Brexit talks...

For Britain, the worst of Brexit talks is yet to come

Getting the EU to agree to move on to trade negotiations is just the start of a very long road.

By ANAND MENON

There’s no need for Britain to panic over Brexit talks — not yet anyway.

After the European Council declared earlier this month that Brexit negotiations have not yet made “sufficient progress,” the good news is that all signs suggest the U.K. can expect Brussels to agree to kickstart talks on the future relationship at December’s summit. The bad news is that that’s when the real trouble will start.

There are still a number of issues to be resolved under the Article 50 talks. There is an increasing, albeit belated, recognition that the issue of the Irish border must be dealt with in the context of talks over trade. And when it comes to the rights of EU citizens living in the U.K., the role of the European Court of Justice remains a point of contention, even if both sides are edging toward some form of compromise.

Then, of course, there is the money. But for all the noise surrounding the issue, here too a compromise is within reach. The probability of continued payments during any transition period should also ease both sides toward a solution.

We’ll have lost a couple months, but ultimately this hardly matters. A trade deal could not have been negotiated between October and March 2019 any more than it could be between December and March 2019. What matters is that the British government’s slow, grudging recognition of the need for a transition period is taking off any immediate time pressure.

Britain is particularly dependent on a deal on services, which make up a staggering 91 percent of London’s economy.

Still, if it thought negotiations so far were tough, Britain should be steeling itself for a far bumpier ride ahead.

There is no reason at all to assume that the negotiations to come will be any more straightforward. Indeed, they promise to be far more problematic than what we’ve seen so far — and that’s leaving aside the inconvenient fact that the British government itself has yet to agree on what it actually wants.

British political debate is treating the transition as if it were something we only need to ask for to get. Yet what Jean-Claude Piris, a former EU adviser, recently referred to as a “full Monty” transition — in which the U.K. maintains its current trade status with the EU — raises all kinds of legal issues.

It also has to be negotiated extremely quickly, as Chancellor of the Exchequer Philip Hammond himself admitted, to prevent businesses from triggering contingency plans based on a worst-case scenario. Delaying an agreement could become a rather useful negotiating tactic for the EU.

So far, so challenging. But even assuming Britain gets an agreement in principle on Article 50’s initial divorce issues and can quickly agree on the terms of its transition period, our problems will not be over.

We will be forced to negotiate a trade deal without our strongest negotiation asset — money. Because any Article 50 deal must be signed, sealed and ratified by March 2019, and because no trade deal will be agreed by then, we will have committed to making payments to the EU before we can extract trade concessions in return.

Britain is particularly dependent on a deal on services, which make up a staggering 91 percent of London’s economy and, in 2013, accounted for 79 percent of our GDP. Negotiating tariffs is relatively straightforward, but negotiating an agreement on services will require coming to an agreement on regulations, which in turn means establishing some kind of oversight mechanism.

Previous EU trade deals involving the single market tell us that access to the single market requires accepting the jurisdiction of the European Court of Justice in some shape or form. The free-trade agreement between the bloc and Canada, in which the EU’s top court does not have a role, is not yet confirmed to comply with EU law.

Negotiations will be tough and the reality is that the EU27 will have other, conflicting priorities. They may not even see a trade deal with the U.K. as a top concern. And even if a deal does emerge, there is the question of ratification, which is where politics is sure to rear its ugly head.

A trade deal of the scope Prime Minister Theresa May has implied she will pursue would almost certainly constitute what is called a “mixed agreement,” meaning it would have to be ratified not only by all EU27 national parliaments but, in some cases, by regional parliaments as well.

Every parliament will need to be satisfied that its country is getting a good deal. Another, potentially more serious problem, is that the mood in some of Europe’s major countries has turned sharply against free trade in recent years.

Take Germany, for example, where a Bertelsmann poll carried out in 2016 found that approval for free trade was decreasing sharply. Two years earlier, 88 percent considered trade with other countries a good thing, but that figure fell to 56 percent in 2016, with 27 percent expressing a negative opinion.

Even if Britain is allowed to move on to the next phase of talks in December; even if we manage to negotiate the principles of a transition arrangement remarkably quickly thereafter; and even if we manage to agree on a comprehensive trade deal with the EU before that transition period comes to an end, there is still the danger that the ratification process could grind the whole thing to a halt.

None of which is to say that we might not get there in the end. But it is to caution against the belief that December marks anything more than the start of the Brexit road.