So, finally, 17 months after voting to leave the European Union, and eight months after triggering Article 50, the EU and UK have finally agreed a deal on ‘Phase One’ of talks. In theory, having achieved ‘sufficient progress’, this will allow the two sides to move on to negotiating a new trade deal in the remaining 16 months before the UK leaves.
An agreement had been expected on Monday before it fell through at the last minute, reportedly due to the DUP not being happy with the agreement on the Irish border, but it seems that they have been placated - for now.
Jean-Claude Juncker’s chief of staff tweeted a picture of white smoke - the traditional sign that agreement has been reached on the election of a new pope.
So what does all this actually mean?
What are the components of Phase One?
1. Britain’s settlement bill to cover future EU costs which it had agreed to: some MPs claimed that we wouldn’t ‘pay a penny’, while others suggested the bill would be up to £50 billion.
2. The future rights of the three million EU citizens currently living in the UK: Theresa May had initially been keen to use this as a bargaining chip to ensure reciprocal rights for UK citizens in the EU - as well as for extra concessions elsewhere.
3. The issue of what would happen with the border between Northern Ireland and Ireland: this, of course, is an incredibly complicated issue but suffice to say that the overwhelming preference of almost all stakeholders is to retain a ‘soft border’ between the two areas.
What has been agreed?
1. There is no official figure but, according to Theresa May, a financial settlement has been reached which is “fair to the British taxpayer”.
2. May said that the deal would guarantee the rights of all EU citizens in the UK, “enshrined in UK law and enforced by British courts”.
3. May has guaranteed that there will be “no hard border”, preserving the “constitutional and economic integrity of the United Kingdom”. DUP leader Arlene Foster told Sky News that “six substantive changes” had been made to the earlier, rejected, text, saying: “There is no red line down the Irish sea and clear confirmation that the entirety of the UK is leaving the European Union, leaving the single market and leaving the customs union.”
What does this actually mean?
1. The draft paper contains no figures but a ‘methodology’ has been agreed to calculate the final bill, for example, the UK will continue to pay into the EU budget until 2021, but it will keep its rebate until 2020. This means that there will be a drip-drip of payments over many years, rather than any single lump sum. Experts, including the FT’s Linda Yueh, believe that the UK is expecting an “estimated net payment of €40-€45 billion, while the EU put(s) it at around €55 billion.
#Brexit bill: draft paper contains no figures, FT reports during talks UK estimated net payment of €40bn-€45bn while EU put it at around €55bn. When contingent liabilities, such as loans to Ukraine, are added the bill rises to an estimated €55.5-65.5bn https://t.co/suUKBRXTc9— Linda Yueh (@lindayueh) December 8, 2017
2. Pretty much what it looks like - EU citizens’ rights in the UK have been guaranteed, with a reciprocal agreement.
The BBC writes: “The deal done this morning means EU workers and their families will be allowed to live and work in the UK in line with current freedom of movement principles. It also give rights to those who won’t have secured permanent residency when the UK withdraws from the EU. The UK will offer reunification rights for relatives, including spouses, parents, grandparents, children and grandchildren, who do not live in the UK, to join them in the future. UK citizens living in countries within the union will have similar guarantees.”
3. This is the big one - no one is entirely clear. Monday’s aborted agreement suggested that, in order to maintain a soft border, Northern Ireland would have “regulatory alignment” with Ireland, and the EU, suggesting that, somehow, it would remain inside the single market and customs union. However, this would have meant that the effective EU/UK customs and trade border would be in the Irish Sea, something that the DUP, a Unionist party committed to remaining equivalent to the British mainland, would not tolerate.
The Telegraph’s James Crisp now writes that “regulatory alignment”, the phrase that so enraged the DUP and Brexiteers, has been replaced in the joint text with “no new regulatory barriers”. Tellingly, regulatory divergence - when new UK laws change or move away from EU regulation - will be allowed in Northern Ireland, but only if Stormont [the Northern Ireland parliament] decides… The UK promises to avoid a hard border through its overall future relationship with the EU. If that isn’t possible, it undertakes to provide “specific solutions” to prevent the hard border. If agreed solutions aren’t found, Britain, has promised to maintain full regulatory alignment with Single Market and Customs Union rules that protect the Good Friday Agreement, support North-South cooperation and the all-island economy.
These are the ‘six substantive changes’ described by Arlene Phillips:
So what does this actually mean?
1. The UK has effectively given the EU pretty much everything it demanded, moneywise, a move that suggests it was pretty desperate to move on to trade talks, which in itself suggests that it is pretty desperate for a trade deal, which in itself suggests that the idea that it will accept a ‘no deal’ in the end is pretty fanciful.
2. Considering how quickly this was settled, it makes it all the stranger that Theresa May ever suggested that this would be something that might not happen. So she caused needless stress for a lot of EU citizens living in the UK.
3. There is still no clear idea of exactly how to square the circle. It is unclear how Northern Ireland “will leave the single market and the customs union along with the rest of the United Kingdom” and for there not to be a hard border. With talk of “no new regulatory barriers” and “specific solutions”, in summary, it sounds like the UK is saying, “We’ll find a way to make this work later down the line” - in other words, they still have no idea how to make it work, but are desperate to move on to a trade deal, so have fudged it for now. However, some people have seized on the notion that, if agreed “solutions” aren’t found - and it’s hard to see how they will be - Britain has promised to maintain full regulatory alignment with Single Market and Customs Union rules - i.e. the whole of the UK will actually remain in the Single Market and Customs Union. That is, a soft Brexit.
So what happens next?
The agreement will need to be ratified by the leaders of the EU27 next week, but this is expected to be a formality.
Then, next year, talks will move onto the future relationship, with Donald Tusk making no bones about what is coming, telling reporters: “The most difficult challenge is still ahead… We all know that breaking up is hard. But breaking up and building a new relation is much harder.”
He added: “So much time has been devoted to the easier part of the task. And now, to negotiate a transition arrangement and a framework for our future relationship, we have de facto less than a year.”
Phase One has essentially seen the EU achieve all of their stated objectives, while the UK has caved on the bill, and citizens’ rights. You could argue that the EU has caved on the Irish border issue as it has allowed Phase One to be completed without having a ‘real’ solution. And how will this eventually be settled? It will surely come down to what the UK values more, leaving the single market, or maintaining the Good Friday agreement.