No Progress On Brexit

No progress on Brexit at EU summit as clock ticks on 29th June 2018

Pawel Swidlicki Senior Account Manager

KEY TAKEAWAYS A few months ago, this summit was billed as critical in terms of demonstrating progress on Brexit with a view to finalising the negotiations in October. However, the combination of the refugee and migration crisis flaring up again (causing bitter ructions within the German government and threatening Angela Merkel’s position) as well the lack of any headway both in terms of the UK-EU talks and securing a common Brexit position within Cabinet, meant it was largely a non-event from a Brexit perspective. The summit conclusions on Brexit came in at only 4 paragraphs – here is our summary of the key points: • Both sides welcomed the (very limited) progress made in the talks over the past 3 months. This mainly covers relatively routine technical issues, the EU notes that “other important aspects still need to be agreed”. • In addition to the question of the agreement’s governance, this includes the well-established problem of the Irish border backstop. The EU expresses its “concern that no substantial progress has yet been achieved”, notes that the UK committed to this in principle in December, 29 June 2018

• and stresses “that negotiations can only progress as long as all commitments undertaken so far are respected in full”. This morning, Michel Barnier went even further, warning that “huge and serious divergence remains… time is running short” • Gibraltar has also been brought into play more explicitly. The EU has already given Spain a veto over the agreement but the specific reference in the conclusions is generally seen as nod to the new socialist-led government.

• The EU also notes, ahead of next week’s Chequers summit at which the Cabinet will aim to agree on a common position, that “work must also be accelerated with a view to preparing a political declaration on the framework for the future relationship”. • EU leaders also state that “if the UK positions were to evolve, the Union will be prepared to reconsider its offer”. A reminder then that if the UK were to further water down its red lines (especially on the ECJ and free movement) the EU would be in a position to improve their offer.

• Finally, the EU also “call upon Member States, Union institutions and all stakeholders to step up their work on preparedness at all levels and for all outcomes”. This is clearly a reference that the EU is taking the prospect of no deal seriously and is preparing for that eventuality. Given the impact of no deal on the EU – while bad it is generally felt by the EU to be smaller and more evenly distributed they will be feel they are in a better position to cope, thereby even further degrading the effectiveness of a No Deal outcome as a UK negotiating position.

All eyes now turn back to UK domestic politics and whether May can force a common position on the Cabinet. The expectation is that the UK will pitch to remain de facto within the single market for goods and something that in practice, if not in name, closely resembles a customs union (and if so, would any ministers be prepared to walk). The risk is that the EU will conclude the model above is still too favourable to the UK in terms of its balance of benefits vs obligations, but at least there would be a substantial proposal to negotiate.

NEXT STEPS Early July: UK Cabinet to convene at Chequers to sign off on Brexit White Paper setting out UK more detailed proposals for new UK-EU relationship

Mid July: Customs and Trade Bills back expected back in the Commons with likely showdown over new UK-EU customs union 24 July – 3 September: Parliamentary recess 22 - 26 September: Labour Party Conference 30 September - 3 October: Conservative Party Conference 18 - 19 October: European Council Summit at which both sides hope to conclude Withdrawal Agreement Late October: House of Commons set for crunch vote on Withdrawal Agreement 13-14 December: European Council summit possibly the last chance for UK and EU to conclude Withdrawal Agreement if not done in October

REACTIONS “Not only will we have to stay in a “I want to see a strong and deep form of customs arrangement security partnership continuing with amounting to a union, but we're also our EU partners. We’ll be setting that going to have to have a high level of out in more detail in the White Paper regulatory alignment because we publish shortly and I want to otherwise the life that take place show we can accelerate and along the border will be impossible.” intensify negotiations. I want to see that from the European Union and Rebel Tory MP Dominic Grieve the European Commission as well” Theresa May, UK Prime Minister “Not only will we have to stay in a form of customs arrangement “On Brexit we have made progress, amounting to a union, but we're but huge and also serious divergence going to have to have a highparticularly level of remains, on Northern regulatory alignment because Ireland… Now we are waiting for the otherwise the life that takes paper place and I hope it will UK white along the border will be impossible.” contain workable and realistic proposals… We want a deal but the Rebel Tory MP Dominic time Grieve is short. I’m ready to invite the UK to come back and present next Monday.”

“Not only will we have to stay in a “On the EU side we are doing form of customs arrangement everything to also make sure that the amounting to a union, but we're [Brexit] timings are respected… [but] it going to have to have a high level of all depends on the UK proposals… We regulatory alignment because are preparing for all scenarios. This is otherwise the life that takes place the last summit before the October one along the border will be impossible.” when the Withdrawal Treaty should be decided. If it’s not concluded, then we Rebel Tory MP Dominic Grieve are in a big problem.” French President, Emmanuel Macron “The Labour Party respects the “The EU is of willing to make outcome the EU referendum concessions and willing to make and does not support the EEA ora special case for Northern Ireland Norway model as it is not the right because of Britain.” its size, history and option for geography. But that special treatment and access to the singleCorbyn market and Labour leader Jeremy all of those things can’t unfortunately be on offer to the U.K. as a whole.” Leo Varadkar, Irish Taoiseach

Michel Barnier, EU Chief Brexit Negotiator

29 June 2018

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