply, Conservative party’s coalition partners, way.17 Protection of the integrity of the including the competence of the Court of the Northern Ireland Democratic Unionist Single Market is vital for the EU and the UK Justice of the European Union. As the Uni- Party (DUP), who have categorically will not be treated as an exception. The UK ted Kingdom will continue to participate in stated that they do not want to operate may be an important part of the European the Customs Union and the Single Market on a different regulatory standard than economy, but the integrity of the Single (with all four freedoms) during the transiti- the rest of the UK.12 This places a great Market is vital for the EU’s existence and on, it will have to continue to comply with deal of complexity on these negotiations. this will not be sacrificed. How this thorny EU trade policy, to apply EU customs tariff The British government has proposed subject will be resolved will be a topic of and collect EU customs duties, and to en- that the UK’s regulations would remain intense debate that has the capacity to sure all EU checks are being performed on close to the EU’s in order to facilitate the prolong talks for months if not years. the border vis-à-vis other third countries.”20 creation of a trade deal that bears close resemblance to its current arrangement;13 A further problem concerns the promise of For the EU, this position is non-negotiable however unless the UK offers full regula- no hard border between Ireland and Nort- and it has already caused problems for the tory alignment this will not be accepted hern Ireland. Because of the DUP’s stated Prime Minister with her pro-Brexit Cabinet by the EU because they have to “avoid up- demand that Northern Ireland must have colleagues and the pro-Brexit backbench setting existing relations with other third the same regulatory standards as the UK in MPs in the Conservative Party who argue countries”.14 Other forms of cooperation theory the only way this can be achieved is that the UK will become a “vassal state” of will also be discussed within phase two for the UK as a whole to have full regulato- the EU.21 How exactly the Prime Minister including “the fight against terrorism and ry alignment with the EU:18 This means the will perform this near impossible balan- international crime, as well as security, UK would have left the Single Market in cing act of satisfying both the EU and her defence and foreign policy.”15 name only which is something pro-Brexit pro-Brexit party members will likely be a members of the Conservative Party are cause of many political headaches in the Key Challenges of Phase Two vehemently against. months to come.

There are a plethora of intricate and The Transition Period Conclusion complex challenges ahead in phase two; however the issues of constructing the The position of the EU regarding the pro- The complexity of the negotiations has the framework for the future trade deal and posed transition phase is very clear: In its potential to drag on for months potentially the proposed transition period will cause stipulated guidelines for the next phase of years. The EU’s position has been made the greatest amount of heated debate in Brexit negotiations the European Council clearly and loudly: It is now up to the UK to the negotiations, and further consterna­ agreed that during the transition period decide how it wishes to proceed and what tion for businesses and citizens. the UK would cease to be a full member of future it wants with the EU. Realistically the EU and have instead a ‘third country’ the UK has very few options: It can stay in status. the Single Market and Customs Union in which case it would have to accept all four

2 Brexit Negotiations: Phase One Completed?

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December 2017, accessed December 21, 2017, http://www.tele- 18) Adam Tomkins, “Why “regulatory alignment” must apply to freedoms and pay into the EU’s budget. graph.co.uk/news/2017/12/08/brexit-divorce-deal-agreement- the whole of the UK after Brexit”, The New Statesman (Online), 6 It could leave the Single Market but have full-read-report-published-phase/. December 2017, available at https://www.newstatesman.com/ full regulatory alignment with the EU, in politics/staggers/2017/12/why-regulatory-alignment-must- which case the UK leaves in name only. Or 6) Telegraph Reporters, “Brexit Deal Agreement in Full: Read the apply-whole-uk-after-brexit Report Published after Phase One of Talks,” The Telegraph, 8th the UK leaves the Single Market and has a December 2017, accessed December 21, 2017, http://www.tele- 19) European Council, ‘European Council (Art. 50) meeting (15 Canadian-style trade agreement that will graph.co.uk/news/2017/12/08/brexit-divorce-deal-agreement- December 2017) – Guidelines’, (15 December 2017), Available at be merely a shadow of the relationship full-read-report-published-phase/. http://www.consilium.europa.eu/media/32236/15-euco-art50- that the UK currently enjoys. guidelines-en.pdf 7) Jon Stone, “Brexit: agrees to pay £39 bn divorce bill to the EU”, , 8th December 2017, accessed 20) European Council, ‘European Council (Art. 50) meeting (15 Naively optimistic pro-Brexit supporters in 17th December 2017 http://www.independent.co.uk/news/uk/ December 2017) – Guidelines’, (15 December 2017), Available at various circles believe that there can be a politics/brexit-divorce-bill-financial-settlement-39-billion-there- http://www.consilium.europa.eu/media/32236/15-euco-art50- sa-may-juncker-agreement-northern-ireland-a8099076.html guidelines-en.pdf new model in which the UK can enjoy all the benefits but not accept the same rules. 8) European Council, ‘European Council (Art. 50) meeting (15 21) Joe Watts, “ warns UK could become a ‘vassal This, however, is totally impossible for the December 2017) – Guidelines’, (15 December 2017), Available at state’ if it accepts EU’s Brexit plans”, The Independent, December simple fact the EU is committed to pro- http://www.consilium.europa.eu/media/32236/15-euco-art50- 2017, available at http://www.independent.co.uk/news/uk/po- guidelines-en.pdf litics/boris-johnson-brexit-latest-vassal-state-philip-hammond- tecting the integrity of the Single Market. a8115041.html Any deal of this nature would undermine 9) Charlie Devereux, “U.K. Wants ‘Virtually Identical’ Trade Deal the very essence of the EU project and risk With EU After Brexit”, Bloomberg (Online), 12 December 2017, further member states wanting prefe- accessed 15 December 2017, https://www.bloomberg.com/ news/articles/2017-12-12/u-k-wants-virtually-identical-trade- rential treatment. The UK government, deal-with-eu-after-brexit therefore, has very limited options if it continues to be committed to leaving the 10) Daniel Boffey, “Brexit: UK Likely to End up with Canadian- European Union. Whichever option Britain Style Deal, Warns Barnier,” , October 24, 2017, sec. Politics, http://www.theguardian.com/politics/2017/oct/23/uk- decides for will determine the future of the likely-to-end-up-with-canadian-style-deal-warns-michel-barnier. UK for years to come and is limited in fact to a simple choice: Participate in the Single 11) Adam Tomkins, “Why “regulatory alignment” must apply to Market, or leave the largest trading bloc in the whole of the UK after Brexit”, The New Statesman (Online), 6 December 2017, available at https://www.newstatesman.com/ the world and risk the disintegration of the politics/staggers/2017/12/why-regulatory-alignment-must- United Kingdom itself. apply-whole-uk-after-brexit

Lawrence Kettle is an Associated Fellow at 12) Ian Graham, “Northern Ireland’s DUP says will not accept different rules to rest of UK”, Reuters (UK), (Online), 25 November the AIES. 2017, available at https://uk.reuters.com/article/uk-britain-eu- nireland/northern-irelands-dup-says-will-not-accept-different- rules-to-rest-of-uk-idUKKBN1DP0H3 Notes 13) Tim Ross and Emma Ross-Thomas, “U.K. Proposes Staying Close to EU Rules to Unlock Brexit Talks”, Bloomberg (Online), 1) European Council, ‘European Council (Art. 50) meeting (15 5 December 2017, available at https://www.bloomberg.com/ December 2017) – Guidelines’, (15 December 2017), Available at news/articles/2017-12-05/davis-sees-regulatory-alignment- http://www.consilium.europa.eu/media/32236/15-euco-art50- post-brexit-for-all-of-britain guidelines-en.pdf

14) European Council, ‘European Council (Art. 50) meeting (15 2) Martin Banks, “Rights of EU Citizens in Post-Brexit UK, ‘number December 2017) – Guidelines’, (15 December 2017), Available at One Priority’ Warns EU Parliament Chief, “The Parliament http://www.consilium.europa.eu/media/32236/15-euco-art50- Magazine (Online), 6th September 2017, accessed December 21, guidelines-en.pdf 2017, https://www.theparliamentmagazine.eu/articles/news/ rights-eu-citizens-post-brexit-uk-%E2%80%98number-one- © Austria Institut für Europa- 15) European Council, ‘European Council (Art. 50) meeting (15 priority%E2%80%99-warns-eu-parliament-chief. und Sicherheitspolitik, 2017 December 2017) – Guidelines’, (15 December 2017), Available at http://www.consilium.europa.eu/media/32236/15-euco-art50- Alle Rechte vorbehalten. Nachdruck oder ver­ 3) Ioannis Papageorgiou, European Parliament Think Tank, guidelines-en.pdf gleich­bare Verwendungen von Arbeiten des “The Impact and Consequences of Brexit for Northern Ireland,” Austria Instituts für Europa- und Sicherheitspolitik European Parliament Think Tank, Constitutional Affairs Briefing, 16) Daniel Boffey, “EU Leaders Agree Brexit Talks Can Move on (AIES) sind auch in Auszügen nur mit vorheriger 17th March 2017, Available at http://www.europarl.europa.eu/ to Phase Two,” The Guardian, December 15, 2017, sec. Politics, Genehmigung gestattet. Die im AIES-Fokus thinktank/en/document.html?reference=IPOL_BRI(2017)583116 http://www.theguardian.com/politics/2017/dec/15/brexit-talks- veröffentlichten Beiträge geben ausschließlich die eu-next-phase-brussels-theresa-may. Meinung der jeweiligen Autorinnen und Autoren 4) Lianna Brinded, “Everything You Need to Know about the wieder. Brexit ‘divorce Bill,’” Quartz (blog), accessed December 21, 2017, 17) Jon Stone, “UK wants ‘impossible’ Brexit deal and doesn’t https://qz.com/1134703/brexit-divorce-bill-explained-why-the- Dr. Langweg 3, 2410 Hainburg/Donau understand single market says EU negotiator”, The Independent, uk-needs-to-pay-the-eu-to-leave/. Tel. +43 (1) 3583080 31 August 2017, available at http://www.independent.co.uk/ E-Mail: [email protected] news/world/europe/brexit-britain-impossible-deal-latest-single- 5) Telegraph Reporters, “Brexit Deal Agreement in Full: Read the Website: www.aies.at market-barnier-davis-eu-doesnt-understand-a7921996.html Report Published after Phase One of Talks,” The Telegraph, 8th Layout: Medienbüro Meyer

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