Whereas the negotiations made nominal progress on Northern Ireland and the common travel area, the parties could not see eye-to-eye on the all-important exit payments.
The EU argues that it is in the middle of the 2014-2020 budget cycle. In their eyes, all obligations within this cycle need to be honored, as do longer-ranging agreements such as that involving the European Development Fund. Davis argues that his obligation is to the British taxpayer and the UK will only pay up until it leaves the EU.
Whereas these squabbles can be expected in any divorce negotiation, the malaise is more fundamental: The EU side is exasperated with the lack of specificity it received from the UK, as well as with the slow pace of the negotiations. Davis lamented the lack of flexibility and imagination on the EU side.
Barnier has a point: He has been mandated by 27 EU member countries to negotiate Brexit within a specific framework, which only allows for trade talks when fundamental housekeeping issues — the exit bill, citizens’ rights and Northern Ireland — have been resolved. This structure does not allow for flexibility because of the multi-member makeup of the EU. In other words, Barnier has 27 bosses. If Davis wants to change tack, he goes to Downing Street and negotiates with his one boss, the UK Prime Minister Theresa May.
Barnier also has a point in terms of specificity: Trade negotiations are detail-driven and tedious. The UK has yet to come up with a clear negotiating position over its divorce with the EU. That comes down to one key rule of negotiating: It is hard to find the end point when there is no clearly defined start.
Specificity and timing are really where it is at: Her majesty’s government is having a hard time arriving at a unified position amid all the party squabbles over precisely what sort of a Brexit they want: Soft, hard, with adjustment periods, or without. This has not only frustrated the EU negotiating team, but also many among the British business elite. As for timing, the UK lost valuable time by calling an election and hence procrastinating on the issue of Brexit. As early as late last year Barnier had warned that the UK did not have two years but only about 18 months after triggering Article 50 of the Lisbon treaty, because 27 national parliaments within the EU needed to be given time for deliberation before ratifying the divorce agreement.
Britain has yet to come up with a clear position over its divorce with the EU. That comes down to one key rule of negotiating: It is hard to find the end point when there is no clearly defined start.
The UK parliamentary establishment misses another crucial point: Domestic deliberations over the desired shape of Brexit are immaterial, when they are not seen in the context of the negotiations in Brussels. The outcome of the Barnier-Davies negotiations will eventually inform what the post-Brexit UK-EU relationship looks like. These negotiations are to a large part dependent on the legal framework of the EU and their treaties.
Whilst all of the above is going on in Brussels, Prime Minister May is jetting around the world looking for new trade partners. This is admirable and probably necessary. However, the UK can only sign trade agreements once it has left the EU. All future trade relationships will furthermore be informed by the shape and dimension of the Britain’s post-Brexit relationship with the EU.
Japan, which May visited this week, is an excellent case-in-point. Prime Minister Shinzo Abe politely pointed out that he would appreciate some predictability as far as Brexit is concerned. This is understandable, because a lot is at stake: Japanese companies have invested billions in the UK, making the country the second-largest recipient of Japanese investment after the US. Many of these companies are in the automotive sector and have operations in the UK, because they gained access to the European market and benefitted from the ease of doing business within the EU. This enabled them to create highly integrated and efficient supply chains.
Japan is but one example of how the UK’s position in the global economy will eventually be shaped by the outcome of its negotiations with the EU. The pressure is on for Mr. Davis.
• Cornelia Meyer is a business consultant, macroeconomist and energy expert. She can be reached on Twitter @MeyerResources.