The Complexity of Brexit is Dawning on All Concerned

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Britain’s Prime Minister, Theresa May’s speech at Lancaster House, London this week spelled out for anyone who hasn’t been listening for the last couple of months exactly what her government intends to do regarding the shape of the U.K.’s eventual relationship with the European Union once their divorce is completed.

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As negotiations have not yet started, nor will they until the British government invokes article 50 this Spring and formally announces its intention to leave the union, May’s speech was more wish list than template for post-Brexit Britain’s working relationship with Europe. Nevertheless, it was broadly well received in Europe both for its tone and because it gave recognition that her priority is for a clean break.

Breaking Up is Hard to Do

Repatriating control of borders and laws means that the U.K. will be leaving the single market, quitting the jurisdiction of the European Court of Justice and putting into action an independent trade policy. To what extent the U.K. can achieve these objectives while still clinging onto tariff-free trade with Europe is the known unknown.

As the Financial Times explains in a recent article, in the days after the June 23 referendum, the remaining E.U.-27 countries have shown remarkable unity around their negotiating principles, which make access to the single market conditional on acceptance of the E.U.’s four freedoms, rules out cherry-picking and insists on an orderly divorce before trade talks can begin.

Beyond the E.U. 27’s cohesive position above, there is some variability about how the negotiation process may be conducted. Hardliners such as Michel Barnier, the E.U.’s lead negotiator, insist Britain must disentangle itself from Europe and pay all its bills before any discussion about a trade deal can start. Another E.U.-27 camp is said to be more open to a limited parallel trade conversation, linked to Britain’s progress in divorce talks, yet nearly all agree that achieving even a framework agreement on trade within article 50’s two-year time frame is completely unrealistic.

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In recognition of this, the British are suggesting an “implementation” period, essentially some form of extension allowing them zero-tariff trade of goods and services with Europe, after the two-year article 50 deadline is reached. Europe, however, sees this as the U.K. having its cake and eating it, too.

Extending E.U. rights for citizens and companies, such as prolonging market access privileges, would de facto require Britain to continue to accept the E.U.’s four freedoms — the free movement of goods people, services and capital. Having stated so clearly that Britain rejects the idea of free movement of people, the jurisdiction of European courts, and the continued payment to the E.U. budget, Theresa May’s government may find it politically damaging to try and sell to the British people that she backtracks on those commitments after the two-year deadline expires.

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