By Laurence Norman
BRUSSELS--The U.K. and the European Union have reached an
agreement on Brexit divorce terms after six months of tense talks,
opening the way for negotiations to advance on a trade deal but
leaving big challenges still ahead.
The deal eases pressure on U.K. Prime Minister Theresa May, but
if approved by leaders next week it still remains only a
door-opener to difficult negotiations. Britain is pushing for an
ambitious trade deal that EU officials have warned could be much
more restrained and take years to hammer out.
After a brief meeting Friday morning with Mrs. May to finalize
the agreement, European Commission President Jean-Claude Juncker
said his negotiating team was now formally recommending that EU
leaders agree to advance the talks when they meet next week.
"I believe we have now made the breakthrough we needed," Mr.
Juncker said.
The deal includes a Brexit financial settlement and guarantees
on the future rights of EU citizens in the U.K. There was some
give-and-take on both issues although the EU secured the lion's
share of its demands of Britain. The most contentious issue--how to
avoid a hard border on the island of Ireland--was somewhat papered
over in Friday's text although Britain accepted Irish demands of
hard commitments to resolve the problem.
Mrs. May, who has been under pressure from competing factions of
her party since losing her parliamentary majority in June, hailed
the deal and said that both sides had to make concessions.
"Millions of jobs depend on the future trading relationship we
will determine and I am optimistic about the discussions ahead,"
she said.
British Foreign Secretary Boris Johnson, who has differed with
Mrs. May on her Brexit approach, cheered the prime minister, saying
the country would remain close to the EU while "taking back control
of our laws, money and borders for the whole of the U.K."
But a cadre of strong Brexit backers argued she had given too
much away, including agreeing to pay a financial settlement to the
EU for previous spending promises it has made. A Downing Street
spokesman said the U.K. expects a final net bill of EUR40-45
billion which will be paid for in euros in the coming years. Some
liabilities may only come due decades from now.
Nigel Farage, the former leader of the UK Independence Party and
a leading proponent of Brexit, said on Twitter the advance in
Brexit talks simply meant Mrs. May's government "can now move on to
the next stage of humiilation."
The British pound initially traded 0.2% higher against the
dollar before falling to trade 0.1% lower at $1.3460, while the
U.K.'s blue chip FTSE 100 index was up 0.35%.
There have been major disagreements over the past few months on
the U.K. financial settlement and citizen rights, but the Irish
border emerged as one of the major hurdles in the divorce deal--and
is likely to remain a huge stumbling block.
The U.K. plans to quit the EU single market and customs union,
effectively creating two economies on Ireland and requiring a
border between the U.K. and the Republic of Ireland, which will
remain in the EU.
A draft agreement between the EU and the U.K. was scuttled
Monday after Northern Ireland's Democratic Unionist Party, which
Mrs. May's Conservatives depend on for a parliamentary majority,
objected.
Friday's agreement retains strong commitments from Britain that
it will do what is necessary to avoid customs checks on the border
between Northern Ireland and the south. To achieve this, Ireland
had been calling for Britain to allow a broad swath of EU rules to
continue to operate in Northern Ireland.
The agreement is ambiguous on specifics, saying the U.K. remains
committed to its "guarantee of avoiding a hard border." It also
says that unless other arrangements are worked out to avoid a hard
border, "the United Kingdom will maintain full alignment" with EU
rules needed to maintain economic and political cooperation between
Northern Ireland and Ireland.
"We have got a cast-iron guarantee from the British government
that under no circumstances will we see a hard border. That was at
the core of what we wanted," Ireland's Foreign Minister Simon
Coveney told state-owned broadcaster RTE.
EU chief negotiator Michel Barnier warned that if Britain's red
lines remain the same--leaving the EU's single market and customs
union and being fully independent of EU court rulings--a future
trade deal would likely be based on the goods-heavy Canadian
model.
British officials have explicitly said they are looking for a
more ambitious deal than that, one which includes financial and
other services.
Britain voted in June 2016 to leave the EU. The planned exit
date is March 2019. Mrs. May has said Britain will request a
two-year transition period after Brexit to avoid a hard landing for
the British economy. A trade agreement can only be signed after
Britain leaves the bloc.
European Council President Donald Tusk said he has now
circulated the EU's draft guidelines--the key principles of its
approach--to the future trade relationship. EU leaders will need to
agree and sign off that text next week.
He also said the EU and the U.K. should move quickly to start
negotiating the transition period to provide certainty for
businesses well in advance of Britain's departure.
However, Mr. Tusk said the U.K. would need to agree to continue
to make budget payments, respect the decision of EU courts and
apply current and new laws during the period. EU officials said
discussions on a transition could start in early January.
In the deal, the EU and U.K. agreed that EU citizens in the U.K.
will be able to pass on their rights to their children and to ease
entry for the spouse or partner of an EU citizen in the U.K.
Britain will enshrine the rights of EU citizens in its own
laws.
Paul Hannon, Wiktor Szary and Jenny Gross in London and Emre
Peker in Brussels contributed to this article.
Write to Laurence Norman at laurence.norman@wsj.com
(END) Dow Jones Newswires
December 08, 2017 09:13 ET (14:13 GMT)
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