Leaders of the 27 European Union (EU) members gathered here for the Winter EU Summit had approved the second phase of Brexit talks, European Council President Donald Tusk said Friday.
"The European Council welcomes the progress achieved during the first phase of negotiations as reflected in the Communication from the Commission and the Joint Report, and decides that it is sufficient to move to the second phase related to transition and the framework for the future relationship," said a Guidelines submitted by the General Secretariat of the Council to the leaders.
Commenting on the approval, British Prime Minister Theresa May thanked Tusk and EU Commission President Jean-Claude Juncker via her twitter account, saying "Today is an important step on the road to delivering a smooth and orderly Brexit and forging our deep and special future partnership."
Echoing May's optimism, David Davis, Britain's Brexit Secretary and a staunch Brexiter, said on twitter that "Today is a good day for Brexit and an important step for Britain. Thanks to hard work and determination, we have reached an important milestone and have achieved sufficient progress. There are still lots of work to come but we are ready for the next stage."
A STRONGLY-WORDED GUIDELINE
Despite May and Davis' optimism, the Guidelines made it crystal clear that negotiations in the second phase can only progress as long as all commitments undertaken during the first phase are respected in full and translated faithfully into legal terms as quickly as possible.
It also requires Britain to be treated as a third country and will no longer participate in or nominate or elect members of the EU institutions, nor participate in the decision-making of the Union bodies, offices and agencies, but at the same time abides all existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures, including the competence of the Court of Justice of the EU.
If adopted by the EU, May would for sure face more anger and challenges at home.
What is worse, the Guidelines said Britain will continue to participate in the Customs Union and the Single Market with all four freedoms, i.e. free movement of goods, services and capital and labor during the transition, which means more immigrants.
But to EU leaders, this seemed not a question for bargain. Responding to the question of "can Britain remain part of the single market after leaving", German Chancellor Angela Merkel gave a short and affirmative "No" during a press conference after the Winter Summit.
"You can't stay in the internal market with only three freedoms (without the free movement of labor)," she said.
FUTURE RELATIONS: CETA-TYPE OR EEA-TYPE?
"While an agreement on a future relationship can only be finalized and concluded once the United Kingdom has become a third country, the Union will be ready to engage in preliminary and preparatory discussions with the aim of identifying an overall understanding of the framework for the future relationship, once additional guidelines have been adopted to this effect," said the document.
Local media is mainly focusing on two types of future relations, CETA-type and EEA-type.
A CETA-type trade deal would fall much short of what Britain is looking for, mainly because it offers relatively limited access in services, with no passporting rights for financial services - an important sector for Britain.
On the other hand, an EEA-type agreement would give Britain much of what it is looking for in trade, including passporting rights for financial services. However, the EU insists that access to its single market, which EEA countries enjoy, must mean not only free movement of goods, services and capital, but also of labour -- a demand that Britain is not willing to accept.
In other words, Britain is looking for a "CETA-plus" (i.e. plus services, including financial services) or an 'EEA-minus' (i.e. minus free movement of labour) agreement. For its part, the EU is sticking to its CETA or EEA offer, without plus or minus. Whether there is room for a compromise between the two positions and at what price -- in terms of UK contributions to the EU budget and with respect of ECJ decisions -- is what the negotiations of phase two will really be about, said Maria Demertzis, deputy director of the Bruegel think tank based in Brussels.
"Given the tight schedule of phase two, which requires a deal to be reached by October/November 2018, CETA-plus looks much more feasible than EEA-minus. For the EU, CETA plus would avoid getting into the discussion on the indivisibility of the single market's four freedoms, which it considers sacrosanct at this stage and which EEA-minus would imply. For Britain, CETA-plus would probably require less contribution to the EU budget and less respect of ECJ decisions than EEA-minus, and therefore be easier to accept politically," she added in an analysis co-writing with Bruegel's senior research fellow Andre Sapir.
"But the problem with a CETA-type agreement, even if it were upgraded to CETA-plus, is that it is an agreement designed for countries outside Europe, not for European neighbours -- let alone for a neighbour with close economic and political ties, like the UK. So even if the future EU-UK trade agreement were 'virtually identical' to the current trade arrangement inside the EU, it would miss the other dimensions of the EU-UK relationship," they said in the analysis.
