The UK negotiates transition period and gets scalable sanctions


A week after becoming Britain's second woman prime minister, Mrs Theresa May attends her first Prime Minister's Questions in the House of Commons, Westminster, London 20th July 20th 2016.

The UK negotiates transition period and gets scalable sanctions

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Theresa May has managed to remain the leader of the Conservative party, at the expense of being a Prime Minister.

Brussels is no longer negotiating a “transition deal” with the UK. Instead, what is under negotiation is a divorce settlement, complete with a provision for scalable sanctions, in the event London fails to pay alimony.

In December the UK was confident of concluding a transitional deal that will maintain Single Market access for two additional years, providing scope for further trade negotiations. The price was a commitment to the status quo, including Customs Unions membership, contributions to the EU budget, enforcement of the acquis, and a borderless Northern Ireland.

In effect, these commitments mean very little, as the British prime minister prioritizes staying in power, which means retaining the parliamentary support of hardline Brexiteers. That is problematic.

No sooner Theresa May had committed to these principles – at least for the transition period – the Brexit secretary David Davis said that this was nothing more than “a statement of intent” rather than legally binding commitment. In January, the Conservative MP Jacob Rees-Mogg dismissed these commitments as an attempt to turn the UK into an EU “vassal state.”

In sum, no one in Brussels or London can take seriously the commitment of a government that cannot take commitments its parliamentary group will honour.

Freedom of Movement

Maintaining the status quo as regards to freedom of movement has been fiercely opposed by prominent Leave campaigners. The demand from the Leave ranks of the Conservative party is to register any newcomer after March 2019, making clear that any new arrivals from the European Union would not automatically have the right for permanent residence.

On Tuesday, Theresa May’s spokesman also made clear that the government is not ready to commit to a position for the future of EU migration to the UK. “We will bring forward proposals on the future immigration system as and when they’re ready,” her spokesman said on Tuesday.

Customs Union

Maintaining the status quo as regards to the customs union has been fiercely opposed but the Leave campaigners. On Monday, the British government made clear the UK has no intention of remaining in the Customs Union, proposing a “streamlined customs arrangement” that no one has been able to explain.

The bottom line is that it would be a “bespoke agreement” that would allow the UK – and only the UK – full access to the Single Market, including services, but would simultaneously allow trade deals with other countries.

On Tuesday, Home Secretary Amber Rudd reiterated the government’s commitment to this elusive bespoke agreement.  “We want to have a bespoke agreement.; we’re not going to surrender before we have that battle,” Rudd said.

Rudd is not counted in the ranks of Leave campaigners. However, she remains convinced that the UK can retain full Single Market access – including services – while limiting freedom of movement.

Northern Ireland

While the unity of the Conservative Party and the resilience of Theresa May’s premiership is not everyone’s concern, peace in Northern Ireland is something both the UK and Brussels are committed, theoretically. The island is facing a real prospect of a physical border being erected in the event of the UK leaving the Customs Union, which is why Dublin demanded guarantees prior to authorizing trade talks.

The Irish Finance Minister, Paschal Donohoe, reiterated on Wednesday that “the agreement that we reached with the British government through the European Union last year must be honoured.” In this case “must” expresses a demand, not a certainty.

Brussels braces for scalable sanctions

The chief Brexit negotiator for the European Commission, Michel Barnier, made clear on Tuesday that “without a customs union and outside the single market, barriers to trade and goods and services are unavoidable.”

Between calls for a “comprehensive” trade deal by Davis and a “bespoke” deal by Rudd, what is lost is that London is negotiating with the EU. The current negotiation in London is primarily between different factions of the Conservative Party.  In this political context, negotiations are heading towards derailment and there is little hope for a deal on a transition deal by March 13.

On Wednesday the EU 27 went a step further. According to a leaked position paper leaked to the press, there no trust in the UK’s commitments, and the EU is preparing for scalable sanctions in the event the UK fails to stick to its commitments. Such sanctions will include tariffs on goods and/or the suspension of the single air aviation agreement between the UK and the continent.

No deal is better than losing power

Addressing questions in the House of Commons on Wednesday, Theresa May’s dismissed the document as merely “noise” surrounding the negotiations, offering assurances of a “robust” negotiating position.

The British government is now unwilling to promise anything more than “robustness,” in the spirit of the “no deal is better than a bad deal” position.

The business secretary Greg Clark said on Wednesday that there is no guarantee on the UK’s future trade relations with the EU. “We can’t guarantee an end-state until it has been agreed by both sides,” Clark told BBC radio.

In the meantime, the UK’s economy is experiencing a slowdown in investment and there is serious doubt as to whether London will be able to maintain its position as the world’s top financial center in the world.  Still, the Conservative party remains united, apparently.

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