The View From Brussels: Where the EU Says Brexit Heads Next

(Bloomberg) -- The Brexit deal agreed last week was hailed by both sides as a major step forward. But it conceals plenty of pitfalls, unanswered questions and opportunities for new confrontations as talks head into the next phase.

First up is the transition arrangement -- the grace period that businesses want to pin down as soon as possible so that they have time to prepare for the change in trading rules. 

Talks on this will start in January, but as far as the EU is concerned, there’s not much to discuss: it will probably last for about two years, the U.K. must remain in the customs union and single market, and abide by all its rules, including free movement of people. It will remain in every respect a member of the EU -- but without voting rights. It’s not clear yet if the U.K. government agrees.

The deal agreed on Friday, which included U.K. commitments on the Irish border, the financial settlement and citizens’ rights, isn’t legally binding, but it will form part of an overarching treaty that will take effect on Brexit day in March 2019.

The European Commission on Monday called it a “gentlemen’s agreement.” But EU envoys made clear that if the U.K. tries to unpick any of what it agreed, it will halt the next phase of talks.

In any case, negotiations on trade won’t start until as late as March, according to a document drawn up by ambassadors on Friday. The U.K. cabinet hasn’t decided yet what kind of trade deal it’s going to seek and plans to have that discussion next week. The EU says it will offer an agreement like the one it gave Canada. U.K. Brexit Secretary David Davis wants “Canada plus plus plus.”

And there are plenty more issues that still need solving. Here’s a selection:

  • The U.K.’s commitment to avoiding a hard border between Northern Ireland and the Republic of Ireland still needs work. The EU will “pursue further refinement”
  • The Commission says the U.K.’s pledge to pay a divorce bill, which British officials estimate to run to a maximum of about 39 billion pounds (44 billion euros, or $52 billion), “has not yet been translated into a firm and concrete commitment”
  • The issue of citizens’ rights hasn’t been fully settled and the EU signaled it might make this a bargaining chip. “This important matter should be dealt with in the second phase of the negotiations and will inevitably be linked to the level of ambition of the future partnership between the EU and the United Kingdom,” the Commission said.

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