By Anastassia Beliakova
In terms of Brexit, 2018 starts with a sense of cautious optimism. The confidence and bluster that prevailed in early 2017 was gradually replaced with a conciliatory approach from the UK and the ruling out of a no-deal scenario. But it's difficult to shake the sense that we're experiencing the calm before the storm.
Considering that the next phase of negotiations will not formally begin until late March – when new guidelines will have been discussed by member states and adopted by the European Commission – the actual trade talks will last no longer than six months. The time from autumn 2018 to March 2019 will be put aside for the ratification of the deal by the European parliament, the European Council, and, potentially, member states' national parliaments.
This means that, in practice, this next phase of talks will not contain a great level of detail but will cover the 'framework for the future relationship' between the UK and the EU, and will therefore be critical.
Nevertheless, we should not make the mistake that the bulk of the discussions will be taking place from March until October. The crucial time will not be the stage-managed official negotiation sessions. The crucial time is, in fact, now: the two and a half months leading up to the next Council summit meeting on March 22nd and 23rd.
As we have seen from the painful first 'divorce' stage of the negotiations, once EU guidelines are agreed by the member states and adopted by the European Commission, there is little room for manoeuvre from the EU side. There may be fudges and concessions (as we have seen with the Irish border question) – but the scope of what is negotiated is set in stone.
This means that now is the moment for the UK to decide what it wants from a future relationship with the EU – and to use all its political and diplomatic capital to explain why its proposal is beneficial for both sides. Brash statements will no longer cut it – and while the UK must be confident in its stance, this confidence must be backed up with credible suggestions. This would give confidence to business communities across the country and their partners in the EU.
The UK government must, in this stage of the negotiations, marry realism about what can be achieved in such a short period of time with a healthy dose of ambition. In December, the Italian prime minister Paolo Gentiloni expressed his support for "a tailor-made model for the relationship between the UK and the EU" – indicating the willingness of some EU members to move beyond the Norway-Canada options, but underlining that the first move needed to come from the UK.
Thus, before the next EU Council summit, the UK government has a mere two and a half months to a) internally reach a decision as to what kind of relationship it wants to have with the EU in the future, b) set out credible proposals to make this happen, and c) discuss these with individual member states.
So, what could the UK government feasibly propose? For the time being, all we know is what it does not want: it does not want 'just' a Canada-style trade agreement (barely covering services) or a full Norway-style commitment to accepting EU regulations. This leaves us with the as-yet-undefined 'tailor-made model'.
Such a model would undeniably depend on political willingness to significantly amend existing technical frameworks – and the UK's success in this respect will depend on careful diplomacy, as well as on the EU's readiness to be flexible. Both sides will need to soften some of their red lines.
The greatest challenge in the negotiations will be on the four freedoms, and especially: is it possible to maintain access to the Single Market while introducing restrictions on migration?
And if there is a compromise (some levels of market access with some restrictions on migration), how much market access does the UK want? Business will want to see participation in the EU's regulatory agencies (such as for chemicals, aviation, pharmaceuticals), acceptance of UK tests and certification on goods destined for the EU market, continued recognition of professional qualifications, passport-like rights for the financial services sector.
Such a wish list is ambitious – and depends entirely on the level of regulatory cooperation and alignment that the UK wishes to have with the EU.
Companies would certainly welcome greater clarity on what this will look like. In our latest survey of UK exporting and importing companies' plans for the next three years, businesses told us that western and eastern Europe will remain their top trading markets. The priority for those firms across the country continues to be a deal with the EU first, before arrangements with other countries are undertaken. It is crucial for business confidence that a sensible, practical and ambitious deal is struck between the UK and the EU.
The UK has agreed the negotiating timetable as set out by the EU – but it can and must influence the content of what will be discussed over the next two months. This means that if it wishes to achieve all of its ambitions for a future relationship, it must put together a plan for a new model for cooperation between the UK and the EU, and actively promote it before the next EU Council summit in March.
We are in a rare moment when the scope of the negotiations can be influenced – a point when the UK government must be clear on its aspirations to deliver what businesses need. We have all year to talk – but the time to act is now.
Anastassia Beliakova is head of trade policy at the British Chambers of Commerce.
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