Brexit Bulletin: Last-Minute Treaty
From the start, the European Union said Brexit negotiations needed to be wrapped up by October 2018. That provides enough time for British and European parliaments to approve a treaty before the U.K. leaves the following March. The EU’s chief negotiator, Michel Barnier, keeps pointing out that the “the clock is ticking.” Both sides know there’s much still to do.
In public, the British are still signed up to that timetable. But in private, officials are dancing to a different beat. Not only do they not recognize October as a hard and fast deadline, but behind the scenes they’ve already decided to aim for January next year, according to people familiar with the U.K. side of the negotiations.
That wouldn’t give either assembly much time to sign off or request any changes. British lawmakers have been promised a “meaningful vote” on the divorce deal, but if it comes to them just two months from exit day, the choice might have to be “take it or leave it.”
“Leaving it” would mean crashing out without a new deal on trade and other matters, which, some say, would wreak chaos. One senior official on the EU side this week described that prospect as “cataclysmic” for Britain. Foreign Secretary Boris Johnson isn’t quite so bothered. In the Daily Telegraph today, Johnson says the government is preparing for both scenarios and a “no deal” Brexit shouldn’t hold any “terrors.” The country would thrive if it had to accept World Trade Organization rules, he says.
Any delay prolongs uncertainty for businesses. A transition period, which businesses hope will provide a smooth landing after Brexit day, won’t become legally binding until the final withdrawal agreement is signed.
The deal also needs to include a solution for how to trade across the Irish border, as well as a string of other arrangements from data protection to aviation. It will be accompanied by a separate document outlining the principles of the two sides’ future relationship that will form the basis of talks over a free-trade deal.
There’s a history of missed deadlines already in the Brexit talks. Seven months before the October deadline, it seems the British are getting their excuses in early.
Only Way | The U.K. will almost certainly have to stay in a customs union with the EU after leaving the bloc, the opposition Labour Party said. “I don’t see any other way about securing the tariff-free access that we want, and also securing the position with regard to the Northern Ireland border, which is extremely complex,” the party’s finance spokesman, John McDonnell, said in a Bloomberg TV interview.
Feeling Positive | Virgin Atlantic said it’s “not at all” concerned that Brexit poses a threat to the U.S.-U.K. Open Skies treaty on which European and American carriers rely for unfettered access to trans-Atlantic routes. Chief Executive Officer Craig Kreeger told Bloomberg he was in Washington last week for talks with representatives of the two governments and “heard enough” from both sides to be sure that reaching an agreement on extending the current liberal arrangements won’t be an issue.
Ireland First | The EU wants a “strong signal” from the U.K. that it’s prepared to engage with the Irish border issue before allowing Brexit talks to move on, according to a diplomat familiar with the bloc’s thinking. “If in London someone assumes that the negotiations will deal with other issues first, before moving to the Irish issue my response would be: Ireland first,” EU President Donald Tusk said in Dublin.
Not Happy | Meanwhile, Arlene Foster, leader of the Democratic Unionist Party that props up Theresa May’s government, said the draft EU withdrawal agreement is an “act of bad faith” by Brussels because it only includes a “backstop” position on the Irish border.
Worst Hit | The government’s Brexit analysis, released yesterday, shows access to EU markets is most critical for the pharmaceuticals industry, closely followed by automotive and chemicals. Financial services — in particular, banking and market infrastructure — is the most important sector to the U.K. economy. But the government doesn’t think the industry has very much to lose from Brexit, placing it toward the bottom of the list of sectors affected.
Paying Up | The U.K.’s Office for Budget Responsibility will estimate the effect of EU divorce payments on public finances in an annex to its economic and fiscal outlook, as part of Chancellor Philip Hammond’s Spring Statement on Tuesday, the Financial Times reports. The OBR will present a chart of the U.K.’s payments, the newspaper says.
Cloudy Outlook | With the start of U.K.-EU trade talks looming and an ongoing civil war within the Conservative Party over Brexit, the only real bright spot for May last month was the economy, Bloomberg’s Brexit Barometer shows. The barometer, which includes data for U.K. growth, labor market, inflation and other key economic indicators, rose to 25.2 in February from a revised 12.2 in January, marking an improvement to “cloudy” conditions after seven months in “windy” territory.
EU President Donald Tusk spends a lot of time dealing with British issues these days, which might be why he opened up a press conference in Dublin yesterday talking about the weather. Ireland was on the receiving end of some pretty chilly temperatures last week as a bout of high pressure from Siberia, dubbed “the beast from the East,” brought heavy snow, which closed schools and made travel impossible.
“Let me reassure you that I’ve not come here to chill the air but rather to warm it up,” said Tusk, a former prime minister of Poland. “I may be from the East, but I’m not a beast.”
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