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https://www.ft.com/content/738a995a-35ca-11e9-bd3a-8b2a211d90d5 How no-deal sets the stage for Brexit’s biggest negotiations
EU goal will be to make UK pay its €45bn bill and agree backstop
Alex Barker in Brussels
If Britain leaves the EU without a deal next month, Europe’s Brexit negotiators will not end talks but reset their clocks to a new cliff-edge date: April 18.After 20 days of likely disorder at ports, supermarkets and borders, the deadline will be Britain’s chance to avoid a more lasting rupture with its biggest trading partner — if it can stomach the price. By April 18, according to European Commission contingency plans, Britain must confirm whether to make around €7bn of net contributions to the EU’s budget for 2019. The first payments, which require House of Commons approval, are scheduled for April 30; EU negotiators say missing them will “ruin” relations.The budget ultimatum, cast by Brussels as a generous offer to provide continuity for Britain after the country’s scheduled March 29 departure, is one of the most striking examples of the diplomatic crunch that looms in the immediate aftermath of a no-deal exit.Driving the EU side will be a new aim: making Britain meet its withdrawal treaty obligations, including the €45bn budget bill and backstop arrangements to avoid a hard border on the island of Ireland, even though the treaty itself will have perished. As a result, a no-deal exit would kick off the most fast-paced and consequential period of negotiations since the Brexit referendum in 2016. “This is when it all shakes out,” said one senior EU diplomat closely involved in Brexit.In the white-heat of a traumatic break with four decades of shared sovereignty, the two sides will confront decisions that will frame relations for years to come. The choices made in the space of a few weeks may determine whether a no-deal Brexit becomes a hostile divorce or a more managed break that keeps a path to reconciliation open.
“Here in Berlin, people are starting to realise that no-deal Brexit is not an event in itself but a new phase of the process,” said Nicolai von Ondarza of the German Institute for International and Security Studies. “It will not mean the breakdown of negotiations but a different form of negotiation.”No-deal Brexit threat focusing minds, says Philip HammondEU sets its deadlines and demandsA “managed no-deal” scenario has long been derided by the EU, in part to stop Brexiters from claiming that the benefits of the Britain’s exit treaty could be replicated through “mini-deals” after Brexit that have fewer downsides. “If there is a no deal there is no more discussion. There is no more negotiation. It is over,” said Michel Barnier, the EU’s chief negotiator, last year. “Each side will take its own unilateral contingency measures.”But contingency plans issued by the commission since December tell a different story about the type of interaction imagined after Brexit — if the politics will bear it. There will be no overarching UK-EU treaty, nor the soft landing of a full transition, as established by Theresa May’s draft withdrawal treaty. But through “unilateral” arrangements it has already put in place for no-deal, Brussels has set up a series of deadlines and demands — covering areas ranging from fish and money to flying rights — that will inevitably require dialogue with London.“The Brits will be back to the negotiating table within weeks,” said one senior EU figure directly involved in handling Brexit. “We will say, yes, by all means let’s discuss the future. First, here is the backstop and the financial settlement.”Three strands to the talksSeen from the EU, talks would fall into three related strands. First are areas such as fisheries and money, where the EU as demander wants the UK to continue existing arrangements so that divisive fights between the remaining 27 EU states are avoided. Here self-interest prevails. For instance, Brussels’ contingency proposals on fisheries push the EU’s no-deal principles to their limit in a bid to retain access to UK waters that fishermen in France, the Netherlands and Belgium depend on. The draft plans call on the UK to maintain existing agreements for 2019 and allow member states to negotiate swaps of fishing quotas. These swaps, which would then be approved by the commission, are exactly the kind of mini-deals that the EU has long said would be banned.
A second area covers fundamental concerns — such as the maintenance of peace in Northern Ireland, financial stability in markets, and public health — in which co-operation may be essential, even if UK-EU relations badly sour. One senior EU official said that issues such as the Irish border were things that “both sides will need to sit together and discuss”, even in the weeks before a no-deal exit. “There will be pragmatic solutions found,” the negotiator said. One EU ambassador said talks, at an informal level, had already started. Leo Varadkar, the Irish premier, maintains that the ultimate solutions will mirror the backstop plan, in which at least Northern Ireland would remain under the EU’s customs union and regulatory regime — a measure loathed by Eurosceptics and Mrs May’s allies in Northern Ireland’s Democratic Unionist party.“I don’t think that we’ll get to anything very different to the agreement . . . even if that involves a period of uncertainty after 29 March,” Mr Varadkar said this week.
Managing Britain as a ‘third country’
The final big area of concern is the wider economy, and how to manage Britain suddenly becoming a “third country”. Brussels’ aim is to mitigate the worst effects of a break-up and give European businesses time to adapt. But at the same time it wants to show that EU membership has irreplaceable benefits, and keep pressure on the UK to yield on fish and financial payments. The Commission’s contingency plans temporarily relax laws for around a year — for example extending visa-free travel rights and allowing airlines to maintain basic point-to-point flight schedules with Britain — so as long as the steps are “reciprocated” by London. The hitch comes if Britain does not reciprocate, or says it will only do so if access arrangements are improved in one or more sectors. In the past the EU has only taken such “equivalence” decisions — which unilaterally grant market access rights to foreign companies — after having held extensive exchanges with third country governments. The difference with a no-deal Brexit would be the sheer number of areas covered at pace, against the backdrop of a legal revolution.
EU’s view of its bargaining power
The EU sees its bargaining power as coming from managing the implementation of rules that can cause huge disruption to trade — such as customs checks or providing authorisations. The challenge is taking advantage of that leverage that without doing further harm to EU interests. The EU has particular sway in the area of agricultural trade. UK exports face 100 per cent checks under EU law after Brexit. But, for this point even to be reached, Brussels must first authorise the UK as “competent” to export to the EU — a decision that one senior EU diplomat noted might take a day or “maybe a lot longer”, depending on the state of relations. Michael Gove, Britain’s environment secretary, admitted to farmers this week that, by holding back on this authorisation decision, the EU could completely halt Britain’s sales of beef, sheep meat and dairy to the bloc.
“As things stand, just six weeks before we are due to leave, the EU still have not listed the UK as a full third country in the event of no deal being concluded,” Mr Gove said. “That means as I speak that there is no absolute guarantee that we would be able to continue to export food to the EU.” Capitalising on this bargaining power is a high risk strategy for the EU. Britain could impose tariffs, as Mr Gove suggested this week, or indeed ban EU imports, a move that would hit Ireland particularly hard.
But some in Brussels see Britain having few options but to lower trade barriers if it wants to avoid food shortages. “The UK has no incentive whatsoever unless they want empty shelves,” said one official, who predicted some EU states would make fishing rights in UK waters a condition for granting market access to UK farmers.Shifts in British politics difficult to predictCalculations on the balance of power in a no-deal scenario depend heavily on one factor: they assume the UK government will have the political leeway and authority to do deals. While some EU negotiators are confident the UK will have little choice but to co-operate, because of the economic hit in a no-deal scenario, some member states are more unsure. “How exactly is British politics going to turn around after no deal and agree to the backstop that was the cause of them crashing out? I don’t understand,” said one senior official overseeing Brexit for an EU government. Another senior EU diplomat in close touch with Downing Street over Brexit speculated that, when the UK’s exit from the bloc becomes a reality, it will be impossible to predict shifts in British politics, whether because of resignations or elections. “I cannot imagine a hard Brexit will mean business as usual in British politics,” the adviser said. “Something has to happen.”
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