Brexit Briefing No.37 - Association Agreements

May is a quiet time in Brussels, and this week was no exception. With two bank holidays in Brussels, there was little of note happening in the EU's headquarters. Before going on holiday the EU Brexit negotiating team, Task Force 50, did agree a formal list of areas for discussion on the future relationship with the UK team, which can be seen here: https://www.gov.uk/government/news/topics-for-discussions-on-the-future-framework-at-forthcoming-meetings. Whilst this framework for talks contained no surprises it does highlight the vast array of different economic, political and security elements to UK-EU relations which need to be agreed.

Brussels

This week is therefore a good moment to take stock of where we are with the Brexit negotiations. There are four more negotiating rounds before the June summit at which both sides aim to reach provisional agreement on arrangements for the Irish border, thus unlocking agreement on the withdrawal and transition deals. This would effectively ensure that Brexit will happen along the timeframe outlined in Article 50. Negotiations would then focus more fully on the future relationship that would govern EU-UK relations post-2020 as outlined in last week's breakdown paper.

The main stumbling block to this timetable is the Irish border question and how future customs relations will affect whether or not a border is needed in Ireland. It remains to be seen how far the EU will go to defend their line on the border, given the fact that if they go too far, they risk pushing the UK into no deal at all which would definitely bring about a hard border in Ireland.

Despite the rhetoric, behind the scenes, cooperation is relatively good on a technical level between the two negotiating teams. However the major challenge is that the two options currently being debated in the UK (the customs partnership and the maximum facilitation option) have both already been publicly rejected by Brussels so whatever option emerges from the domestic debate is unlikely to engender a breakthrough in June without a change of heart in the Berlaymont. The next few weeks will be critical.

Berlaymont

Once such an agreement is found, as despite the drama, it surely will in the end, attention will then turn to the future relationship between the EU and the UK. In that context this week’s Brexit Briefing looks at what is probably the most likely future framework given the vast swathe of areas needing to be covered - a UK-EU association agreement.

Association agreements help create a legal framework for complex relations between countries or blocs such as the EU where the relationship covers a lot more than just trade. For example, they normally cover education, research and innovation and create mechanisms which promote bilateral cooperation on other topics as well as trade.

Current EU association agreements can be divided into two types: those between the EU and countries seeking to join it, for example Serbia, and those between the EU and countries which do not seek EU membership, such as Israel. The EU currently has around 20 association agreements.

Israel

The agreements open the door for countries to take part in EU-led initiatives such as educational exchanges and EU research programmes, which the UK has already indicated it would like to. For instance, Israel is a partner country in the Erasmus+ educational programme and has participated in the Horizon 2020 Research and Innovation programme since 2014. Access to these programmes comes with a cost however and countries have to pay into the EU budget but they receive the benefits of participating in return.

In recent months there has been a growing discussion on whether an association agreement could be the best framework for future UK-EU relations. Such an agreement could provide a flexible legal foundation for the new ‘deep and special partnership’ that the UK government seeks with the EU post-Brexit. Such agreements also do not mandate membership of the single market so a bespoke trade relationship can be arranged within it without the UK having to be in the single market or customs union. They also do not mandate free movement of people.

As a result the possibility of a UK-EU association agreement is being closely considered. Such an agreement would provide a framework for the UK to maintain close ties with the EU in a tailored array of areas of mutual interest, while also giving the UK the ability to pursue its own trade and economic policy.

The recent EU-Ukraine association agreement is a good example of what could serve as the template for a future UK-EU agreement. This agreement gives Ukraine enhanced access to the EU internal market, especially in the financial services sector which is crucial for the UK, and also creates close ties in the fields of security and defence. Furthermore, the EU-Ukraine agreement allows visa free travel.

Ukraine

Association agreements are normally a stepping stone for countries on their way into the EU, as is the case with Ukraine. However the model demonstrates that third countries with no wish to join the EU such as Israel can have close economic and security ties with the EU despite not being a member state and without upsetting the trade deals the EU has done with other countries.

So it is possible that whatever agreement the EU and UK do will be packaged as a type of “association agreement”, mainly because it needs to cover so many areas including trade, intelligence cooperation, aviation, research and innovation.

The noises from the UK have suggested that the government may be open to an association agreement however some of the usual challenges still exist even with this model. European Court of Justice (ECJ) jurisdiction would still apply in the UK for the schemes (such as Horizon 2020 research funding, Erasmus university exchanges, and membership of some EU agencies) yet whatever model is agreed, if the UK wants to take part in these schemes it seems difficult to see how it can avoid some level of  ECJ jurisdiction. In addition any deal in which the UK gains enhanced single market access may necessitate some agreement to follow EU rules in certain areas.

European Court of Justice

So although the negotiations haven’t yet discussed the future relationship beyond its scope, some thinking needs to be developed quickly in this area if the two sides are going to be able to come to an agreement before the end of the planned transition phase at the end of 2020. An association agreement may be one of the legal means to get there, but it can take time to formally put in place. In essence the content of any association agreement is dictated by the specific needs and demands of the two sides. Israel’s association agreement is very different from Ukraine’s for example. A UK association agreement would be very different again, but don’t be surprised if any final deal is packaged as an “association agreement” even if it bears no similarity to any other one the EU has ever done.