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Yet another Brexit agreement?

22nd March 2018

Thomas Anelay, an Account Manager in the Public Affairs Team, gives four key takeaways from this week’s Brexit agreement.

In typical EU negotiating style, an agreement (ish) has been reached on a transition period and the legal text of the withdrawal agreement just in time for the latest meeting of the European Council. With the dust starting to settle, what are the main takeaways from the latest milestone in the Brexit negotiations?

1.    Nothing is agreed until everything is agreed 

This phrase has now overtaken “Brexit means Brexit” as the soundbite of the negotiations, and rarely has it been more apposite. The withdrawal text is colour coded in three strands. First there is green text which has been agreed by the negotiators but is still subject to legal revisions. Second, there is yellow text which indicates negotiators have agreed on the “policy objective” but are unhappy with the text. The white text that remains is text that is proposed by the EU but on which there is no agreement. With circa 75% of the agreement in green, it’s clear that there is still a long way to go until everything is agreed. 

It was notable that Michel Barnier broke into English during the press conference to deliver the line “nothing is agreed until everything is agreed” and it will certainly be a rhetorical technique not lost on the UK. Some will interpret this as a threat. What is vital to remember is that trade agreements typically have two phases – political agreement and legal agreement. Simply put, what we have seen over the last few days is a political agreement. The legal text will not have legal force until it is agreed and ratified by the European Council, the European Parliament – and the UK Parliament. Even with the 75% of text that is in theory agreed – uncertainty remains. 

2.    The Ireland and oversight issues remain a potent concern

There has been understandable enthusiasm regarding the process of the Brexit negotiations, however, some have noted that the agreed text covers the relatively easy political issues – the financial settlement and citizens’ rights. What remains to be agreed – oversight (notably ECJ jurisdiction) and the status of Ireland – are at the more difficult end of the spectrum.

The UK and EU remain at an impasse regarding the Irish border, with the UK Government committing to no hard border whilst the EU continues to demand that the integrity of its own market is protected. The widely criticised “fallback” option, under which Northern Ireland and the Republic of Ireland would remain in complete regulatory alignment remains in the published text despite Theresa May saying no British Prime Minister could ever agree to it. With the Irish can continuously being kicked down the road, there is heavy briefing on both sides as to who is at fault. 

Similarly, the issue of judicial and administrative oversight of the deal and transition remain subject to agreement. Although Theresa May’s language on ECJ oversight has softened, most notably in her Mansion House speech earlier this month when she accepted European Court law would continue to have a major impact on the UK after Brexit, it remains unclear how a satisfactory resolution will be achieved. Hard Brexiteers continue to see ECJ oversight as a red line. The EU 27 continue to demand it. And we seem no nearer to determining a solution. 

3.    Cherry picking is negotiating

The UK has long been criticised for cherry picking by the EU. The draft agreement indicates that this was, as many have claimed, simply campaigning language and that all trade deals are fundamentally an exercise in cherry picking. The green sections include provisions on temporary oversight, tariffs on goods, and the ability for the UK to negotiate free trade deals with third parties during the transition period. All of these are things that the EU had said were unrealistic. The trade-off between continued access for UK goods versus continuing fishing rights for EU countries is perhaps the clearest example – and the following controversy is probably an indication of the difficulties to come as talks move on to future trade. Considering the UK’s negotiating strategy has long included the ambition to divide the EU 27 from their present unity, this could be a trend the UK welcomes.

4.    Business pressure matters

Business across the UK and EU have long called for a transition period to allow for further time to prepare for Brexit. Notably, there was a widespread consensus that a transition period would have to be agreed in March 2018 to allow for contingency planning. Although the UK Government was initially reticent to seek a transition, and then they were reticent over whether it would be a standstill transition or a period during which regulations steadily diverged, the UK have steadily conceded ground. In the final analysis, business called for a standstill transition by March and they’ve got one. 

Similarly, when compared to a year ago, there are numerous clauses on detailed technical issues such as rules of origin, approvals, data sharing, etc. that weren’t in either the UK or the EU’s position papers. Organisations have successfully informed negotiators of key issues that needed inclusion. There is no doubt that considerably more certainty is still needed for businesses and that there are still gaping holes. As mentioned above, the agreement is only political at this stage and numerous technical issues are still not covered in enough detail, but the efforts of organisations are clear on almost every page of the agreement.

Grayling Team

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