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Flexibility vital as Brexit talks enter third phase in 2018

The United Kingdom will soon begin formal negotiations on a Brexit transition period for when it is scheduled to leave the EU in 2019, before turning this spring to trying to secure a final exit deal framework for the 2020s and beyond. These milestones herald the start of the third, historic chapter in the long-running UK exit saga.
The first phase of Brexit came after the June 2016 referendum, when there were sometimes heated intra-UK debates about leaving the EU, which were also replayed in the June 2017 general election. The end of this first chapter came with the triggering of Article 50 by the United Kingdom in March 2017, which started UK-EU discussions around divorce issues such as the UK’s exit bill, post-Brexit rights for citizens, and the future of the Irish border.
On Dec. 8, a preliminary EU-UK deal was agreed on divorce issues, enabling the third phase of Brexit. As 2018 dawns, it is already clear that this third phase will see the toughest talks yet, in what may prove to be the most complex peacetime negotiation that London has ever undertaken. 
 

Even with goodwill from both sides, it is unclear whether UK’s demands on its transition period and future relationship with the EU can be realized in the timeframe of Article 50, given the bloc’s own robust negotiating positions.

Andrew Hammond 


The forthcoming discussions encompass not just the nature and length of Brexit transitional arrangements and the parameters of the newly defined UK-EU relationship, including a new trade deal, but they will also involve issues not fully resolved in earlier divorce discussions, including the Irish border.
This is a massive agenda, and the most definitive statement yet from Brussels came from the EU’s Chief Negotiator Michel Barnier, when he said that a framework deal should be reached by October. This implies an extremely tight window, and Barnier has also proposed four to five months for ratification. This timetable, which could potentially be extended beyond two years if all 27 remaining EU member states agree, is especially short given that any final, fundamental decisions from the EU side may not be possible until after a new German government is formed following last September’s elections.
The limited timeframe offered by Article 50 is exactly why UK Prime Minister Theresa May has suggested an “implementation phase” or transition to help smooth Brexit. Such a period will help give time to adjust to new political and regulatory frameworks, although some leading Brexiteers, including former United Kingdom Independence Party leader Nigel Farage have slammed this option as “backsliding.”
While there is a growing sense among some stakeholders that a transition deal is now inevitable, it is not. Barnier has said a transition would be “useful” but has to be time limited to from when the UK leaves the EU in 2019 until Dec. 31, 2020, the end date of the EU’s current budget.
However, Barnier has also said it is important first to know more about the UK’s negotiating positioning. Specifically, “what the intentions of a request from the United Kingdom are, what they would like and what they are prepared to accept with the new (long-term) partnership.”
Remarkably, the UK Cabinet only had its first discussion in December about what it wishes the nature of the final deal with Brussels to be. No details of this discussion have yet emerged, so the most authoritative roadmap remains the two key speeches May gave in January and September 2017, in London and Florence respectively. 
In January, May asserted that she does not want to keep “bits of the EU,” but would like a “bold, ambitious free trade agreement” with “the freest possible trade on goods and services”; a new customs agreement that would allow for “tariff-free trade with Europe and cross-border trade that is as frictionless as possible,” while leaving the common commercial policy and no longer being tied to the common external tariff. At the same time, she aims to take back full control of immigration policy, and move toward ending the European Court of Justice’s jurisdiction in the UK.
Even with goodwill from both sides, it is very unclear whether these collective negotiating demands can be realized from the EU in the timeframe of Article 50, given its own robust negotiating positions. This is especially so given May’s weakened political standing after June’s UK general election, where she lost her parliamentary majority.
Indeed, it remains possible that her government could fall this year. So, with a significant amount now beyond her power, even more rests on whether the remaining 27 EU states will offer outlines of such a deal on attractive enough terms for her to accept.
European Council President Donald Tusk has said that May is becoming “more realistic” about the trade-offs that will be necessary in the final negotiations. Much will now depend on the flexibility of both sides, and here it is interesting to note, for instance, that the UK’s Secretary of State for Brexit, David Davis, has said that the government would consider making a continuing EU financial contribution to “get the best possible access for goods and services to the European market.”
Yet, even with the first phase deal reached on Dec. 8, the talks could still break down in 2018. Indeed, Lord Kerr of Kinlochard, the author of the Article 50 clause, has previously asserted that there is at least a one in three chance that no final overall agreement will emerge; and ultimately also that there is only a 50 percent likelihood of an orderly Brexit.
The stakes in play in securing a final deal, and transition, are therefore huge and historic, not just for the UK but also the EU. Delivering a smooth departure will need clear, coherent strategy and thinking so all parties can move toward a constructive new partnership that can hopefully bring benefits for both at a time of significant global geopolitical turbulence.

• Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics.