Contents

Executive summary ......................................................................................................................... 2

Introduction .................................................................................................................................... 3
The Lisbon Treaty ............................................................................................................................ 4
EU Position ...................................................................................................................................... 6
UK Position ...................................................................................................................................... 7
Negotiations so far .......................................................................................................................... 9
First Round: ................................................................................................................................. 9
Second round: ............................................................................................................................. 9
Third Round: ............................................................................................................................. 10
Fourth round: ............................................................................................................................ 11
Fifth round: ............................................................................................................................... 11
Sixth round: ............................................................................................................................... 12
Possible Brexit scenarios ............................................................................................................... 12
Trade of goods and services between EU and UK .................................................................... 13
Movement of people ................................................................................................................ 14
Hard Brexit ................................................................................................................................ 15
Divorce only agreement............................................................................................................ 15
Single market ............................................................................................................................ 16
Limited tariff-free deal .............................................................................................................. 16
Comprehensive economic and trade deal with the EU ............................................................ 17
Customs union .......................................................................................................................... 17
Conclusion ..................................................................................................................................... 18
Bibliography .................................................................................................................................. 19

1
 Executive summary

We had the task to assess the Brexit negotiations, to do that in this paper we will:

- Identify the issues for Brexit, give answer to what are the reasons that lead to Brexit;

- Elaborate the Lisbon treaty, which policies apply to Brexit negotiations;

- Article 50 from the Lisbon treaty, the plan if any county of the EU wants to exit;

- We will examine both the EU and the GB positions and their demands;

- Comment on the all rounds of negotiations so far and examine what has been achieved;

- Examine what’s at stake with Brexit on the table, trade and people movement between
EU and GB;

- Possible scenarios for Brexit, “Hard Brexit”, “Soft Brexit” or somewhere in between

- Our conclusion

2
 Introduction

“I want Britain to be what we have the potential, talent and ambition to be. A great, global
trading nation that is respected around the world and strong, confident and united at home”
(Moseley, 2017) said Theresa May, the English Prime Minister. But the main question here is if
UK is capable to achieve May’s requirements separately of the European Union?

United Kingdom entered the European Economic Community in 1973 with a membership
confirmed by a referendum in 1975.Scince then UK have been actively enrolled in all the activities
that fulfil the EU goals and values. But eventually something went wrong. On the 23 June 2016, a
referendum held in UK and 51.9% of the population voted to leave the European Union. The UK
is the first country that want exit from the EU. Before, there was no suitable and formal mechanism
for leaving the union but after the Lisbon Treaty there was formed an Article, Article 50 that gives
a way how a country may exit from European Union.
The real reasons for exiting the union are from various characters. The UK government
wants full control over their judiciary, over their economy and their borders. On the question:
“Why did they get to the Brexit Situation? “We can define the following answers:

- UK will no longer pay the membership fee and it will result with immediate costs
savings.
- UK will be free to establish its own trade agreements.
- The immigration will be cut, and UK will have totally regained control on their borders.
- Exiting the EU will allow UK to re-establish itself as a truly independent nation with
connections to the rest of the world.

The negotiations between the UK and the EU is a long process that started on 19 June 2017
and will last the following two years. In our work we will be talking about the Lisbon Treaty
streaming about the Article 50 of the treaty that refers to the ways a country can exit the EU, we
will underline the flow of the negotiations the initial point and the actual point the both sides have,
the positions that European Union and the UK are standing for, alternative scenarios that can be a
result of the negotiations. We will give a suggestion scenario and discuss the implications of the
specific scenario.

3
 The Lisbon Treaty

After the referendum for separation from the European Union was voted, the English Prime
Minister, Theresa May activated the mechanism that this getting out will make it a reality. She
invoked on the Lisbon Treaty, Article 50.

This Article actually is a set of procedures that designate how a Member State to withdraw
from the European Union, and first it was introduced by the Lisbon Treaty in 2007. According to
this Article if a country wants to leave must notify the European Council about the intentions it
want to exit the union. After this Article is triggered the withdrawal agreement must be negotiated
in accordance with Article 218 (3) (European Commision , n.d.), of the Treaty on the Functioning
of the European Union. This Article 218 (3) explains the following:
” The Commission, or the High Representative of the Union for Foreign Affairs and
Security Policy where the agreement envisaged relates exclusively or principally to the common
foreign and security policy, shall submit recommendations to the Council, which shall adopt a
decision authorizing the opening of negotiations and, depending on the subject of the agreement
envisaged, nominating the Union negotiator or the head of the Union's negotiating team.”
After once the Article 50 has been trigged the following steps should to set up:

- Step 1

An extraordinary European Council will be convened by the President of the European

Council. The European Council will adopt by consensus a set of guidelines on the orderly
withdrawal of the United Kingdom from the European Union. These guidelines define the overall
principles that EU will pursue during the negotiations based on the common interest of the
European Union and of its Member States.

- Step 2

After the adoption of the guidelines, the Commission will very quickly present to the
Council a recommendation to open the negotiations. This will be agreed by the College of
Commissioners, 4 days after the meeting of the European Council.
- Step 3

The Council will then need to authorize the start of the negotiations by adopting a set of
negotiating directives. They must be adopted by strong qualified majority (72% of the 27 Member
States, i.e. 20 Member States representing 65% of the population of the EU27).

4
(Hunt, 2017)

This Article 50 refers to the plan if any country of the European Union want to exit. The
Article is a part of the Lisbon Treaty. Before this agreement, that is signed by all EU states and
become a law, there was no formal mechanism for exiting the European Union.

The Lisbon Treaty was signed for the reason to reform the functioning of the European
Union, by the heads of state and government of the 27 EU Member States on 13 December 2007.
The Lisbon Treaty came into force on December 1, 2009 and the aim was to make the organization
become more democratic, more transparent and more efficient. The Lisbon Treaty is consisted of
two parts. The first part refers to the Treaty of the European Union and the second to the Treaty of
Functioning of the European Union.

The article of the Treaty of Lisbon, article 50 refers to giving a right to any EU member to
quit unilaterally, and gives an outline of procedure for doing so. According to this article it is given
the leaving country two years to negotiate an exit deal. The article is consisted of the following
five statement paragraphs:

5
 Any Member State may decide to withdraw from the Union In accordance with its own
constitutional requirements.

A Member State which decides to withdraw shall notify the European Council of its
intention. In the light of the guidelines provided by the European Council, the Union shall negotiate
and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking
account of the framework for its future relationship with the Union. That agreement shall be
negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European
Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority,
after obtaining the consent of the European Parliament.

The Treaties shall cease to apply to the State in question from the date of entry into force
of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph
2, unless the European Council, in agreement with Member State concerned, unanimously decides
to extend this period.

For the purpose of paragraphs 2 and 3, the member of the European Council or the Council
representing the withdrawing Member State shall not participate in the discussions of the European
Council or Council or in decisions concerning it. A qualified majority shall be defined in
accordance with Article 238(3) (b) of the Treaty on the Functioning of the European Union.
If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the
procedure referred to in Article 49.Where a vote is taken, any Member of the Council may also act
on behalf of not more than one other member. (http://www.lisbon-treaty.org/wcm/, n.d.) (htt2)

EU Position

On March 3rd 2017, the president of the European Council, Donald Tusk proposed the
draft negotiation guidelines on Brexit to the 27 EU leaders. To the 27 because after triggering
Article 50, the United Kingdom took place on the other side of the negotiating table.

The president of the European Council outlined the main elements and principles of the
proposal, stating that the EU will treat them as fundamental and will firmly stand by them. The
duty of the EU is to minimize the uncertainty and disruption for its citizens, businesses and member
states that will be caused by the UK`s decision to withdraw from the EU.

The first issue relates to the citizens. Citizens from all over the EU live, study and work in
the UK. As long as the UK remains a member of the EU, their rights are protected. However, their
status and situations need to be settled after the withdrawal with reciprocal, enforceable and non-
discriminatory guarantees.

6
 Second, as after Brexit the EU laws will not apply in the UK, the EU needs to prevent the
legal vacuum that the EU companies will face.

Third, the EU must make sure that the UK will honor all financial commitments and
liabilities it has taken as a member state. It is only fair and just to all those people, communities,
businesses, scientists, farmers and so on, to whom we as 28 members states promised and owe this
money, stated president Tusk. He also personally guaranteed that the EU will honor all of its
commitments.

Fourth, the EU will seek to find creative and flexible solutions that will aim to avoid hard
border between Ireland and Northern Ireland. The EU considers that supporting the peace process
in Northern Ireland is of crucial importance.

These four issues are all part of the first phase of the negotiations. Once a sufficient
progress is done on these four issues, the EU will be open to discuss the framework of the future
relationship. The UK suggested that a discussion should be open on all issues parallel, however
the EU position is that this will not happen.

The EU shares the UK`s desire to establish a close partnership, as this is of mutual benefit.
Strong ties that reach beyond the economy that include also security cooperation are in common
interest of both. The position of the EU27 is not one of pursuing a punitive approach, considering
that the Brexit itself is punitive enough.

Even though the negotiation a harsh and often confrontational, president Tusk stated that
after forty years of being united, both sides owe it to each other to make the divorce as smooth as
possible.

UK Position

The British negotiating position regarding Brexit is described by Financial Times, as

seeking deep and special partnership with the EU after the Brexit. The British position hopes that
an agreement will be made that will include:

Protected rights of EU citizens living in Britain, as well as protected rights of UK citizens

living within the EU.

7
 The second requirement is regarding the border between Northern Ireland and Republic of
Ireland. Britain wishes to have a soft border, meaning people on both sides of the border should
be able to move freely.

The third requirement is free trades of goods and services with minimal customs barriers.
Britain is also open on co-operation for policing and security.

Financial times describes the British starting position as a fantasy. In fact, the starting
position sees Britain as happily already outside of the EU and seeking a better relationship.

In her speech Prime Minister Theresa May clearly expressed in one of her speeches what
the British government is going to deliver to its citizens after the Brexit. She stated: I have been
clear that when we leave the European Union, we will no longer be part of its single market, or its
customs union. The British people voted for control of their borders, their laws and their money,
and that is what this government is going to deliver. At the same time, we want to find a creative
solution to a new economic relationship that can support the prosperity to all our peoples. As it
can be concluded from the speech it is clear that Britain wants to be able to negotiate its own free
trade deals and wants to limit the free movement of people.

Throughout the process Britain has had a lot of disagreements on its Brexit strategy
internally and it is therefore still not fully clear in detail what Britain`s negotiating strategy in terms
of Brexit is.

To simply summarize the positions, the UK position is with focus on the future, basically
UK is focused on how the relationship should continue after the divorce. Contrary to this the
position of the EU is strongly and so far very decisively focused on settling the terms of the
divorce, before continuing any discussion about the future of the relationship. It has become clear
that sufficient progress must be made on three key issues:

The Budget, meaning what will UK`s contribution to the budget going to be. This has been
the most delicate issue so far.

The UK citizen rights within the EU and the EU citizen rights within the UK.

The border with between Northern Ireland and Republic of Ireland.

It has become clear that until sufficient progress has been made on the three issues the EU
commission will not get a mandate to negotiate with the UK about the future of the relationship.

8
 Negotiations so far

To date there have been six rounds of negotiations that took place on the issues regarding
Brexit, this section will briefly highlight the content of each of the negotiation rounds that have
took place so far:

First Round:

For the first round of negotiations, the negotiators for both sides were split into four groups,
discussing four key priorities. The focus of the talks was:

Citizens’ Rights
The EU demand that Britain pays some 60 billion euros to cover ongoing EU budget
commitments. Other loose ends, for example the issue of Britain’s goods in EU shops after Brexit
day.

The fourth set of talks was focused on problems in Northern Ireland, once a new EU border
is established between EU member state Republic of Ireland and Northern Ireland
The expectations for this meeting were that Britain will stop challenging the principle that it will
owe Brussels money. In terms of how much exactly the amount owed by Britain will be was open
for further discussion as it was hard to precisely determine until Britain actually leaves.

Second round:

After discussing for a second time on the key disputes, both sides failed to find a common
ground that will enable them to move the negotiations forward. Michael Bernier said that the
British government failed to produce sufficient convergence on both the UK bill and the future
citizen rights. Mr. Bernier stated that the EU will keep insisting that the rights of citizens should
be guaranteed by the European Court of Justice, a position which the UK was strongly against.

The EU position sees this as a "fundamental divergence" as the citizens must be able to
identify the legal certainty that they need for their everyday lives. EU essentially requires, lifetime
guarantee of rights for EU-27 citizens who reside in the UK when the withdrawal agreement enters
into force, and for UK citizens who reside in one of the EU-27 countries. This also applies to their
current and future family members, who have already joined them, or will join them, regardless of
their nationality.

9
 The EU side was very clear throughout the entire process that the negotiations will not
move onto agreements for future trade, which is UK`s first priority, until the UK provides what is
needed on the citizens` issue and the so called “divorce bill”. On the next session a clarification
will be expected from the UK also on the issue of the maintenance of the common travel area with
Republic of Ireland after leaving the EU.

The Brexit Secretary, David Davis on the other hand sent out a message on the exit bill,
insisting both sides recognize the importance of sorting out responsibilities they have to one
another. He also said there was no dispute in the cabinet whether crashing out of the EU with no
deal will be a disaster for Britain. Mr. Davies said that he was satisfied with the progress that was
made by understanding each other positions. He insisted that the offer UK made on citizens’ rights
was fair and just. The UK position on this issue is the following: EU nationals who have been
living in the UK for five years should receive a new "settled status" in a streamlined process.
People who have been legally resident in the UK for less than five years at the time of Brexit will
have to apply for a temporary status in order to stay.

Third Round:

After meeting for the third time to negotiate the terms under which the UK will leave the EU,
official statements were made from both side that useful clarifications was provided on a lot of
points, such as: the status of frontier workers, the aggregation of social security rights, and
pending legal proceedings before the court of justice were some of them. However, after three
rounds there was still not decisive progress on the main issues in question, it was only stated that
on the topic of Ireland the discussion was quite fruitful. On this subject a real progress was made
regarding the Common Travel Area, on the basis of guarantees provided by the UK and it was
clarified in a constructive manner what is yet to be done, especially with regards to the North-
South cooperation in the Good Friday Agreement, a peace agreement between Republic of
Ireland and The United Kingdom. Regarding the Financial settlement, Michel Barnier stated the
following after the third round:

"EU taxpayers should not pay at 27 for the obligations undertaken at 28. This would not
be fair.
In July, the UK recognized that it has obligations beyond the Brexit date.
But this week the UK explained that these obligations will be limited to their last payment to the
EU budget before departure.
Yet we have joint obligations towards third countries. For example:
We have guaranteed long-term loans to Ukraine, together.
We jointly support development in Africa, the Caribbean and Pacific countries through the
European Development Fund.
After this week, it is clear that the UK does not feel legally obliged to honor these obligations after
departure.
We have also jointly committed to support innovative enterprises and green infrastructure in
European regions until 2020. These are not recognized by the UK as legal obligations."

10
Fourth round:

After the fourth round of negotiations a progress was made on the key issues, however a
lot more remained unsettled, specifically as both Mr. Davis and Mr. Barnier have stated they made
an agreement on:

Citizen rights:

The UK agreed to give direct effect to the withdrawal agreement. This will give assurance
to EU citizens that they will be able to invoke their rights before the UK courts, as defined by the
Withdrawal Agreement. Furthermore, an agreement was made that the UK will apply concepts
from the EU law in a manner which is consistent with the EU law after Brexit. However, both
sides failed to reach an agreement that the European Court must play an indispensable in ensuring
this consistency.

Financial Settlement:

On this issue Prime Minister Theresa May, stated in Florence that no member state should
pay more or receive less due to Brexit. In addition to this she stated that the UK will honor its
commitments taken during membership. However, after the fourth round the UK explained that it
is not yet in a position to identify its commitments taken during membership. As for the EU side
is was stated that all commitments taken by 28 should be honored by 28.

Ireland:

On the issue of Ireland both sides recognized that Ireland is in unique situation and therefor
any potential solutions must fully respect the integrity of the Union`s legal order while at the same
time fully respect all part of The Good Friday Agreement. Also, the commitment on maintaining
the Common Travel Area was confirmed during this round and both sides started drafting common
principles.

Fifth round:

The negotiations after the fifth round were presented as not fruitful, as they did not bring
any particular progress. In fact, it was stated that there was a "deadlock" on the issue of the
financial settlement. Even though Prime Minister May stated that the UK will honor its
commitments, during this round the UK expressed that it was still not ready to honor this
commitment. Also, again after this stage the citizens` rights issue was still not resolved as there
were still disagreements. The fifth round did not bring any particular steps forward for neither of
the sides on any of the key issues.

11
Sixth round:

After the sixth round, some progress was made, specifically the UK will put in place
administrative procedures through which EU citizens can obtain "settled status". The EU in
particular needed assurance and clarification on how the system would work, for which the UK
provided sufficient information which presents solid ground for future work. Both sides agreed
that the dialogue regarding Ireland should continue as it has to be ensured that any potential
agreement must fully comply with the Good Friday Agreement and the Common Travel Area. On
the financial settlement, it was established that both sides now must work on the precise translation
of the commitments made by Prime Minister May in her Speech given in Florence.

All things considered, it is clear that after six rounds of negotiation, even though an
agreement has been reached on certain issues, there has not been sufficient progress on the key
issues in order for future trade agreement to be negotiated between the UK and the EU.

Possible Brexit scenarios

Now, after we have seen the reasons that lead to “Brexit” and we know the positions of
both the European Union and the United Kingdom in the negotiations we can discuss the possible
scenarios.

At this point there are many possible scenarios, ranging from membership in the European
Economic Area (EEA) or so called “Soft (Norway scenario) Brexit” to the most extreme scenario
or so called “Hard Brexit” in which case UK would only be a member in the World Trade
Organization (WTO) and would have no preferential trade relationships with EU. In between these
extreme scenarios there is a variety of other possible and more probable scenarios, it can be a
simple Limited Tariff free agreement between EU and UK, the UK can stay in a Customs Union
with the EU. Finally, the UK can have a Comprehensive Economic Trade Agreement, similar to
the agreement that EU has with Canada.

Before we go into a more detailed description of the possible Brexit scenarios, to put into
perspective what is at stake we’ll look into the trade between EU and UK, the movement of people
and the EU budget contributions. The data in this section will be borrowed from a study for the
IMCO (Internal market and consumer protection) committee. (Emerson, 2017)

12
Trade of goods and services between EU and UK

First, we will discuss the trade of goods, which is substantial. The EU here has a large
surplus with total export to the UK of 306 billion euros and while having total import of 184 billion
euros.

Table 1: Total trade in goods between the UK and the EU27, 2015

Imports
% GDP Exports(€bn) % GDP Trade (€bn) % GDP
(€bn)

EU 184 1.5 306 2.5 491 4

UK 306 11.9 184 7.1 491 19.1

Source: (Emerson, 2017)

As we can see from the table expressed in percentage shares of GDP the trade of the UK
with the EU is far more significant than the other way around. UK’s import from the EU amounts
to 11.9% of GDP compared to EU’s import from the UK which is 1.5% of GDP. Regarding the
export the difference is not so big but still UK’s export to the EU amounts to 7.1% of GDP
compared to EU’s 2.5%.

Second, we will discuss the trade in services between the EU and the UK which is also
very substantial, with EU’s import of 122 billion euros compared to the UK import of 94 billion
euros.

13
Table 2: Total trade in services between the UK and the EU, 2015

Imports
% GDP Exports(€bn) % GDP Trade (€bn) % GDP
(€bn)

EU 122 1 94 0.8 216 1.8

UK 94 3.6 122 4.7 216 8.4

Source: (Emerson, 2017)

When we put the numbers in percentage shares of GDP we can see that the trade percentage
of GDP again is significantly bigger for the UK with import amounting to 3.6% and export
amounting to 4.7% of GDP compared to EU’s 1% and 0.8% respectively.

However, there are difficulties in measuring trade in services and “Mirror statistics”,
statistics where each side is measuring basically the same thing tend to differ when measuring
trade in services.

Movement of people

The number of EU citizens living in the UK is substantially larger than the UK citizens
living in the EU. At the end of 2016 an estimated 3.35 million people from the EU are living in
the UK. Most of them are workers, around two million, around 200 thousand pensioners and 100
thousand unemployed, while it is presumed that out of the “other” category which counts around
650 thousand people most are students. (Emerson, 2017)

The number of UK citizens living in the EU is significantly smaller, with around 400
thousand pensioners out of around 1.2 million in total. This leaves 800 thousand workers, students
and dependent family of the aforementioned. (Emerson, 2017)

All these numbers show us that whatever the Brexit scenario is there will be a lot of
consequences that will affect both sides. So, it is of great importance that both sides make some
concession in their positions and meet each other halfway so the scenario chosen will minimize
the damage of UK leaving the EU.

14
Hard Brexit

The possible scenario if there would be no divorce agreement. The UK will no longer be
enclosed with the UK treaties and the numerous international agreements that come with the
treaties.

This could be called a way of a “clean” Brexit. One of the consequences of this scenario
will be that Britain as a sovereign country will be able to strike agreements with anyone clear of
its complicated and evolving relationship with European Union. From this position Britain would
be able to negotiate new relationships with the European Union and with other countries to form
of course mutual advantage. This so called “clean” scenario has also negative impact and almost
every business in Britain will be affected.

The lack of customs deals would disrupt the trade at the borders significantly, which means
traffic on goods will be imposed to tight border controls. Also, food imports would be a problem.
Air traffic would be affected by a lack of regulatory approval of fly to the EU, British truck drivers
would not be licensed to drive their vehicles in the EU. The transportation of nuclear material to
Britain would stop. The residents who have EU citizenship in Britain and the British citizens in
EU would be left to the mercy of their host country government.

“Philip Hammond, the UK chancellor of the exchequer, says no deal would be a “very,
very bad outcome for Britain”. It is worse than that. It is simply not a viable option. There are
almost no winners and the UK would be pursued in international courts for money the EU claims
it owes. The government’s “no deal is better than a bad deal” bravado has receded; most officials
concede this would be a self-inflicted wound of historic proportions.” (Giles & Barker, 2017)

Divorce only agreement.

This scenario is less disruptive than a no deal scenario. The UK would strike an agreement
with the European Union on its departure from the bloc, but would leave the upcoming relationship
to be negotiated from the outside, with internal trade based on World Trade Organization rules.
This still means that there is no agreement to replace EU membership, but the two sides would
have an agreement instead a conflict.

Because of increased trade barriers with the EU Britain would have to become more
sufficient. Domestic suppliers of UK manufacturers who would no face as much competition will

15
have a win situation. In the longer term, companies oriented towards trade with countries with
which EU does not have a deal might gain if the UK is able to strike a free-trade deal faster.
Companies involved in the trade between EU and UK would be hit by tariff and non-tariff barriers
on both sides of the stream as well as the possible discrimination by the governments. Customs
delays would still be significant at the hard border and behind it as companies would need to fill
out rules of origin declarations.

Single market

If Britain would remain in the single market as a member of the European Economic Area
either with a customs union agreement or without — it would ensure continued regulatory
harmony with the EU and tariff-free trade. Following, any goods and many services placed on
the market in the country could be sold in any EU state. If the agreement included customs and
agriculture, it would be equivalent on the trade side to continued EU membership.

If this scenario were about to happen, London would continue to be able to sell financial
services to the European Union using passports. Large companies, food manufacturers,
construction companies and other employers of EU labor would also gain as Britain would
have to accept the free movement of labor as part of a deal if wishes to remain a member of
EEA. Such a move would allow employers to continue as today without facing huge disruption
to regulatory rules.

However, the EU Court of Justice would still maintain a big role in law interpretation that
applies in the UK. Britain would have to accept EU regulations without much influence on
them.

Limited tariff-free deal

Following this scenario Britain would strike an agreement with EU maintain tariff-free
trade in goods. The UK is free to develop deals with other countries, but there is no guaranteed
access to the EU services market sector. Frictions would still be added to trade on custom checks
and companies could have to duplicate their production lines, producing goods meant to satisfy
UK regulations and others to meet EU rules which differ than the previous. Since Britain ran a
£95bn goods trade deficit with the EU in 2016, the main winners would be EU manufacturers who

16
could sell to UK without facing tariffs. UK manufacturers, particularly in the automotive sector,
would also gain advantage compared with other companies trading on WTO rules.

The service sector would be excluded from a limited tariff free deal on goods. Britain had
a £88bn trade surplus in services, which account for almost 80 per cent of the UK economy.
Financial services will be also excluded from the tariff free deal. Other services sectors, including
architecture and professional services such as management consultancy would also be hit.

Comprehensive economic and trade deal with the EU

Britain would sign a comprehensive trade deal with the EU covering most aspects of trade
with the bloc. The more comprehensive the deal would be the more limitations on sovereignty he
UK would have to accept.

The service sector would benefit from a deeper free-trade agreement. Financial services
covered in such an accord is rare, but British negotiators argue that it will be easier to include the
sector since currently is in full compliance with EU rules. Ensuring regulations are equivalent and
accepting EU regulatory oversight of financial services in London might enable some financial
services to continue to sell to the EU from London. Other parts of the services sector could benefit
from more relaxed rules on movement of labor, even if these were more restrictive than the current
free movement rules.

The UK would in many areas become an EU rule taker rather than a rule maker.
Manufacturers would still have to deal with additional red tape in customs procedures. Companies
which complain about the burden of EU regulation on everything from environmental standards
to capital requirements see no change.

Customs union

Agreeing a new customs union with the bloc would allow Britain to negotiate its own deals for
services, agriculture, and set domestic regulations but external goods tariffs and goods trade deals
would still be run by the European union. Britain and Europe’s manufacturing sector would say
yes to this arrangement. British companies would benefit from EU trade because of no need for
physical checks that goods are not from outside the Customs Union.
However, sensitive goods and goods that do not conform with EU regulations would still face
enhanced customs checks and possible delays.

17
 Conclusion

Our conclusion is that after six rounds of negotiations very little progress has been made.
This is probably mostly because of the issue of the financial settlement. As we have seen so far
EU is with the opinion that obligations undertaken by 28 member states should be honored by
the same 28 states which means GB should honor the agreements even though it is leaving the
union, on the other hand GB is accepting that they would honor the agreements but don’t agree
on the amount of the so called divorce bill. EU has an estimation that Britain should pay around
60bn Euros over the next years while GB has an estimation of 20bn euros.
Regarding the citizen rights after the 6th round of negotiations there have been some
progress an UK has put in place some administrative procedures so EU citizens can obtain a
“settled status”.
Regarding the “Ireland” problem, the border issue, both sides agreed that the dialogue
should continue, as it has to be ensured that any potential agreement must fully comply with the
Good Friday Agreement and the Common Travel Area.

Regarding the possible scenarios, since there have been little to no progress in the
negotiations in most important issue, the “divorce bill” every day we are closer to a “Hard Brexit”
which would be the worse option for both sides. Even though there can be no winner in these
scenarios, “Brexit” with no trade agreements would be worse for GB than it is for the EU.

If we had to guess our opinion is that GB will sign Comprehensive Economic and Trade
agreement with the EU which will be good for both sides, however Britain would still need to
accept some limitations on sovereignty. The better agreement GB wants with the EU the more
limitations it would need to accept.
If we go back at the reasons for Brexit, sovereignty is one of them so a lot of people have
a legitimate reason to wonder why exit the union at the first place.

18
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