Your A To Z Guide To The Brexit Trade Negotiations


A. Article 50 of the Lisbon Treaty set out the rules for leaving the European Union. As with most negotiations, it assumed the leaving country would present its proposals for the post-withdrawal period – which would then be finalised with the other members. The UK government, however, has still not yet set out its post-Brexit trade objectives.  So the UK left the EU on Friday and entered the Transition period without anyone knowing what might happen at the end of the year.

B. ‘Brexit means Brexit’, has been the UK’s core statement since Article 50 was tabled. But as I noted in September 2016, Brexit can actually mean a variety of different outcomes – and they have very different implications as the chart above shows. At one extreme, the ‘Norway model’ is very similar to full EU membership, but with no say on EU decisions. Whereas the ‘Canada model’ – which seems to be the UK’s objective – is simply a free-trade agreement. It would offer some access to the Single Market for goods, but less access for services (which are 80% of the UK economy). A ‘No Deal Brexit’ – which is the likely alternative outcome – means working under WTO rules with arbitrary tariffs and regulations.

C. The European Commission manages the day-to-day business of the European Union on behalf of the European Council, and is effectively its civil service. Its president is Ursula von der Leyen and she re-appointed Michel Barnier to lead the post-Brexit negotiations. As with Brexit itself, the UK’s failure to agree its objectives has allowed Barnier to gain “first mover advantage”, and effectively control the scope of the negotiation, by finalising and publishing the EU’s own negotiating objectives.

D. The Default date for the UK to exit the Transition period is 31 December 2020. It has also been agreed that this can be extended for a further 2 years, if the UK requests this before the end of June – but the UK government has said it will refuse to do this. The UK stance gives the EU a very strong negotiating position, as it means they effectively control the timetable as well as the scope of the negotiations.
Barnier has suggested they have “3 goals for 2020: to maintain a capacity to cooperate closely at the global level; to forge a strong security partnership; and to negotiate a new economic agreement (which, most likely, will have to be expanded in the years to come).” Given the EU’s focus on its proposed EU Green Deal, and the need to ensure a positive outcome for the UN Climate Change Conference in Glasgow in November, there may not be much time left for trade talks, given that security is their second priority. This view is reinforced by Barnier’s suggestion that the new economic agreement will have to be expanded after December.

E. The European Union is a treaty-based organisation of 28 countries. As its website notes, it was ‘set up with the aim of ending the frequent and bloody wars between neighbours, which culminated in the Second World War.’ The UK joined the original six members (Belgium, France, Germany, Italy, Luxembourg and the Netherlands) in 1973, along with Ireland and Denmark. Further expansions took place, especially after the end of the Cold War between the West and the Soviet Union. At the suggestion of then UK Prime Minister Margaret Thatcher in 1986, it was agreed to establish a Single Market and Customs Union in 1993, based on four key freedoms – free movement of goods, services, people and money – and this transformed trading relationships across the continent.

F. The Financial Settlement or ‘divorce bill’ is part of the Withdrawal Agreement and covers the costs of the programmes that the UK agreed to support during the period of its EU membership. Like most organisations, the EU operates on a pay-as-you-go basis and only charges member countries as and when bills actually come due. The UK calculated this to be between £36 billion-£39 billion (€40 billion-€44 billion), depending on the assumptions used.

G. The UK held 2 General Elections whilst finalising the Withdrawal Agreement. The first, in 2017, forced premier Theresa May to rely on the Ulster Unionists in order to gain a working majority in Parliament. The second, in 2019, gave Boris Johnson a comfortable 80 seat majority on the basis that he would “Get Brexit Done”. In reality, however, the only bit of Brexit that has been “done” is the exit from the EU. The process of replacing all the arrangements built up over the past 47 years, since the UK joined the then European Economic Community, has yet to begin.

H. A Hostile No-Deal at the end of December would be the worst of all possible outcomes, as it would mean the UK had to trade on WTO terms. Unfortunately, this is a significant risk, given the range of areas that could cause friction – fisheries policy, financial services, immigration and EU citizen rights etc. The underlying issue is that the UK has now become a “Third Country“, and lost all its veto rights in Brussels as well as the ability to help determine policy. Trade negotiations always cause Winners and Losers to emerge, as they are based on the negotiators conceding something of value to the other side in one area, in order to get back something of value for themselves. And potential Losers generally complain very loudly.

I. Ireland proved to be a key sticking-point in the negotiations, as nobody wanted to disturb the peace created by the Good Friday Agreement in 1998. The Withdrawal Agreement means that Northern Ireland will remain in the UK customs territory and, at the same time, benefit from access to the Single Market without tariffs, quotas, checks or controls. In turn, this means the end of frictionless trade between it and Great Britain. The border will effectively run down the Irish Sea, as the EU will need sanitary and phyto-sanitary checks on food products and live animals entering from GB. The EU will also be able to assess risks on any product coming into its market and, if necessary, activate physical controls.

J. June 2016 was the date of the referendum that voted to take the UK out of the EU by a 52%: 48% majority.

K. Keeping the UK aligned with EU standards is a key concern for many UK businesses. They rely on complex supply chains, and would face major expense if they have to operate to 2 different standards. However, the Chancellor of the Exchequer, Sajid Javid, told the Financial Times last month that “There will not be alignment, we will not be a ruletaker, we will not be in the single market and we will not be in the customs union — and we will do this by the end of the year.”

L. Legal issues are, of course, a critical area in the negotiations as the UK currently operates under the jurisdiction of the European Court of Justice (ECJ), and now intends to ‘take back control’ to its own courts. The ECJ role will continue during the Transition Agreement, but seems unlikely to continue after the Transition period ends.

M. Tariffs on Materials and goods will be introduced between the UK and EU27 unless a comprehensive trade deal can be finalised by the end of the year. The EU’s terms for this depend on continued UK alignment with Europe’s societal and regulatory model. If the UK refuses to agree to this, then its trading terms will likely also change with countries outside the EU27. It currently operates under more than 750 free-trade and trade-related agreements negotiated by the EU – and it is unlikely that the UK could continue to benefit from them

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Angry Old Lady 3 months ago Member's comment

Sigh, so sick of #Brexit. Can't wait for it to all be over and done with!

Paul Hodges 3 months ago Author's comment

Agreed. After 3 years, only the "easy part" of leaving has been done. The real hard work of "getting Brexit done" and replacing all the relationships built up over 47 years has yet to begin.