Two-year timetable for Brexit deal ‘simply impossible’

June 7th, 2017

Please click here to view article on Noreena’s ITV blog.

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Today the British government triggers Article 50 which formally starts the process of leaving the EU.

What this means is that the ticking clock starts – the UK now has a two-year period to both decouple from the EU and agree a new trade deal.

If you like certainty, if you’re the kind of person who likes knowing what lies ahead, this next two years isn’t going to sit well with you.

Because what the ultimate new deal will look like, how different sectors will be affected, what this will mean for your business and your customers’ businesses, what this will mean for your EU national employees operating in the UK are all questions that at present we cannot answer.

All we know so far is that the Prime Minister plans for us to:
– Exit the single market
– Is seeking special sector by sector customs arrangements with the EU
– Plans to conclude the negotiations within the two year period

Over the past few months, at Davos, in London and other European capitals, I have spoken with a number of European Finance Ministers, prime ministers, former and current trade negotiators.

All of whom expressed skepticism that the Prime Minister would pull this off.

The notion that we can cherry pick our customs arrangements, whilst at the same time pursuing bilateral free trade deals with the rest of the world – is viewed as unrealistic.

As for the two year timetable – those I have spoken to say it is simply impossible.

Remember we have to first decouple from the EU, agree a host of issues such as how our collective security will now work, agree what we will still pay for, what our divorce bill should be etc etc.

That is before we even get to negotiate the Brexit trade deal – a process which itself may take a couple of years.

And then all 27 EU members need to approve the deal before it is ratified – a process which itself is not going to be straightforward given the different interests at stake.

Some countries trade significantly with the UK, and so will want to make this as pain-free for the UK as possible – but others don’t.

Several face anti-EU populist moments at home that they will want undoubtedly to send a message of zero tolerance to.

Whilst the fact that France and Germany are in campaigning mode, with elections looming in both, will clearly affect the tone of the negotiations and of course depending on who is elected, the ultimate outcome.

It’s simply impossible to predict with certainty how long it will take for us to agree a new trade deal with the EU.

When I met with Pascal Lamy, the former Head of the World Trade Organization, last week, he said he thought that four to six years is realistic.

What kind of transition arrangement we might be able to agree in the interim is still unknown.

As for how the negotiations will ultimately play out? Impossible to know in advance.

But what is clear is that during the negotiation process every grumbling and rumbling from Brussels and negotiators has the potential to move the market and spook investors.

 
Last updated Thu 30 Mar 2017