UK sets for combative tone for Brexit talks as divisions persist

The flags of Britain and the EU are seen at the EU Commission headquarters in Brussels, ahead of Brexit talks on July 17, 2017.
The flags of Britain and the EU are seen at the EU Commission headquarters in Brussels, ahead of Brexit talks on July 17, 2017. PHOTO: REUTERS

LONDON (BLOOMBERG) - Britain returned to a provocative posture a week before Brexit talks with the European Union (EU) resume in a bid to pivot discussions toward a trade deal. 

Prime Minister Theresa May's government will publish five new position papers this week after declaring on Sunday that it is "stepping up pressure" on the bloc to shift the negotiations away from the terms of separation. The use of fighting words in the past have not budged the EU, which has time on its side.

With the clock ticking down to the UK's March 2019 departure, and the two sides still at odds on many key issues, Brexit Secretary David Davis seems bent on reviving a debate over whether discussions should run in parallel rather than in the strict order the EU has laid out.

Signs of fresh discord may unnerve investors after the pound last week under-performed all of its Group of 10 counterparts. By giving out more details of where it stands and spelling out its demands, the UK wants to change the narrative that it has been too vague, and by doing so jolt the EU into talking trade sooner.

Instead, the rhetoric will draw short shrift from the EU. Chief negotiator Michel Barnier last week reiterated that the other 27 governments would not allow trade talks to start until "sufficient progress" has been made resolving residency rights, the UK's exit bill and the border with Ireland.

The hope was to reach this milestone in October - in time for a summit of EU leaders - but Mr Barnier complained in July of slow talks and a lack of detail from the British. Mr Davis has instead returned from the summer break to give his counterpart another reason to worry about the timeline.

Having once predicted differences over the timetable would prove the "row of the summer", Mr Davis backtracked in June by appearing to sign on to the EU's preferred plan. But writing in the Sunday Times, he insisted it would be helpful "to run aspects of the negotiations twice", pointing to Northern Ireland as an issue where the divorce and commerce are intertwined.

"It is simply not possible to reach a near-final agreement on the border issue until we've begun to talk about how our broader future customs arrangements will work," he wrote. "Furthermore, if we get the comprehensive free trade agreement we're seeking as part of our future partnership, solutions in Northern Ireland are easier to deliver."

This more combative approach was criticised by anti-Brexit campaigners as casting doubt on the government's ability to conduct negotiations.

"To be now, a couple of months down the line, trying to reopen the issue reeks of desperation at an approaching economic storm and a cabinet who don't have a clue," said Liberal Democrat lawmaker Tom Brake, who speaks for the party on Brexit.

The UK last week outlined its position on future customs arrangements, only for Mr Barnier to tweet that the quicker an agreement was found on the breakup topics "the quicker we can discuss customs & future relationship".

This week's papers will include an outline of "goods on the market" and "confidentiality of documents".

The first is a response to an EU paper setting out provisions that goods made available for sale before Brexit should still be available for purchase in both the EU and UK after Britain's withdrawal.

Mr Davis will say the EU proposals should extend to related services; for example, a maintenance contract that comes with the sale of an elevator.

Later in the week, documents dealing with data protection, judicial cooperation and resolving post-Brexit disputes will come out. The latter will prove the most contentious given that Mrs May has made escaping oversight of European courts a red line while the EU sees a continued role for the ECJ.

One of these papers will suggest establishing a new court to oversee post-Brexit relations between the UK and the EU, looking at precedents such as European Free Trade Association court, the Financial Times reported.

Mr Davis will set out options on the judicial regime sought by the UK, including trade, security and citizens' rights.

Mrs May's refusal to allow the jurisdiction of the European Court of Justice is "foolish" and incompatible with UK proposals for a post-Brexit transition period, Mr Paul Jenkins, a former chief of the government's legal services told the Observer newspaper.

Meanwhile, economists exchanged blows on Sunday over whether Brexit will help or harm the British economy.

A group of pro-Brexit economists, including Mr Patrick Minford of Cardiff University, estimated that leaving the EU single market and customs union could add 135 billion pounds (S$237 billion) to the UK economy, and lower prices by opening up global free trade and spurring competition.

In response, Ms Monique Ebell of the National Institute of Economic and Social Research said the UK stood to lose as much as 30 per cent of its total trade by leaving the EU's single market, and that a decline in sterling would boost inflation.