Phoney war continues as EU meets to discuss post-Brexit future

EU leaders gather in Bratislava on Friday for a landmark meeting on the future of the European Union following Britain's shock decision to leave the bloc.

In a sign of things to come the meeting will be a gathering of 27 rather than 28, as the EU considers the way forward post-Brexit.

Though technically Britain can continue to attend EU meetings while still a member – prime minister Theresa May will attend the October 20th summit in Brussels – the decision to convene without Britain is a reminder of the enormous significance of the British referendum vote. As one EU source puts it: "Britain has voted to leave; the remaining members of the EU must focus on the best way forward for them as 27, not for Britain."

A phoney war between Britain and Brussels has set in since the referendum almost three months ago.

EU officials have watched from afar as the internal domestic British politics have played out. During this time the EU has been quietly bolstering its formidable bureaucratic capacity by putting in place three different teams of Brexit negotiators at the council, commission and parliament.

Minimal contact

While the British government's most senior EU adviser, Oliver Robbins, paid a visit to Brussels ahead of European Council president Donald Tusk's visit to London last week, there has been minimal contact between number 10 and senior EU officials. Tusk is taking a tough line by insisting that there will be no negotiations before article 50 – the mechanism triggering formal exit negotiations – is invoked.

The feeling in Brussels is that there have been few signs of a coherent Brexit strategy from London. It is understood that a similar message was relayed to Tusk last week during his meeting with Taoiseach Enda Kenny, with the Government raising concerns about Britain’s level of preparedness, particularly in regard to the Border issue.

While May has sensibly promised not to provide a “running commentary” on Brexit negotiations, there have been mixed messages from members of the British cabinet, particularly on the crucial issue of participation in the EU customs union.

The customs union – which is separate from the single market – is a free trade area that allows goods to move freely without tariffs throughout the zone, while applying common tariffs and rules to goods coming into the bloc.

Both Brexit secretary David Davis and secretary of state for International trade Liam Fox have hinted they favour Britain leaving the customs union, mainly because remaining within it would preclude Britain from striking trade agreements with other countries. But experts warn that leaving the customs union could result in huge administrative costs and tariffs on British businesses selling into the EU.

The issue also has particular ramifications for Northern Ireland, as goods crossing into the Republic would be subject to tariffs and checks if Britain was outside the customs union. While choosing to participate in the single market and not the customs union is possible – countries in the EEA (European Economic Area) such as Norway are members of the single market but not of the customs union, allowing them to strike trade deals with third countries – crucially these countries also have to conform to free movement rules and contribute to the EU budget.

Glaring gaps

Providing clarity on Britain’s future role in the customs union is vital if Britain wants to open free trade negotiations with third countries as promised by Davis and Fox.

In addition, there are glaring gaps in May's pledge that Britain will retain access to the single market while at the same time restrict free movement. European Commission president Jean-Claude Juncker again warned on Wednesday that Britain could not have a la carte access to the single market.

The most optimistic outcome for Britain may be that it forfeits access to some parts of the single market, in exchange for restrictions to free movement.

One of the comprehensive expositions of the challenges that lie ahead for Britain is a paper published by the Japanese foreign ministry ahead of the G20 summit.

The 15-page paper sets out a list of demands – from maintaining the EU's current tariff rates and free movement of capital and services, to ensuring that non-British nationals can continue to work in Britain – for Japan to maintain the same level of investment in Britain.

In short, Japan is demanding that virtually all of Britain’s existing arrangements with the EU remain in order to guarantee investment. For British officials embarking on one of the biggest trade negotiations in history, the paper presents disquieting reading, as it sets out in stark terms the scale of the challenge ahead.