UK prime minister Theresa May will give the EU’s 27 other heads of state and government a brief update on the UK’s Brexit preparations over dinner on Thursday in Brussels.
Brexit is not formally on the menu of this week’s European Council meeting, May’s first since becoming prime minister, but council president Donald Tusk has invited her to say a few words before discussions move on to the main topic of conversation: the EU’s relations with Russia.
Keen for the 27 to stick to their “no negotiations before Article 50 is triggered” position, Tusk will want to steer away from any open discussions about Brexit, BuzzFeed News understands.
With the council’s agenda focused on migration, revitalising the European Union's trade policy (and dealing with the Walloon parliament’s opposition to a trade deal with Canada), as well as Russia, most Brexit-related conversations will be limited to brush-bys and bilateral chatter. On Friday, May will have a more formal working lunch with European Commission president Jean-Claude Juncker.
It is understood that the UK wants to negotiate a trade deal in parallel to an exit agreement. The goal would be to conclude the two separate agreements within the same two-year timeframe.
The 27 have yet to express a position on whether they will engage in trade talks at the same time as exit negotiations. Back in June, the EU trade commissioner said the UK would need to first exit the EU before trade talks could even begin. But sources within both EU institutions and in European governments have told BuzzFeed News that line is likely to soften because it would be impractical to not have concurrent negotiations, and any settlement arrangement would need to be informed by whatever EU–UK relationship follows the current status.
The same sources also suggest that any free trade agreement (FTA) will likely centre primarily on goods, as granting UK services continued full access to the single market without accepting freedom of movement would effectively amount to the cherry-picking that the 27 have ruled out.
Analysis published this week by the think tank Open Europe points out that the EU has more than 30 FTAs with more than 60 states, all of which provide fairly comprehensive reduction in tariffs on goods and access to the single market in goods. There is no precedent, however, for access to the single market in services without full membership of the single market and acceptance of all EU rules and regulations (as under the EEA model).
The Spanish foreign minister said on Monday that the Brexit deal would likely be modelled on the EU–Canada pact. Except for a few goods, the EU–Canada deal, known as CETA, abolishes virtually all tariffs between Canada and the EU.
On Sunday, the Financial Times reported that the UK is exploring plans to pay billions of pounds into the EU budget to allow some sectors, including financial services, to access the single market.
The bar for any trade agreement would be higher than for the exit deal as it would need to be signed off unanimously by all 27 member states. Both deals will also need to be approved by the European parliament.
Concluding a trade agreement within two years could prove ambitious. The deal with Canada has been in the works for seven years. This has led to business groups and some MPs demanding the UK government prioritise a transitional arrangement.
The UK has said it would not rule out introducing work permits for EU nationals, a move a number of European governments told BuzzFeed News would be “unacceptable”. As a result, should negotiations last longer than two years, it could preclude Britain from being granted even partial access to the single market as part of any such interim deal.
Without a comprehensive transitional deal that goes beyond a short-term phasing out from existing agreements, the UK would have to revert to trading solely through the World Trade Organisation, full membership of which will require a separate negotiation, until an FTA is agreed. This would see tariffs as well as regulatory barriers and restrictions imposed on both goods and services.
David Davis, the secretary of state for exiting the EU, has been unable to rule out such a scenario, although he has hinted that he believes a trade deal can be completed within the two years.
Meanwhile, resistance is likely to continue against any attempt by May this week to suggest that talks about the single market and free movement be split and tackled separately.
But beyond the prime minister’s words on Thursday, May’s tone is likely to matter as much as what she says. One diplomat told BuzzFeed News that the UK’s attitude on an array of topics not directly linked to trade talks, such as pending budget liabilities, will inevitably influence negotiations. A confrontational tone, or attempts to drive a wedge between member states, would likely make the 27 "less constructive".
May's first European Council comes as some of the rhetoric and policy proposals coming out of London since the referendum have hardened the stance of many European capitals, including those usually more sympathetic to Britain’s point of view.
Alberto Nardelli is Europe editor for BuzzFeed News and is based in London.
Contact Alberto Nardelli at firstname.lastname@example.org.
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