The U.K. clinched a deal that will buy it time in Brexit talks in a move the European Union’s chief negotiator hailed as a decisive step. But it’s all still contingent on finding a solution to the most intractable issue of all — the Irish border.
The two sides reached an agreement for a 21-month transition period that’s due to start on Brexit day in March next year, and said progress had also been made on the broader withdrawal treaty. Brexit Secretary David Davis said a good deal was now closer than ever.
The pound rallied. But the reaction from business was lukewarm, as the transition agreement won’t be legally binding until the final withdrawal treaty is signed — and that won’t be until next year. Chief EU negotiator Michel Barnier reminded reporters on Monday that “nothing is agreed until everything is agreed.”
With just a year to go until the U.K. leaves the bloc, talks on the future trading relationship aren’t due to start until the end of this month. The last year has been focused on what the U.K. will pay as a settlement when it leaves, how EU citizens will be treated in the U.K. after Brexit, and the Irish border. Prime Minister Theresa May has spent much of her time finding ways of holding her divided party and Cabinet together.
To get this far the U.K. had to make concessions in areas May had vowed to fight. It has backed down on the key issue of EU immigration, allowing EU citizens to continue enjoying the same rights during the transition period as before. May had wanted to cut this short. It has also accepted a slightly shorter transition period than the one it originally wanted.
But U.K. officials believe there are five areas in the transition and the wider withdrawal agreement where the EU has listened to its concerns:
- Explicit permission that the U.K. can negotiate and sign its own trade deals with third countries during transition, without needing the EU’s approval first, as long as the deals don’t come into force until afterward. They can be implemented during the transition if the EU gives consent. Where the U.K. doesn’t implement new trade deals, the EU will ask other countries to treat the U.K. as if it is still bound by EU agreements during the transition.
- Opt-outs for the U.K. from EU foreign policy decisions during the transition phase.
- A guarantee the U.K. will retain the same access to fisheries during transition and a consultative process to ensure the U.K. understands all fisheries decisions.
- An ability for the U.K. to opt in to new justice and security measures during the transition.
- A pledge from both sides to act in “good faith” with a joint committee to oversee the agreement.
The promise to act in good faith is a hint that the EU won’t pass laws during the transition period — when the U.K. has no vote — that would damage the U.K. That has been one of the U.K.’s key concerns.
The Irish issue has continued to dog talks, and a new temporary compromise on the wording of the withdrawal agreement has now been agreed. May said the EU’s proposal — which would have put a border between Northern Ireland and Britain in a worst-case scenario — was something no U.K. premier could accept.
The two sides agreed that there needed to be a backstop plan for the Irish border — but remain divided on what it should be. They’ve also agreed to a separate series of talks just on the border.
The transition arrangement is weaker than what businesses initially imagined. When it was first proposed, the idea was that the future trading relationship would already be clear and the grace period would allow for the implementation of the new regime. Now, the transition is going to be used to complete trade talks, according to Barnier.
That has prompted business to start calling for a second transition, once the terms of the new relationship are clear.
“Both sides should commit now to a finite adjustment period once a new trade agreement has been finalized,” the Institute of Directors said in a statement.
“Not enough attention is being given now to the finer details and practical implications of transition,” it said. “Many businesses will only be able to sufficiently plan and prepare for Brexit once the precise details of the future relationship are known, and any changes to domestic infrastructure like customs have been implemented.”
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