Fourth Round of EU-UK Talks Conclude, Divergences in Key Areas Remain

5 October 2017

The United Kingdom’s Secretary of State for Exiting the European Union David Davis and the European Chief Negotiator for Brexit Michel Barnier both acknowledged a more positive tone during the fourth round of Brexit negotiations which concluded last week. Barnier however signalled a lack of substantive progress in key areas of the withdrawal discussions.

The talks followed a speech delivered by UK Prime Minister Theresa May in Florence earlier this month, in which she suggested determining a new type of future economic partnership and requested a two-year Brexit transition period. (See Bridges Weekly, 28 September 2017)

“After four rounds, when I look across the full range of issues to do with our withdrawal from the EU, I am clear that we have made considerable progress on the issues that matter,” said Davis in his closing remarks following the talks in Brussels.

“We managed to create clarity on some points,” commented Davis’s European counterpart Barnier, referring to the results of the fourth round of negotiations. “On others, however, more work remains to be done. We are not there yet.”

The official talks covering the UK’s exit from the EU started in June 2017, two months after the British government invoked Article 50 of the EU Treaty, which sets out the provisions for exiting the union. The mechanism provides for two years to reach an agreement, with the UK scheduled to leave on 29 March 2019, unless an extension is agreed by all parties.

A phased approach to negotiations

Following the UK’s notification of withdrawal in March, European Council President Donald Tusk outlined the draft negotiating guidelines for the 27 EU member states. The EU view assumes a two-phase process, in which both sides first agree on divorce issues before proceeding to broader negotiations on the future relationship. (See Bridges Weekly, 6 April 2017)

The divorce issues seen as a priority for Brussels in the current phase of negotiations are citizens’ rights, a financial settlement or Brexit bill, and the Northern Ireland border.

“Once, and only once we have achieved sufficient progress on the withdrawal, can we discuss the framework for our future relationship. Starting parallel talks on all issues at the same time, as suggested by some in the UK, will not happen,” said Tusk in his remarks on Brexit negotiations immediately after the UK notification.

Regarding the rights of EU citizens in the UK and British citizens in Europe, Davis reported at the end of the fourth round of talks that both parties agreed on “most of the aspects of social security coordination.” He also acknowledged that “a major question remains open between us – it relates to the enforcement of citizens’ rights after we leave the European Union.”

Barnier, for his part, stated that the parties had agreed “to guarantee – for the citizens concerned – that the UK will apply EU law concepts in a manner that is consistent with EU law after Brexit. But we failed to agree that the European Court of Justice must play an indispensable role in ensuring this consistency. This is a stumbling block for the EU.”

The UK’s Department for Exiting the European Union subsequently released a document mapping areas of convergence in EU-UK positions on topics related to the rights of citizens.

Commenting on discussions surrounding the financial settlement, both parties held to the position laid out in Theresa May’s Florence speech, suggesting that the UK will “honour commitments” taken during its membership.

“We are not yet at the stage of specifying exactly what these commitments are. That will need to come later,” said Davis.

The position in Brussels is that no member state should pay more or receive less due to Brexit. In a speech addressed to EU lawmakers in Strasbourg on Tuesday in the lead-up to a vote on the talks, Barnier warned of “serious divergences” over the financial settlement.

The outcome of the non-binding vote saw 557 out of 751 MEPs favour a delay in opening discussions on trade relations, with the next round of Brexit negotiations set to commence on 9 October.

On Ireland – the third area of focus in the divorce phase of Brexit negotiations – both parties recognised the uniqueness of the situation and the need to uphold the principles of the Good Friday Agreement. “Any solution will need to be fully informed by the special circumstances on the island of Ireland,” reaffirmed Barnier.

Future trade relations

On 19-20 October, leaders from all 28 member states will meet at a summit where Brexit will be on the agenda alongside other important items. If the 27 EU countries involved in negotiations with the UK agree that sufficient progress has been achieved on divorce issues, negotiations over the future relationship and a transition period could be triggered – as hoped by Britain.

The UK has stated its intention to leave the European customs union after Brexit and become a legally separate customs territory. It remains unclear what this will imply in terms of institutional arrangements.

The official position paper on future customs arrangements released by the UK government suggests two alternatives: a “streamlined customs arrangement” and a “new customs partnership.” The UK Trade Policy observatory (UKTPO), a think tank on UK trade relations, reacted to these options.

“This is extremely ambitious, to say the least,” says Peter Holmes, UKTPO fellow, in an online article. “It is not impossible, but it effectively means negotiating the most complex customs union that exists outside the EU for a three-year interim period and then getting rid of it. And, crucially, relies on the EU accepting the proposal.”

In her Florence speech, Prime Minster May outlined a new transition plan involving an interim deal in which business conditions remain unchanged until the end of the “implementation” period. (See Bridges Weekly, 28 September 2017)

Besides hammering out a deal with the EU, the UK also faces the challenge of reaching formal arrangements with over 50 countries with which the bloc currently has trade agreements.

“If the UK leaves the EU without any agreement with these countries all this trade could be negatively affected as the UK would have no legal option but to switch to trading on less advantageous market access conditions,” argue UKTPO experts.

Preliminary deal at the WTO

In another development – technically distinct from the formal Brexit negotiations – the Financial Times reported this week that the EU and UK had agreed to a preliminary deal on WTO quotas.

A joint letter from European and British negotiators to EU capitals says that the “EU and UK intend to maintain the existing levels of market access available to other WTO members. Both the UK and the EU would like to reassure our WTO partners that we will strive to minimise disruption.”

ICTSD reporting; “Boost for Pound Sterling Outlook as 4th Round of Brexit Negotiations Confirm Progress is Finally Being Made,” POUNDSTERLING LIVE, 29 September 2017; “Brexit negotiations are at a stalemate over the divorce bill,” BUISINESS INSIDER, 26 September 2017; “Barnier: UK has not made ‘sufficient progress’ in Brexit talks,” FINANCIAL TIMES, 03 October 2017.

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