EU Brexit Negotiator: U.K. Has Less Than Two Years to Negotiate Brexit Deal

EghtesadOnline: The European Union signaled Prime Minister Theresa May must first strike a deal for the U.K.’s post-Brexit trade ties with the bloc or lose out on a transitional phase that banks and businesses want.

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06 December 2016

As both sides prepare to face off in the new year, Michel Barnier, the EU’s chief negotiator, told reporters in Brussels on Tuesday that there might be “some point” to granting British industries a period to adjust to the new arrangements after Brexit, but that would depend on a permanent trade plan being agreed, Bloomberg reported.

“What the future relationship may be may shed the light on the usefulness of a transitional period and may have an impact on the negotiations itself,” Barnier said. “There would be some point and usefulness to a transitional period if it is the path to this new partnership.”

While bankers and corporate executives would welcome clarity about the U.K.’s long-term plan and a transition to it, May is reluctant to give too many details about her ambitions early on for fear she would hand a negotiating advantage to her interlocutors. Pressed on the issue during a trip to Bahrain, May said only that she wanted the “right deal” for Britain.

“People talk about the sort of Brexit that there is going to be, is it hard, soft, is it grey, white, actually we want a red, white and blue Brexit,” she said in an interview with Sky News. “That is the right Brexit for the United Kingdom.”

Safety Net

Refusal to sign up to the EU’s map would risk leaving the U.K. without a safety net in the event it cannot secure a permanent trade pact by October 2018. Barnier said an agreement will be needed by then if May triggers talks by March 31. While the law allows for two years of discussions, any deal will need to be ratified by the European Parliament.

May’s spokesman, Greg Swift, told reporters in London that the U.K. is “not making any kind of commitment” on a possible transitional agreement and has no intention of taking more than two years to exit the bloc after triggering talks by the end of March next year. The detailed time scale will emerge as the negotiations develop after the invoking of Article 50 of the Lisbon Treaty, he said.

“It’s our Article 50 as well, as we are members of the EU,” Swift said. “The timetable is clear and we have been very clear that once we’ve triggered Article 50 we will use the negotiations to secure the best possible deal we can to exit the European Union while not looking to extend that two year process.”

Barnier said “it’s too soon” to discuss the details of Brexit although he noted it is for the U.K. to make a proposal. He said the rest of the EU would be united, wouldn’t engage with Britain informally before the official talks and that the U.K. wouldn’t be able to cherry pick the benefits of membership. He also said the single market and its four freedoms of capital, goods, services and people were “indivisible.”

‘Keep Calm’

“Keep calm and negotiate,” Barnier said. “The work will be legally complex, politically sensitive and will have important consequences for our economies and first for our people on both sides of the channel.”

In a sign relations between the U.K. and EU remain brittle, Dutch Finance Minister Jeroen Dijsselbloem said on Tuesday that Brexit “can be smooth, it can be orderly, but it requires a different attitude I think on the part of the British government.”

“The things I’ve been hearing so far are incompatible with smooth and orderly,” said Dijsselbloem, who also chairs the group of euro-area finance ministers. “There are different options that are not available and if the U.K. wants to have access to the internal market, it will have to accept rules and regulations that will go with internal market.”

Travelling in Bahrain, May said on Monday that the U.K. “is looking to negotiate the best possible terms that we can.” Chancellor of the Exchequer Philip Hammond said in Brussels on Tuesday that Britain “wants to keep all options open” and will only strike a “deal if it’s in Britain’s interest.”

Common Position

Senior officials from the 27 other members of the EU will meet over dinner on Dec. 12 to discuss their strategy. They are aiming to reach a common position ahead of a summit of EU leaders scheduled for Dec. 15 in Brussels.

Member states have vowed to be represented in the negotiations, so that national governments are fully briefed on the state of discussions between the commission and the U.K. government, according to an official familiar with the arrangements.

Cliff Edge

May acknowledged for the first time on Nov. 21 that a “cliff edge’’ exists for businesses if Britain leaves the EU before a new trading relationship is established, subjecting them to the tariffs under the World Trade Organization and bureaucratic hurdles to conducting commerce with the U.K.’s biggest market.

Fearful of such an outcome and desperate for transparency to allow them to plan for the future, lobby groups such as the Confederation of British Industry and British Bankers’ Association as well as Bank of England Governor Mark Carney are urging May to seek a bridge between Brexit and beyond. Some have said she might even need to secure one before the official talks begin so as to support businesses.

In an interview with Channel 4 News on Monday, Carney said a transition is “absolutely desirable.’’

The worry for May is that if she fails to secure a transition early on in the talks then banks will begin shifting jobs and operations elsewhere in the continent, while businesses will cut back on hiring and investment. At the same time, agreeing to longer links could antagonize those pro-Brexit campaigners who want a swift, clean break from the EU.