"Clear As Mud" Brexit Negotiations Officially Begin: Here's What To Expect

Tyler Durden's picture

Today Britain and the EU officially begin the first day of formal Brexit negotiations, "aiming for a constructive, orderly launch that avoids a noisy clash on the big policy differences over Britain’s exit", according to the FT although the sellside reaction was decidedly less optimistic, as summarized by SocGen's Kit Juckes who in previewing today's events said that he expects "nothing because the UK position is as clear as mud' beyond growing signs that the UK wants free trade without being part of the customs union or conceding grounds on borer controls."

To be sure, no breakthroughs are expected on Monday, or indeed for some weeks and possibly months to come. The idea is for the EU and UK sides to meet, exchange views, plan practicalities and set agendas, all ahead of more detailed talks in coming weeks. “This is about building trust, nothing more,” said one senior EU diplomat quoted by the FT.

Looking at today's main political event, DB's Jim Reid writes that the Chancellor of the Exchequer Phillip Hammond suggested yesterday in a TV interview that a gentle departure from the EU should be targeted. The Chancellor indicated that “transactional structures” would be needed to help smooth the process and that “we need to get there via a slope, not via a cliff edge” - suggesting a softer tone in negotiations. In contrast to the PM, Hammond also rejected the mantra “no deal is better than a bad deal”. Hammond also said that his position was one of a “jobs first” Brexit which is also a slight shift in tone compared to the PM. Separately, Hammond said that the UK government had “heard a message last week in the general election” and that ways to soften austerity were being looked at with voters seemingly growing “weary” of it.

Hammond did however also say that he will still look to balance the budget by the middle of the next decade and that the UK had to “live within our means”. It’s worth noting that Hammond is due to deliver his Mansion House speech tomorrow after it was delayed from last week.

On the same day there seems to be momentum building for a "day of rage" against the Government with marches and protests planned. Those on the left of the political spectrum have really been emboldened over the last few weeks. Wednesday could be an interesting day in the UK. As we've been saying a lot over the last year we think the Brexit and Trump vote will be seen in years to come as an inflexion point  across the world where Governments had to spend more to appease the bottom half of the population on the income scale or risk getting voted out. The recent political developments in the UK make me more convinced of this. Europe is not immune from this but as discussed above populism is seeing a slight retracement as growth edges towards the upper end of the post financial crisis range. If and when growth fades Europe will again likely face these issues.

Previously, Barclays laid out its own scenarios for a soft, hard and crash Brexit

From a high level, Brexit negotiations lead to a continuum of possible outcomes ranging from some form of status quo to the UK crashing out of the EU without any type of agreement. A first categorisation relies on the orderly or disorderly nature of Brexit:

  • Orderly Brexit: Under orderly Brexit scenarios, the UK and the EU would agree on rules and governance ensuring that Brexit follows the rule of the law. An orderly Brexit would likely lead to further trade talks once the UK leaves the EU with the objective agreeing a long-term UK-EU partnership. Despite its negotiated nature, an orderly Brexit could still have a substantially negative impact on the economy, depending on the final terms of the partnership. We distinguish between a hard and a soft version of such an outcome:
  • Soft Brexit: The UK leaves the single market but is able to establish an enhanced partnership with the EU. One possibility would be it stays in the single market (best case from an economic perspective, in our view) or at the very least within the Customs Union. The deviation from the status quo would be small and the economic impact, though still negative, would likely be largely contained.

Hard Brexit: The UK leaves the single market and likely also every other form of existing European trade arrangement. It is not able to establish any strong partnership with the EU in the short term. The negative impact is magnified by the fact that value chain adjustments to business operations take place over a short period of time while the reestablishment of hard borders leads to disruptions.

In case of an orderly Brexit, the UK and the EU would also likely agree on a transition period starting in April 2019 and lasting for a maximum of three years (according to the EU parliament). During the transition, existing arrangements could be upheld (under some conditions) and some long-term features, if already agreed upon, could be phased in. As the UK exits the EU, it will also be allowed to formally conduct trade negotiations with the rest of the world in order to offset its exit from the EU-RoW trade agreements.

 

Disorderly Brexit: Disorderly Brexit may occur either because talks collapse at some point during the coming 18 months, or because parliaments fail to approve the final agreement. The establishment of hard borders will inevitably generate disruptions, and the negative economic consequences would be maximal for business and citizens. Only dramatically innovative solutions could help address specific issue in selected area (WTO tariff waiver for instance for trade in goods and services).

In terms of the timing, we believe risks are the highest in the first months of discussion, and at the end of the process.

  • Early Crash: Talks could collapse at the start if one of the parties walks out on negotiations. The UK and the EU might then use the remaining time until April 2019 to prepare for the April 2019 “cliff edge”. We believe that the results of the UK’s 2017 general election have, generally speaking, weakened her “no deal is better than a bad deal” stance and, accordingly, reduced the likelihood of the UK government walking away early from Brexit talks.
  • Late crash: Even though talks could finish on time, failure to secure parliamentary approval could precipitate a no-deal Brexit. In the UK, a hung parliament makes it more likely that a small group of MPs blocks the approval of the final agreement by April 2019. In continental Europe, parts of the final deal will most likely require member state parliamentary or referendum ratification, which is a risky process.

Once the UK leaves the EU, all existing treaties and agreements that the UK enjoyed as part of the EU cease. If no transition is in place, the UK will face a legal vacuum regarding all cross-border trades and travel. Hence, it will have to hold emergency talks with international organisations and bilateral counterparties in order to reestablish trade and travel arrangements. While final agreements might not be in place in April 2019, the UK could request waivers to address some aspects of the transition.

 

Extension: If UK and EU fail to reach an agreement by April 2019, the EU27 can decide by a unanimous vote of the Council and with the approval of the UK, to extend the negotiations beyond the two years foreseen by the Article 50 of the Treaty of the EU. Such an extension could be used to iron out last minute roadblocks (positive scenario) or to avoid a cliff edge if the deal is rejected by one of the involved parties (emergency solution). Fundamentally, however, an extension can only be conceived as a short-term fix and will likely have to be renewed after a relatively short period of time if needed.

* * *

And while embattled Theresa May is still deciding if she, and the UK, want a "hard", "soft", or "scrambled" Brexit, the timeline remains quite challenging, expecting to unwind 70 years of integration in as short a period as 2 years.

In terms of today's events, David Davis, Britain’s Brexit secretary, will see Michel Barnier, the EU’s chief negotiator, in Brussels for the debut round of a complex negotiating process that is expected to stretch to November 2018 with ever increasing pace and intensity. Barnier has already made public the EU’s positions on Brexit withdrawal issues, including citizen rights and Britain’s financial obligations. But in a bid to avoid the opening of talks being marred by a dispute over policy, Davis has pushed back plans to issue a “generous” offer on the 3 million migrants resident in Britain for later in the month, the FT reported.

As the FT adds, Theresa May will follow through on the first one-day encounter with an explanation to EU leaders at a summit dinner on Thursday night about what Britain’s inconclusive election means for her exit plans. While she will be listened to over coffee, diplomats are adamant the summit room will not be a forum for talks. As the EU treaties suggest, once she has spoken Mrs May will be escorted out of the room so the other 27 EU leaders can confer in private.

British officials say they will be going into talks with their “head held high”. Ahead of the talks, Mr Davis said he was looking forward to discussing a “new future”. “While there is a long road ahead, our destination is clear — a deep and special partnership between the UK and the EU. A deal like no other in history.”

However, in light of the recent disappointing general election which has eliminated much of May's leverage, "one of the most telling aspects of the first exchanges appears to be a desire to avoid confrontation."

Some in London had contemplated making a big offer on citizen rights this week, in an attempt to dramatically kick-start negotiations, with Mrs May trying to drive home a deal at the summit. With the election result, that plan was ditched.

 

Mr Davis, too, promised the “row of the summer” would be over sequencing — the European Commission’s insistence that trade talks only start once Britain gives assurances on a gross Brexit bill of up to €100bn and settles questions over the rights of 4m migrants caught out by Brexit.

Continuing the day's event, after a first session between officials on Monday, and lunch between Mr Barnier and Mr Davis, senior officials will break into the “working groups” for talks. These four- to six-member mini-negotiations will do the technical heavy lifting on divorce: citizen rights, a financial settlement, outstanding legal issues, border questions such as Northern Ireland, and civil-nuclear matters.

Then, after taking stock at the end of the afternoon, Barnier and Davis will conclude the day by holding a press conference, formally marking the start of Brexit negotiations some 82 days after Britain’s Article 50 exit letter and just 500 days before Mr Barnier’s November 2018 deadline for an informal deal.

While we wait, here are some charts from Barclays laying out the current situation.

Cost-benefit analysis:

A guide to EU-UK negotiations:

 

Trade considerations

The people's reaction

Finally a "simple" flowchart on how to trade the pound

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Looney's picture

 

How many negotiations has Theresa May ever conducted?

I’m afraid the Bitch is gonna screw the Brits up worse than the EU fucktards ever could.  ;-)

Looney

Ghordius's picture

well, our negotiating team, that of us "EU fucktards" is not interested in "screwing"

in fact, our negotiating team has only one goal, one scope, for a while. all written and posted, all transparent:

to settle the divorce part of the exit of the UK from the EU. which depends in it's entirety on what kind of agencies and other things the UK wants to keep staying into after the departure from the club

to put it simpler: anything the UK wants to continue to use... a price has to be set. yes, it's about "you use it, you pay for it"

interestingly, all that "kinds" of Brexit exist only in the imagination of the Brits. for the EU27, it's just another form of "Cherry Picking", or, as BoJo said "eat your cake and have it, too"

as soon as the divorce/money part is settled enough, the options asked by the UK might be in the kind of "same deal as Turkey (Customs Union)" or "same deal as Norway (European Economic Area)"

again, all talk about "customized deal, please some free trade, hold the ECJ, hold the FoM" is again some kind of wishful thinking by the UK, seen from the other 27's point of view

and, more importantly, the 27 are more clear and more united in this then the very UK Parliament that just was elected

Ghordius's picture

the clock is ticking. do you hear it? A50 was triggered, remember?

tick tock. tick...   tock. tick-tock

GreatUncle's picture

Actually I agree with you Ghordius but UK being a purchaser I exepct a detailed breakdown of the costs the EU apporitions to each part of the purchase.

Be very interesting to see how they justify the up to $100B for what?

gregga777's picture

"This is about building trust, nothing more,” said one senior EU diplomat quoted by the FT."

 

Anyone who trusts the unelected Brussels nannycrats deserves the resulting a**-f***ing.

Ghordius's picture

and where do you see those "unelected" "nannycrats"? or, better, when did they ever betray your trust, or that of anybody else?

it's the same bunch that negotiated some 60-odd deals, lately. all satisfied customers with the exception of that damned TTIP which should not even have been proposed in the first place

you are not smarting because you were a fan of TTIP, were you?

gregga777's picture

Yeah, right.  The MORONS that have allowed unrestricted Islamic terrorist immigration and have allowed thousands of young girls to be gangraped by them are definitely not the people to be negotiating anything.  

Ghordius's picture

the true morons are those who still believe that the EU has anything worthwile to say about immigration from outside of the EU, which is not it's purview

it's the same thing as something that was agreed by 28 countrie's governments in the EU format: the "rebalancing" of refugees

to which countries like Poland kind of say: "refugees? nope, only 22 of them if they are badly in need of hospitals"

to which the EU commission said: "but, but, you...." and Poland and Co answered "Sue us"

and so no such thing is happening, and some net recipient of EU funds might get some less of it, and that's it... except for morons, that is

morons are fact resistent, you see? that's nearly the definition of morons: can't do with facts, need beliefs

Swamp Yankee's picture

"Dharmok and Jillard at Tenagra!"

shovelhead's picture

Lol.

They're going to steal her purse and then bend May over the table.

All done in exquisite slow motion.

They better send in Jason Statham to the rescue.

wonger's picture

DelusionsCrowded Jun 19, 2017 2:51 AM

The whole Brexit is smoke and mirrors to keep the sheeple chattering classes occupied and the 'News' full of noise .

Britians not leaving the EU , its all just a game untill those damed Ruskies will take a bait and the Shadow Gov (City of London + Military USA )  can start WW 3 .

Without control of Russia , there is no NWO . China will gobble it up and shit it out .

cookies anyone's picture

brexit schmexit, by the time uk is supposed to go, the eu will be no more

Teja's picture

by the time uk is supposed to go, the uk will be no more

fixed it for you

DavidC's picture

The EU needs the UK more than the UK needs the EU.

DavidC

Ghordius's picture

an often repeated meme, often missing the "because..." after it

besides, how could we hold the UK back, even if we wanted? and who told you that we want in the first place?

truly, the whole point of "voluntary association" is kind of foreign, for some

Horse Pizzle's picture

1. Spanish fishers out of our pond.

2. American beef food costs less than French brie.

3. Ten million Germans can stop working to provide Britian.

4. every EU bank of integrity and good for it is in Britain.

 

Ghordius's picture

1. Spaniards that bought your fishermen's quotas? from British fishermen? in some cases for quotas for the fish that Brits like, elsewhere?

2. that's the French Socialist's fault, is it?

3. that would be Brexit, for you?

4. that's the City of London, isn't it? right

OverTheHedge's picture

As someone who grew up in Cornwall, where farming and fishing are the only commercial enterprises of note (other than pasties, cider  and tourism), I have to ask, "WHAT THE FUCK ARE YOU TALKING ABOUT??!!!"

Are you seriously suggesting that British fishermen,in a spirit of cooperation, esprit de corps and general love for their European counterparts, willingly declared themselves bankrupt, and with much delight and enthusiasm sold off their quotas in the hopes of having a little money to eke out their sudden retirement? Feel free to go back and have a look at some historical reality - about why the eu waters are over-fished to extinction, why the Spanish fleet don't have to comply with all the rules that the British fleet has (sorry, had) to, why the fishing villages of most of the Africancoast are now starved into decline (hint: they don't have the capacity to overfishing, the way Spanish boats do).

I could go on for hours, but the bottom line is that the eu fishing deal was a huge transfer of wealth from UK fishermen to eu fishermen. In the same way that the CAP is a huge transfer of wealth from British farmers to eu farmers. You might say that, because the I individual countries negotiated these deals, it is what they wanted, but frankly that's bollocks. The average British fisherman did not want to b sacrificed on the alter of expediency just so that the wheeler-dealers could gain something elsewhere,  usually for The City.

GreatUncle's picture

Yep ... and all sold out by the lieing thieves in the UK parliament, bit of a ring to it.

This is not just about the EU then, it is also about UK elites selling out the whole country in everything to preserve their priviliged position at the cost of the ordinary person.

Ghordius's picture

have you ever talked with a Cornwall fisherman? like, what kind of fish he can sell for a good price in the UK?

you are putting a lot of words in my mouth, but do you really know much about that stuff?

fact is that fishermen... buy and sell quotas. go on and explain this detail... if you can

chubbar's picture

For someone not wanting to hold the Brexit back, the EU is sure making a lot of noise about it, along with threats.

It appears to me that the one thing that the EU is most adamant about it its desire to mandate immigration levels. If that ISN'T their position, as you imply, then they (EU) should clearly state it. However, by watching what they are doing to Poland, it's quite clear that this is a matter of state sovereignty that the EU isn't willing to concede to the actual government officials elected by those citizens.

I don't think that the citizens of the individual countries of the EU were intending to surrender their sovereignty when they voted on the EU. If they now realize that they in fact did so by mistake, then I don't think it is inappropriate for them to reverse their decision and attempt to realize a trade union that keeps their rights intact as an individual country while maintaining free trade with the rest of the block. The EU officials on the other hand, appear to be pissed off that they are being called out as usurping the authority of the elected leaders of these individual countries. Either the elected leadership of Poland (for instance) has the mandate to control who they want to let into their country or the unelected leadership of the EU has the mandate to control their immigration, it can't be both.

No country should cede control over it's borders to an unelected group of international technocrats who have no interest in maintaining the culture and traditions of it's people. THAT seems to me to be the issue. If as you state this isn't the problem, then the EU should freely make the necessary changes to it's framework so that it's clear that each individual country can control it's immigration. The EU is trying to conflate the issue of each country's citizens being able to travel freely within the EU to that of allowing uncontrolled immigration of cultures/people from outside the EU countries into each EU country. They are separate issues and should be addressed as such.

 

Ghordius's picture

"It appears to me that the one thing that the EU is most adamant about it its desire to mandate immigration levels. If that ISN'T their position, as you imply, then they (EU) should clearly state it."

it's much more then that. actually, the EU's position is that they don't even deserve the label "immigrant"

an "immigrant" should be someone that comes from a non-EU country

a Citizen of a EU Country ought to be a EU Citizen... period. a Peer. (In Sovereignty)

that's the reason why you might be misunderstanding the EU position. EU Citizens have Freedom of Movement in EU Countries... period

"immigration" in the other sense... it's a 100% national affair

nope, that conflation... comes from those who are against all this. and they love to conflate EU governments with "EU officials", too

chubbar's picture

The EU is trying to circumvent the argument I made with the one you just made. Here's the analogy: There are 10 pools all sharing common walls and the people within each pool are familiar with each other, have things in common and decide that they can reduce the cost of maintaining their individual pools by forming an "association" and then knocking down the common walls and allowing the water and people to flow freely between the pools.

Now you have the pool association, which is supposed to be looking out for the common interests of the pool owners, allowing people who the pool owners/members don't know and who don't follow pool etiquite to swim in the farthest pool. When these new swimmers start taking a dump in the far pool (literally in some cases), it then becomes a problem for the other pool owners who are now sharing that pool water. Not only that, but since these people are now in the pool at the opposite end of the complex, they are free to swim down to any of the other pools via the new " common passport" rules.

This problem isn't the same as the original pool owners/members complaining about other original association members using the now "common" areas. It's about the association now allowing non-assimilating "new immigrant" members into one pool where they can not only pollute that pool but move to the other pools. The members would like to maintain the same ambiance as it originally was and are being called racists for resisting a change that they didn't vote for and is physically dangerous to them.

You are quite aware of this issue so I can only conclude by your response that you choose to ignore it or downplay it.

Poland, for instance, can't tell Italy to shut down the George Soros funded ships coming in from Libya packed with thousands of immigrants, and the EU refuses to. The only thing that the leadership of Poland CAN do is shut their borders.

Leading people to believe that this is about Poland trying to stop Italians from immigrating into Poland is disingenuous at a minimum.

 

 

Ghordius's picture

"Poland, for instance, can't tell Italy to shut down the George Soros funded ships coming in from Libya packed with thousands of immigrants, and the EU refuses to. The only thing that the leadership of Poland CAN do is shut their borders."

yes, and their borders are shut for those

"Leading people to believe that this is about Poland trying to stop Italians from immigrating into Poland is disingenuous at a minimum."

agree. and yes, it is disingenous to lead people to believe that. which is not what I am doing

Freedom of Movement is for EU Citizens, not refugees nor immigrants from non-EU countries

Brexit is, among other things, about Poles in the UK, remember? those are EU citizens

Ghordius's picture

"However, by watching what they are doing to Poland, it's quite clear that this is a matter of state sovereignty that the EU isn't willing to concede to the actual government officials elected by those citizens."

Poor Poland. what is the EU commission doing to it? forcing refugees down their throats? nope

Poland has underwritten agreements. Poland is refusing to comply. The EU Commission is going to sue them

that's the same EU Commission that sued other countries for similar cases, including recently a case involving taxes on German roads

since Poland is a net recipient of EU funds, it might mean a smaller EU funds pie for Poland

I do not see Poland's government quaking in their boots, but I see a lot of propaganda made on this spat among neighbours

I repeat: Poland's gov is not going to take up any refugees... and that's it

meanwhile, the whole is treated as if it was a kind of war, or something. for propaganda purposes, of course

Infnordz's picture

FU, I wasn't even old enough to decide and have a vote for the "Common Market" in 1973 when the UK Conservative government foisted this (known by them, via provided civil service analysis, as a political federalist Trojan Horse) political monster on the suckered public, and no continued-full-membership referenda were allowed for then under-age and later generations until recently, so no informed consent, thus quite outrageous theft of our sovereignty by that voting generation and that treasonous government!

If the EU was a private business, it would have be prosecuted and shut down for accounting fraud several years ago, because the auditors have refused to signed off the accounts for many years!

I have never consented to the F'ing Marxist EU and its unelected technocrates, who's harmful corporatist protectionism and bankrupt socialist rules have subtly hobbled/corrupted the UK, and did make it harder to exclude/deport non-EU immigants, even if only indirectly!

UndertheDRADIS's picture

Easy UK negotiating positions:

  • Migrants go back to the nearest EU country and we are going to start now.
  • We aren't paying you another dime.
  • We have begun negotiating trade agreements with China, the United States, and all British Commonwealth countries. If you want to do business in the future, let us know.
wonger's picture

Can someone who knows more than me about the subject post up exactly how Theresa May covered up pedophilia Please.

P.s NSA,Mi5, CIA, MOSSAD need not reply, you complete and utter morons! 

silverer's picture

Why is throwing your country down the toilet by letting in everyone from the rest of the world that doesn't give a shit about you and your customs and culture a condition for existence? I guess the last 500 years really sucked? But where's the "improvement" due to the vehicle sidewalk killings, bombings, rapes, stabbings, shootings, beheadings, etc.?

Ghordius's picture

you seem to be talking about UK's immigration issues from Muslim countries

well, none of that is even remotely related to Brexit, or the EU

(there are no Muslim EU countries, Brexit is in part related to, for example, Catholic Poles, whereas some Brits want Polish Nurses and Doctors but no Polish Plumbers and Logistic Workers. though they don't realize the first part, of course)

but Mr. Boris Johnson (of claimed Turkish descent) managed to make it sound so. by promising Turkey EU entry while scaring Britons about "70 million Turks invading the UK" at the same time. it's true, however silly and improbable that it sounds

Xredsx's picture

The one thing you can always expect from the British is the unexpected.

DelusionsCrowded's picture

"Hope " for the white sheeple to angst over whilst Brits Who will never be slaves , are infact inslaved via MC driven terrorism and PC legal and MSM indocrination .

There won't be a Brexit . The white sheeple don't seem to understand that the forces that have promoted this canard are promoting the whole world in the oppersite direction ; a unified ONE world order . Why would they suddenly let Britain retire from the EU ?

Russia has been sanction because its not under Masonic control and can create with China a new world centre block .

 

Brexit came about because WW3 wasn't taken up by Russia , something had to be done to fill the Newspeak (and give the sheeple hope)  lest the people start demanding an end to the bogus anti Russian sanctions . Same goes for Germany . Flooding the country with Terrorists makes it difficult for the German people to demonstrate against Russia sanctions or US military bases , as the immigrate chaos can be used as a screen by the Shadow Gov to attack such  activists with German trained MK slaves . Same goes with Britian , MK slaves used for false flags etc .

 

 

Cordeezy's picture

After the attack yesterday does supporting Brexit make you a racist?

 

 

www.escapeamazon.com/read-this

 

 

Glyndwr will return's picture

Only two things are certain . It will be a complete clusterfuck and the British people will not get the outcome they want. That would be the British people not the ones who have just a passport.