Clearly, there is still work to be done, and concessions to be made, if ‘sufficient progress’ is to be established by December. Irrespective, for business the progress made at the last European Summit means that the phoney war of trade association task force fact finding and scenario planning is nearly over, and the real work hopefully begins. And for third-country governments, as the negotiations move towards the transitional arrangements, the issue of trade will really come into play.
The pre-summit build-up saw the first real cracks in the unity of the EU27 begin to emerge. Various countries including Belgium, the Netherland and Cyprus were counselling for a less draconian and faster divorce settlement. This, and the fact that EU and some of the 27 Member States are now beginning to plan for the possibility of a ‘no deal’, shows that there is a little more traction, whether by design or default, for the UK’s negotiation strategy than many acknowledge.
Interestingly, the argument is now also being made by some commentators that the ongoing Jamaica coalition negotiations in Germany may strengthen the hand of German business in relation to the Brexit negotiations. Merkel has to minimize any disruption to German exports, so the argument goes, if she is to meet the financial demands of her coalitions partners.
What does this mean for businesses trying to influence the negotiations? Although the post-divorce phase will be even more complex, and it will remain difficult to exert real influence, the prospect of a nightmare ‘no deal’ scenario and the EU27 unity starting to fragment will certainly concentrate minds and provide fault lines that can be worked by businesses at the member state and EU level.
Understandably, the focus is on business, but what has been largely ignored is that the post-divorce phase will bring into play third-party trade and governments. Non-EU countries will need to be very careful to ensure that their trading interests are not compromised by the negotiations. The reaction of countries, including the US, Argentina, Brazil and New Zealand, to a preliminary EU – UK deal on how to divide up WTO quotas on imported farm products provides a foretaste of the battles ahead.
There is also the small question of what happens to the 63 EU FTAs the UK is currently party to. There is no guarantee that these will simply be rolled over during the transition period – a point acknowledged on Wednesday by the UK’s Chief Brexit negotiator David Davies.
And if the EU quickly accepts the principle that the UK is free to formally start negotiating its own bilateral agreements, then that would be a major boost to the UK, and Liam Fox in particular. This means that for those countries who do see Brexit as an opportunity to build trade links with the UK – many more than most people think – this is the moment for them to start positioning themselves with the UK government if they are to be near, or at the front of the queue.
The end of the phoney war promises a step-change in business and third-country engagement around Brexit.