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Invocation of Article 50

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On March 29, 2017, British Prime Minister Theresa May signed a letter to European Council President Donald Tusk invoking Article 50 of the Lisbon Treaty formalising the United Kingdom’s withdrawal from the European Union. May’s letter (issued 9months after the Brexit referendum) triggers a two-year negotiation between Brussels and London over the terms and conditions of the UK's exit. 

Those negotiations will focus on a wide range of politically contentious and technically complex issues: The rights of the 3.2 million EU citizens now residing in the UK; the treatment of the 1.2 million British citizens living in EU-27 countries; the disposition of the 20,000 EU regulations currently in force in the UK; the future of the border between the UK and the Republic of Ireland and its implications for Northern Ireland. Negotiators will also address the price of Brexit, which European Commission officials have estimated as high as 60 billion euros covering UK commitments on pension payments to EU civil servants and other budgetary obligations.

In her Article 50 notification letter, Prime Minister May acknowledged that the European Union’s “Four Freedoms” (free movement of goods, services, capital, and people) are indivisible and that the United Kingdom cannot “cherry pick” amongthose pillars to access the Single Market in a post-Brexit environment. But May also appealed for a “comprehensive agreement” that would simultaneously settle the terms of the withdrawal and create a framework for future relations. Noting the “deep and special partnership” between the EU and UK, she proposed a “bold and ambitious” Free Trade Agreement whose scope would include financial services, information technology, and other industries. The “soft Brexit” envisioned by May would ease the UK's exit from the EU while preserving the country’s access to the huge continental European market. 

However, EU authorities (including German Chancellor Angela Merkel) signaled their preference for a “divorce first” negotiation limited to the legal, regulatory, and financial conditions of the UK's withdrawal. A parallel negotiation of an EU-UK Free Trade Agreement is not feasible given the two-year window of Article 50. Furthermore, such an FTA would require accelerated ratification by all 27 remaining EU countries, an improbable scenario in the present international political environment. EU officials cite the example of CETA (Comprehensive Economic and Trade Agreement), the EU-Canada FTA that took 7 years to negotiate before final approval in February 2017.

 

Read the full article in the European Financial Review

 

This article was written by David Bartlett. David Bartlett is an Economic Adviser and Writer for RSM. He is Executive in Residence and MBA Director at the Kogod School of Business, American University in Washington, DC. Bartlett’s research, teaching, and consulting focus on International Corporate Strategy with special attention to emerging markets and emerging technologies. He has published widely on these topics while leading interdisciplinary research projects on the global economy.

 

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