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The formal process for leaving the EU, Article 50, has now become common knowledge. There remains a huge debate about when it should be triggered and the role of Parliament in activating it. But an under investigated area is what will the Article 50 negotiations actually involve and how might issues be separated out? Raoul Ruparel tries to provide some answers.
13 July 2016
We’ve looked in detail at Article 50 negotiations and the leaving process here and here. As we’ve noted, the process of leaving the EU will have to involve both a withdrawal/transitional agreement and a new trading relationship between the UK and EU. Article 50 is fairly clear on the first of these, saying, the EU “shall negotiate and conclude an agreement” with the leaving state “setting out the arrangements for its withdrawal”. However, it less clear on whether this should definitively include a new trading relationship, saying only that the agreement should be structured “taking account of the framework for its future relationship” with the EU. Below we look at how issues might be separated out and what this could mean for the negotiations.
This is quite hard to pin down, but essentially it would seek to tie up the institutional, regulatory and financial loose ends which would be created by the UK exiting the EU, both for the rest of the EU and the UK. This will have to be combined with a domestic process in the UK determining how to deal with issues such as existing EU regulation and the policy on funding regions or farmers for example.
In its pre-referendum report on the process for leaving the EU the Government outlined a few issues which would need to be sorted out in the transitional/withdrawal agreement:
If it becomes more of a transitional agreement, then it will also have to lay out what happens to the UK’s EU rights and obligations during a transition period to the new trade agreement.
This is slightly easier to pin down since we know the issues which are often discussed in modern free trade agreements. This involves but is not limited to: trade in goods and agriculture (tariffs), trade in services, regulatory harmonisation, procurement rules, state aid, competition policy, product standards, rules of origin (ensuring products origins fit terms of the agreement), recognition of professional qualifications, investment rules (capital movement) and international arbitration/enforcement of the agreement. Exactly which issues and to what extent they are included in the agreement will of course depend on how depth and breadth of the trade agreement.
A crucial point which remains unclear is whether the negotiations over the two agreements will happen in parallel or separately. There has always been an assumption in the UK, and I dare say many member states, that they would be done together. However, recently the Commission and others have been sending out the message that the two should be handled separately. Trade Commissioner Cecilia Malmström recently suggested that the negotiations would be handled separately with the UK reverting to World Trade Organisation (WTO) rules until the new trade agreement was struck. This was then echoed by Irish Prime Minister Enda Kenny, usually a close ally of the UK in EU issues. There are a few points to make on this, two practical and one strategic.
One final point on timeframe. As we have explained before, whether separated or together these negotiations are expected to take a number of years. If they do happen at the same time/in parallel then it’s hard to see how it can all be wrapped up in the two years outlined by Article 50. Therefore nailing down whether the agreements will be negotiated in parallel or apart as well as the timeframe for whichever is chosen will be one of the most important jobs for the new UK Government.