White Smoke

08 Dec 2017

News: The European Commission has recommended that the European Council conclude that sufficient progress has been made in Phase I of the UK’s Article 50 negotiations to move on to Phase II.


Analysis

Phase I covered the three priority areas of citizens’ rights, the divorce bill and the Irish border. To take those in turn:

  1. The UK and European Commission have agreed to a reciprocal arrangement where the rights of citizens will remain the same post Brexit as they do today;
  2. “The UK has agreed that commitments taken by the EU28 will be honoured by the EU28, including the UK”; and
  3. The UK “acknowledges the unique situation on the island of Ireland and has made significant commitments to avoid a hard border”. Once the governments sign off on this, work on Phase II is said to be able to start “immediately”.

Our focus here is, unsurprisingly, on the Irish situation and in this regard we are pleased to see Prime Minister May say that she has given an undertaking to the Irish government that there will be no barriers to trade either North-South (Island of Ireland) or East-West (Ireland – Britain). The UK is the destination for about 16% of Irish exports, but this number is diluted by the multinational sector – for indigenous businesses the UK’s share is more than double what the headline figure suggests.

Action

While the final settlement between the UK and the EU27 has yet to be concluded, the outcome to Phase I is very reassuring from an Irish perspective. We are particularly encouraged by the Joint Report from the Negotiators of the EU and UK released today, which says that the commitments and principles outlined in respect of the Irish situation, inter alia, “are made and must be upheld in all circumstances, irrespective of the nature of any future agreement between the EU and UK”; “the UK remains committed to protecting and supporting continued North-South and East-West cooperation across the full range of political, economic, security, societal and agricultural contexts”; “in the absence of agreed solutions, the UK will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement”; and “given the specific nature of issues related to Ireland and Northern Ireland…both parties agree that in the next phase work will…also address issues arising from Ireland’s unique geographic situation, including the transit of goods (to and from Ireland via the United Kingdom)”. While there are still risks to the successful outcome of these discussions, at first glance the documents released this morning provide plenty of reassurance in respect of Irish trade with the UK and beyond in the long-term, while in the near-term the strengthening of the pound in response to this progress (it briefly broke through 87p to the euro this morning) is a help to Irish exporters.