U.K.’s Apparent Serenity on Brexit Leaves Brussels Perplexed

Government’s stance of ‘keep calm and carry on’ raises questions in Brussels and among British businesses over its vision of future ties

British Secretary of State for Exiting the EU David Davis listening to remarks at EU headquarters in Brussels last month.
British Secretary of State for Exiting the EU David Davis listening to remarks at EU headquarters in Brussels last month. PHOTO: VIRGINIA MAYO/ASSOCIATED PRESS

British government ministers are keeping calm and carrying on, in public at least, in the face of the many challenges posed by Brexit negotiations.

This apparent lack of urgency has created bewilderment in Brussels. And among British businesses, there is growing anxiety over the absence of a clear vision of the government ‘s desired future trade and economic relationship with the European Union.

Britain’s Brexit Secretary David Davis was at his most serene this week when he spoke to Parliament. Yes, the U.K. can get a preferential trade deal and customs arrangement concluded before it leaves the EU in March 2019, he said.

He acknowledged that there might need to be a transition or implementation phase after Brexit day but that, he said, would be mostly to give the French, Dutch and Belgian customs time to get their procedures in place.

Mr. Davis gave no sign that he was taking seriously what his negotiating partners have been saying: Such a trade and customs arrangement is impossible to negotiate in that time frame, even though some broad principles about the future relationship may be agreed.

Fabian Zuleeg, chief executive of the Brussels-based European Policy Center think tank, says agreement on an interim arrangement is possible. But regarding a long-term trade deal, he said, “I don’t think we’ll agree anything in the two years.”

It isn’t clear either how closely Mr. Davis listened to what businesses were telling him last week when he met them at the government’s country retreat. The Confederation of British Industry, for example, spelled out that it wants a multi-year transition—with the U.K. ideally remaining in the EU’s single market and customs union—to avoid a cliff edge 21 months from now.

But while they are sympathetic to an implementation phase of some sort, British ministers are currently ruling out those two options even as an interim step, remaining true to the unyielding vision of Brexit set out by Prime Minister Theresa May before the election in June. There have been some signs of a softening of language since last month’s election, but the official government line remains unchanged. If that position holds, trade friction at the U.K.’s borders will rise sharply and quite soon.

U.K. Prime Minister Theresa May arriving on Thursday for a bilateral meeting with Spain's King Felipe VI in London.
U.K. Prime Minister Theresa May arriving on Thursday for a bilateral meeting with Spain’s King Felipe VI in London. PHOTO: SIMON DAWSON/BLOOMBERG NEWS

Britain’s customs and revenue service estimates that it will have to handle as many as 255 million customs declarations annually from March 2019, compared with 55 million now. There is a risk, the U.K.’s National Audit Office said Thursday, that the agency’s computer systems won’t be able to cope.

Pulling out of the customs union in March 2019 would increase the urgency of some other unresolved questions, such as how to avoid creating a hard border on the island of Ireland, which will become the site of a new external EU border.

Citing their planning horizons, businesses say they need to know the nature of a transitional deal soon; otherwise they will be compelled to make investment choices on a worst-case basis. Settling on the nature of a transition deal late in 2018, they stress, would be too late.

The government apparently hasn’t abandoned a hope expressed in its Brexit policy paper in May: that a “comprehensive, bold and ambitious” post-Brexit free-trade agreement “may take in elements of current Single Market arrangements in certain areas.”

Many EU officials and politicians say the British government is delusional to suggest that the U.K. could preserve its membership in the single market in some business sectors—say automobiles and banking—and abandon it in other areas it considers less appealing. From their standpoint, it is this “cherry- picking” approach that most sticks in their craw.

While such arrangements might benefit some in the EU, like the German car industry, they would undermine the bloc, these officials and politicians say. Their greater strategic imperative is the coherence and unity of the EU and its single market.

“From an EU perspective, there is not going to be any give on this. Politically, economically and legally, there are too many reasons not to do it,” Mr. Zuleeg said.

If the U.K. persists with this approach, EU unity will be tested. After all, the U.K. can point to Norway and Switzerland, both with different relationships to the EU, as countries that are inside some but not all parts of the single market.

From a negotiating standpoint, it will be a while before the U.K. has to declare its approach. The EU won’t move on to questions of future relations until it is satisfied with progress on citizens’ rights, the financial divorce settlement and Ireland. The next stage of the negotiations on these issues starts on Monday. In the best case, talks about the future will start in November.

For the moment, ministers’ statements should probably be interpreted as a mixture of substance, negotiating tactics and playing to the domestic political gallery. However, the longer it the U.K. and the EU appear to be on a collision course over their future relations, the more nervous many business leaders will become—and the more investment decisions will be put on hold.

https://www.wsj.com/articles/u-k-s-apparent-serenity-on-brexit-leaves-brussels-perplexed-1499978475?mod=e2fb

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