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Why Brexit deal is still not 'in the bag'

PM May and some EU leaders are demanding significant changes that could upset the political apple cart.

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Mrs May with French President Emmanuel Macron; France is leading a group of countries in pushing for an EU declaration that a future EU-UK free trade agreement must rest on the United Kingdom granting comparable access to its fishing waters to those which now exist.

WITH European presidents and prime ministers making final preparations for this weekend's historic Brexit summit, much remains "in the air". While many leaders want to get ratification underway, British Prime Minister Theresa May is not alone in demanding significant final changes which could yet upset the political apple cart.

Take the example of Spain which earlier this week threatened to veto the Brexit deal over the thorny issue of the future of Gibraltar, the overseas territory on the southern Spanish coast which was ceded to the UK crown under the 1713 Treaty of Utrecht. Madrid, which maintains a claim to the peninsula, has long adopted a sharp stance on this issue which has become more politically sensitive in the context of forthcoming local elections where the government of Socialist Prime Minister Pedro Sanchez has been criticised by the right-of-centre Popular Party for not being robust enough.

Spain is the eurozone's fourth largest economy and benefits, economically, from around 300,000 UK citizens residing in the country. It also has a significant trade deficit with the United Kingdom which - other things being equal - favours softer negotiating positions on Brexit.

Yet, this picture is complicated by Gibraltar. And after reading the draft Brexit deal, the Sanchez government has demanded to Brussels that no future EU-UK trade or security deals can be applied to the territory without Madrid's consent, and also that any extension of the proposed UK transition deal would not automatically apply to it either.

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Even if a deal is found to smooth these issues, it may only "kick the can down the road" with tensions arising again in the future. Previous prime minister Mariono Rajoy and his Popular Party government had invited the United Kingdom to negotiations on Gibraltar's future, including proposals for joint sovereignty.

In October 2016, Mr Rajoy told Mrs May that such a joint sovereignty model could be, post-Brexit, the only way for Gibraltar to secure continued access to the European Single Market which is key for its economy. However, the problem for Madrid is that the territory's government - and by extension, London itself - is vehemently opposed to Spain's proposals.

Beyond Gibraltar, there are other political grumblings about the draft Brexit deal from other members of the EU-27. For instance, France is leading a group of countries, including the Netherlands, in pushing for an EU declaration that a future EU-UK free trade agreement must rest on the United Kingdom granting comparable access to its fishing waters to those which now exist. This would be hugely politically contentious in the United Kingdom were Mrs May to concede.

Meanwhile, France is also concerned that the withdrawal agreement which provides the basis for at least a temporary UK-EU customs union, and the possibility of a permanent free trade agreement, does not provide strict enough conditions to prevent the United Kingdom from enjoying an economic competitive advantage. There is therefore a push underway for so-called equalisation requirements, as a condition for any future EU-UK trade deal, that would try to prevent future unfair competition in areas such as taxation, and employment policy.

What the positions of countries such as France and Spain on these issues underline is how, despite the EU-27 negotiating the last two years as a cohesive bloc, each of the countries has distinctive political, economic and social interests that influence its stance on the UK's exit. These positions - which vary according to factors such as trade and wider economic ties and patterns of migration with the United Kingdom - are likely to come out more prominently in 2019 and 2020 if a Brexit withdrawal deal is agreed, and negotiations move on squarely to the future EU-UK relationship.

BIG DECISIONS STILL AHEAD

Yet, for all this EU-27 upset, it is Mrs May who is pushing for the most changes at this weekend's summit. She therefore continues to have intense pressure on her with some big decisions still to make.

One of these decisions is the length of the transition period after end-March 2019 if a Brexit withdrawal deal is agreed. Originally, this was planned to be until December 2020, but Chief Brexit Negotiator Michel Barnier and UK Business Secretary Greg Clark have this week suggested that the transition could last until at least December 2022.

Wider changes that Mrs May wants to make to the draft text includes not just to the 585-page withdrawal document, but also the accompanying political declaration document on the future relationship between the United Kingdom and the EU which is currently only seven pages. One of her key ambitions with the latter document is to make it longer and stronger.

The reason for this is that it will set the agenda - if the much longer, legally-binding withdrawal deal is ratified by the UK and European Parliaments - for the talks from April on the new relationship between the United Kingdom and the EU. Moreover, with the price tag for the withdrawal deal set at around £40 billion (S$70.4 billion), Mrs May is under intense political pressure to show that she has won significant concessions in her future ambition to secure the widest and most comprehensive future free trade deal with the EU-27. At present, many UK Brexiteers believe - in the words of former foreign secretary Boris Johnson - that the commitments which the EU has so far given here amount to "diddly squat".

As well as adding some text, there are also key elements of the current political declaration that Mrs May wants to see removed. For instance, Brexiteers have raised concerns about the reference to "combining deep regulatory and customs cooperations, building on the single customs territory provided for in the withdrawal agreement" which they suggest has potential to become a permanent EU-UK customs union.

Taken overall, it is not just Mrs May but also other EU leaders who are unhappy with parts of the withdrawal agreement and the accompanying future relationship declaration. Despite the political pressure to finalise the details at the summit, this could mean that there is an unexpected negotiating breakdown, or that more time may potentially be required to seal a deal, with the next scheduled EU leaders meeting in mid-December.

  • The writer is an associate at LSE IDEAS at the London School of Economics