Following the release of the EU’s negotiating guidelines for talks with the UK on Brexit, James Roberts, Chief Economist at Knight Frank comments:
“Some commentators are describing the EU guidelines as a hard line response. In fact, it is a balancing act of tough talk mixed with offers of compromise. The overall message running through the document is “we want a deal, just not at any price”, which is just straightforward logic from an EU perspective. It is made clear that any future trade deal will be inferior to full membership, but again that is an understandable position.
Moreover, this is just the EU’s starting point in a negotiation that will move towards compromise. The EU was bound to start off by insisting it will give little ground; but when they are already proposing “transitional arrangements”, it is obvious this will end in a deal.
The interesting point for me is the call upon Britain to honour “international commitments”. The EU has many free trade treaties with other nations, signed on the understanding that the other country would have access to the UK market. The EU must either guarantee those countries continued access, or pay compensation, or renegotiate the deal. It sounds like the EU favours the first option, which means the UK could have several trade deals already in place on leaving the bloc.”
The key points from the guidelines are:
- The EU initially rejects the UK’s demand that talks on exit obligations and on future trade relations occur concurrently, insisting the former proceed the latter.
- However, the EU then appears to give ground on this point, saying that once sufficient progress has been made in negotiations on exit obligations, preliminary talks on trade can begin.
- Also, the EU said that nothing agreed in the early stages of negotiations becomes permanent until all stages of the process are agreed. This appears to be a move to neutralise the concern that if the UK makes concessions on exit obligations it has no cards to play in the trade talks.
- Interestingly, the talks “may also seek to determine transitional arrangements which are in the interest of the Union and, as appropriate, to provide for bridges towards the foreseeable framework for the future relationship.”
- Given a full trade treaty is unlikely to be settled in two years, this could indicate bridging agreements will be arranged for critical areas like financial markets. This matches a similar statement from the UK government in its Article 50 letter.
- Once outside the EU, the UK is called upon “to honour its share of international commitments contracted in the context of its EU membership”. This might suggest the EU wants the UK to remain a party to free trade agreements signed by the bloc with other countries while Britain was a member state.
- Presenting the document, the European Council President Donald Tusk warned that the talks would at times be “difficult, complex and sometimes even confrontational”, but added that the bloc would not pursue a “punitive approach”.