The Brexit Talks Are Going in Circles

(Bloomberg View) -- The most interesting part of the draft Brexit agreement the European Union published Wednesday is its complete disregard for the topsy-turvy mess that is U.K.'s internal politics. Something has been happening there every day -- a major speech, a heated exchange, a clash of ambitions. Yet the EU's position hasn't evolved since the preliminary deal in December, and perhaps since the sides started talking.  

Since that deal was reached, the U.K. government has wanted to move on to the terms of trade with the EU. But it couldn't quite do that as long as ministers argued about the particulars. By the end of last week, Prime Minister Theresa May achieved a compromise of sorts, getting top-ranking Conservatives to agree on a policy of "managed divergence" under which rules for different industries would diverge from EU ones at different speeds. The idea is to keep full access to the EU market for the industries that need it most. But EU negotiators reject that paradigm, favoring an all-or-nothing choice between a trade agreement (which likely wouldn't include services) and membership in the European Economic Area. That won't change when formal talks begin in March.

Tired of listening to Brussels' broken record, chief U.K. Brexit negotiator David Davis has toured European capitals to build support. Or sympathy, at least. That has angered the EU's chief negotiator Michel Barnier, which is dangerous given his influence over the process for gaining approval for any deal from the European Council of government heads (20 out of 27 EU states, representing at least 65 of the bloc's population, will eventually need to approve them). In a way, the draft published on Wednesday is his response to what he sees as the U.K.'s government's shirking of meaningful negotiation. It's basically a translation into legalese of the December deal -- but a translation that sharpens certain angles that could be smoothed over in an informal document. And it aims to point out to the U.K. that there's unfinished business from the previous phase of the talks that could scupper any trade agreement.

Perhaps the most controversial part of this unfinished business has to do with the border between the Republic of Ireland and Northern Ireland. In the December deal, the U.K. merely promised to propose a solution consistent with "its guarantee of avoiding a hard border" -- and, should it fail to do so, to stick to EU rules that make a transparent border possible. Since the U.K. hasn't come up with any such proposal, Wednesday's draft agreement sets up a "common regulatory area" on the island of Ireland that isn't divided by a customs border, meaning that Northern Ireland remains, for all practical purposes, part of the EU. 

There's no attempt at a compromise. One could even say the draft agreement's Northern Ireland protocol amounts to a territorial claim: The U.K. is told that, to keep its commitment on the Irish border, it would have to give up sovereignty over part of its territory.

May said on Wednesday that "no U.K. prime minister could ever agree" to the EU proposal, and that she'll make it "crystal clear" to the EU. But with ministers like Boris Johnson going through highly visible contortions on the issue (from promises that nothing would change to a recently leaked letter in which he stated the government's task shouldn't be seen as maintaining "no border"), May's biggest problem is clarity. The border proposals the U.K. promised in December haven't materialized, so Barnier's team is sticking to the status quo.

The only way for the U.K. to change that is to present a counterproposal that doesn't establish a hard border, which would be difficult to iron out, especially with the clock ticking. Another sharpened angle in Barnier's draft agreement is the unequivocally short transition period to the end of 2020. If the Irish border debate remains deadlocked, Barnier's proposed deadline doesn't leave much time to negotiate a trade deal -- at least not by the EU's usual standards for such negotiations. And that deadline is not a random date; it's the end of the EU's current budget period, during which the U.K. agreed in December to stick to its funding commitments. These are described in detail in the draft, providing ample fodder for a replay of the first stage of the talks: The December deal contained just five pages on the financial settlement, which have turned into 13 pages of the draft. 

With the new document, Barnier shows May and her cabinet that nothing has been agreed and that any appearance that the sides have come closer together on the most contentious issues is an illusion. May can reject the draft. She can even print it out and burn it. But that won't erase the reality: woefully little progress and a fast-approaching deadline. It's time for the U.K. to put something on the table that will make sense to its negotiating partners, and that includes, above all, a clear proposal on the Irish border -- or an equally clear admission that the status quo will do.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website

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