Trade deals’ pure realism: it may take 10 years for a post-Brexit agreement

theresa-may-15122016

Mrs Theresa May, UK Prime Minister. The EU Heads of State or Government met on 15 December 2016 in Brussels to discuss migration and security issues. Leaders also discussed economy and youth, as well as the issue of the ratification of the EU-Ukraine Association Agreement in the Netherlands. Shoot location: Bruxelles – BELGIUM. Shoot date: 15/12/2016. Copyright: European Union.

It was already a well-known fact that the UK had a bumpy road ahead before a post-Brexit deal with the European Union could ever see the light, but last week’s news are now showing that reality could be even more complex than that. Britain’s ambassador to the European Union, Sir Ivan Rogers, warned British ministers last week that a UK-EU trade deal might take up to 10 years to finalise, as learned by the BBC.

Despite that a Downing Street spokesperson immediately dismissed the suggestion, Theresa May’s government has now to deal with the harsh reality that trade agreements are immensely complex to negotiate, even for ex-members of the EU.

The facts

Earlier this year in October, Sir Ivan Rogers, who conducted David Cameron’s negotiation over the UK’s relationship with the EU, advised British Ministers that the view of the 27 other countries was that a free trade agreement will not be finalised until the early to mid-2020s, as reported by the BBC. Sir Rogers is also said to have revealed that the European leaders see more likely an EU-UK agreement to be a free trade arrangement rather than a continued single market membership.

And that’s not all about it. The senior British civil servant, who has been the Permanent Representative of the United Kingdom to the European Union since 4 November 2013, has also reportedly cautioned PM May that an agreement, even once concluded, could be still far from secure, as it could be ultimately rejected by any of the 27 national parliaments during the ratification process.

Downing Street was quick to dismiss those words and brand Sir Rogers’ advice as a result of personal pessimism. “It is wrong to suggest this is advice from our ambassador to the EU. Like all ambassadors, part of his role is to report the views of others”, a No 10 spokesman highlighted. However, the truth could be a bit bitterer, as it is understood that Sir Rogers was reporting back conversations he had had with European politicians, and gave no personal advice to the British government.

Article 50’s mechanism

Sir Rogers’ comments were leaked last Thursday after nearly two months since his original report, and are widely in contrast with British ministers who are formally declaring that a deal with the European Union can be concluded within the two years foreseen by the triggering of Article 50.

Article 50 of the Treaty of the European Union allows a Member State to withdraw from the Union with a notification to the European Council of its intention. The binding rules that Article 50 involve then oblige the EU to negotiate a “withdrawal agreement” with that state. UK’s Prime Minister Theresa May has repeatedly said that she will trigger Article 50 before the end of March next year, to then start the two-year negotiation process and eventually leave the 28-nation bloc.

Trade deals’ labyrinth

Things can be quite complex still for Theresa May’s squad from a mere organisational perspective though. What history has told everyone in the last decades is that trade agreements can be sensationally long to design, discuss and – most of all – agree. The European Union has more than 30 free trade agreements in actual force with many countries worldwide, which are by all means the result of a precise will to cooperate with a partner.

Despite that, there’s often a lot underneath the tip of the iceberg to be considered. Many of those already-signed trade deals indeed took years to come into force, like for example the EU-Israel “Association Agreement”, which was signed in 1995 and officially became effective in 2000, or the one with Serbia, which took almost 5 years to be cut.

There are also agreements that were signed but are not provisionally applied. A good example is the CETA. The Comprehensive Economic and Trade Agreement with Canada is indeed a fair example of a huge trade agreement that has anyway a relatively simple body in terms of laws and clauses, as it does not include investor-state settlements and services provisions. Despite this relatively “simple nature”, the deal took seven years to negotiate, two of which were devoted to the negotiations.

Political changes and impacts

Deals such as TTIP, between the European Union and the United States, and the TPP, between the US and Pacific countries, are not even worth mentioning, since their complexity and geo-political impact are literally dragging them down, making them almost impossible to accomplish.

Just to spend a few words on the latter, during the 2016 US Presidential Campaign, President-Elect Donald Trump had repeatedly declared that he would have opposed the deal in case of his election, arguing that it would “hurt” American workers. This surely provides a clear evidence of how a change in a country’s political class can really bring substantial changes to a trade deal like the Trans Pacific Partnership, which was signed in 2015 but not yet ratified.

Transitional agreements?

British ministers and members of the current leading class are spreading optimism at the moment – possibly to compensate Sir Rogers’ alleged “negative views”. David Davis current Secretary of State for Exiting from the European Union said that “everything is negotiable” within a year and a half of the formal article 50 notification in March. Trade Minister Liam Fox declared that Britain may need a transitional agreement to have a smooth exit from the European Union, but that it should not pursue a deal that would be too similar to a membership of the bloc.

While attending BBC1’s The Andrew Marr Show on Sunday, Mr Fox said the government needed to seek interim solutions to “minimize disruption to businesses” and international trade. UK’s Prime Minister Teresa May declined to comment the Brexit timetable as she arrived in Brussels for an EU Leaders Meeting last week, although she also said that British negotiators have been “preparing” for the talks with the EU.

“Difficult to imagine”

However, the road doesn’t look so smooth even in this eventuality. Several EU politicians have indeed turned their nose up recently regarding a temporary Brexit option. EU’s chief Brexit negotiator, Michel Barnier, recently said that a transitional deal would have “some point and usefulness”, but he also declared that such a situation would only be reachable once Britain has explained exactly what it wants from the EU, and the bloc has “established what it could accept”.

At present, it was “difficult to imagine”, he reportedly said, according to the Guardian. Xavier Bettel, Luxembourg prime minister, clearly said he would oppose to the Union giving the UK an interim solution to cover the transitional period between a formal Brexit and the end of negotiations. “What would interim mean?”, Mr. Bettel told Agence France-Presse. “We are not going to make a status of ‘a little bit member’ or ‘not completely’, ‘pending divorced’, ‘nearly divorced’,” he also said.

Complex position

The British government at the moment seems to be convinced that a 360-degrees cherry picking will be possible: halting immigration from the EU, keeping financial services firms in the City, obtaining a transitional deal and securing a smooth Brexit within two years; reality though looks a bit different.

Moreover, if it’s absolutely true that the EU is going to lose as member one of the most advanced economies of the world, it is also inevitable to see the UK facing the risk of giving up existing free trade arrangements with crucial trading partners in Europe, such as Germany and France.

For now the UK government looks in a quite more complex position, which should be handled not only with a firm approach, but also with realism. European Parliament’s president Martin Schulz recently urged leaders of both sides to work towards Brexit “in a spirit of loyal co-operation”.

“We cannot allow the Brexit process to become an emotional affair, nor should we turn it into a legal maze from which exit is extremely difficult”, he added.

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