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What to expect from Phase 2 of Brexit negotiations

By Snigdha Kalra 

The first Phase (Phase 1) of Brexit negotiations is over. They led to clarifications on several essential issues, including settlement amount to be paid by the United Kingdom (UK), discussion about borders of Northern Ireland, and the rights of UK citizens living in EU and vice-versa. The guidelines for Phase 2 were agreed upon by the European Council in December. Discussions in Phase 2 will revolve around arrangements for the transitional period during the exit. Clearly, the UK is moving in a steadfast manner towards the referendum made in 2016. It warrants an in-depth discussion of the negotiations that have already been made and those which are to be made.

Brexit referendum and subsequent impact

A referendum was held in June 2016, in which the majority of 51.9% of the voters voted for an exit from the European Union (EU). This historical referendum had an impact on the economy as well as the political landscape of the United Kingdom.

On the political scene, David Cameron resigned as Prime Minister (PM) of the UK, in protest against the referendum. This paved the way for the leadership of Theresa May, who was previously against Brexit but bowed down to the public opinion. A general election held in June 2017 only went on to display the falling popularity of the Conservative Party in the form of reduced seats in the Parliament. This forced PM Theresa May to form a government in conjunction with Northern Ireland’s Democratic Unionist Party (DUP). Nevertheless, she has been carrying forward negotiations on the Brexit deal, invoking Article 50 of the Treaties of the European Union in March 2017.

The immediate economic impact of the referendum looked gloomy. The Pound fell immediately in comparison to Dollar and Euro, and recession looked like a possibility. However, investor confidence did not go down, and the looming recession was prevented by a lowering of interest rates. The Gross Domestic Product (GDP) has increased from 2016, instead of falling, and the UK economy remains strong.

Phase 1 of Brexit negotiations

Talks under Phase 1 of negotiations began in June 2017. They ended with a last-minute deal made on 8th December. On 15th December, the European Council stated that sufficient progress had been made on the contentious issues under Phase 1, and decided to move on to Phase 2 in 2018. Three main issues dominated talks throughout 2017.

A major decisive area was the financial settlement, also known as “divorce settlement”, that the UK would have to pay to the EU. It has been decided that Britain will have to pay somewhere between 35 and 39 billion pounds to the EU. The payments to be made by the UK include budgetary payments till the time it exits EU as well as the amount that UK owes EU.

Northern Ireland was another point of discussion. There were tensions that a hard border may lead to economic problems for Ireland. There is an open border between Northern Ireland and the Republic of Ireland, with free movement of goods and services. Post-Brexit, there were fears that this may not be the case, with tariffs imposed on trade across the borders. Leo Varadkar, Irish PM, had threatened to block negotiations, asking for a formal letter from the UK, guaranteeing the absence of a hard border with Northern Ireland. The UK has put such apprehensions in Ireland to rest, saying that there will be no hard border between Northern Ireland and the Republic or Britain.

The third issue raised in these negotiations was about the rights of UK citizens living in EU, and EU citizens living in UK, post-Brexit. The EU and the UK have jointly decided to protect their rights, issuing a joint document that stated that till the UK permanently leaves the EU, they will have the right to free movement, and can continue “to live, work or study as they currently do under the same conditions as under Union law.”

Phase 2- What does the future hold?

According to the European Council, Phase 2 of Brexit negotiations will focus on arrangements for the transitional period. This is a two-year period, from 29th March 2017, when Article 50 was called by Theresa May, to 29th March 2019, when the UK will finally withdraw from EU. The second phase would also include longer-term plans. But a prerequisite is the implementation of decisions of the first phase in legal terms. A trade agreement between UK and EU will only be agreed upon, once the withdrawal is complete.

Many issues need to be discussed and decided, and there is little time for discussion, which mounts pressure on Theresa May to conclude the talks quickly. The withdrawal agreement has to be signed by 19th October 2018. Moreover, there is always pressure from a unified EU, which dominates the talks. The second phase of discussions will prove to be more difficult than the first, according to European Council President Donald Tusk.

Featured Image Source: Pexels

This post first appeared on The Indian Economist | For The Curious Mind, please read the originial post: here

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What to expect from Phase 2 of Brexit negotiations


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