Brexit: Important Step Forward on Long Road
Irish politicians and diplomats did a superb job at landing a very good Phase 1 Report on the Brexit talks.
But everyone, especially Irish business leaders, should keep the champagne on ice.
This is just a form of words to move a negotiation process to a second phase. This is just a "report". Even full-blown EU treaties have fallen by the wayside in the past. As the report says on the first page: "nothing is agreed until everything is agreed".
The harder job is yet to be done and it now has to be done in the shorter time frame. Negotiating, agreeing and implementing the deal must now be completed in the 476 days remaining until the UK is scheduled to leave – 533 days have passed since the referendum. It took eight months to reach outline agreement on three issues and there are now many hundreds of topics to be addressed in Phase 2. And even if it is going to be an overarching agreement dealing with issues generally, it is still quite a task. It took the UK 12 years and 2 attempts to accede to a simpler European Communities.
Thankfully, the Irish political and diplomatic machine have proved very adept – especially (and this may be a real key feature of their success), by keeping a separate chapter for Ireland in the Phase 2 negotiations. The risk of "Ireland is ticked off the list" in Phase 1 has been averted.
It is a relief for business that the talks would move forward but business leaders should audit their own operations and see what do they need to have included in the phase 2 process. For example, if UK businesses were not subject to the State aid rules post-Brexit then Irish business would be at a disadvantage compared to their UK counterparts. If the UK were to move to "WTO" then that effectively only covers goods and not services generally. All trade deals take time – years and decades not months – and therefore Irish businesses with UK operations may face challenges there. Commissioner Phil Hogan was right in his comments when he said that "size matters in trade" and that it is "not easy to do trade agreement and not easy to do one with the EU when you're competing with such a large market" – to a potential trading partner, 60 million customers in the UK is attractive but not as attractive as 450 million in the EU.
The report deserves careful parsing. It may well be there will be no "hard border" but the report does not say that the current arrangements will remain the same. There are going to be some changes. It is the degree and nature of those changes which will matter. Businesses need to identify what they want in Phase 2 and feed that through not only to the Irish, UK and EU authorities but also lobby foreign embassies of countries where they have trading partners.
Many have said that the deal signals that we are moving to a "Soft Brexit". The assumption is that there a binary choice between a Hard Brexit or Soft one. In reality, that is too simplistic. Instead, there will probably be a Spectrum Brexit where there will be some sectors affected in a softer and some in a harder way.
The nuances and niceties in the report are significant. For example, the report talks about the EU's "Internal Market" (capital letters) and the UK's "internal market" (lower case letters) – the devil really will be in the detail.
The past week has been, to quote Dickens, the best of times and the worst of times but no one wants to see Monday as a ghost of Brexits future.
Business leaders have just had a vivid glimpse of the difficulties involved for the negotiators. Therefore businesses need to set about Brexit planning in earnest. When the negotiators have left the stage, it will be businesses having to implement the diplomacy.
Date published: 8 December 2017