Article 50 to be triggered: "So what now?" - Westpac

Tim Riddell, analysts at Westpac noted that Article 50 will be triggered and answered the question, "So what now?"

Key Quotes:

The negotiations now begin towards reaching an agreement to leave (within the two-year period or potentially another agreed date).

UK

The UK is not only agreeing to leave EU, it is also leaving the broader EEA (a free-trade area that includes Norway, Iceland and Liechtenstein – Croatia is a provisional member and Switzerland was formerly a member and now has an agreed special status, but is no longer a member). 
Departure from the latter should not involve as deep a level of negotiation as leaving EU

Soon after the official trigger of Article 50 (a written notice), the UK will deliver its initial terms under what is being referred to as “The Great Repeal Bill” (not an official document yet!) and will outline the process by which UK seems to become “an independent sovereign nation” with laws made in Westminster rather than under EU.

PM May has referred to the Bill as providing the scope to “amend, repeal and improve” laws. This is a huge task. The UK has slowly, at times acrimoniously, aligned itself to EU laws, regulations and protocols over the past 44 years.

Replacing all those laws, treaties and negotiations is a huge task. Admittedly some can be amended in brief or just passed into solely UK law, but the majority will involve unravelling commitments and agreements across the EU and, as is the case with Trade Treaties, multiple other States.

A new Government Department (within the International Trade Department) has been formed, but ramifications affect all parts of the Government. 
The three Cabinet members (Foreign Secretary Boris Johnston, David Davies and Liam Fox) have been tasked with developing and steering the UK’s negotiations.

EU

EU officials have stated that within two weeks of receiving the UK’s letter triggering Article 50, they will publish an initial negotiation document. 
Michel Barnier has been appointed as the EU official to steer the negotiations on behalf of EU, but European Commission President Junker and European Union President Tusk will also be prominent in these negotiations.

On 29th April, the European Council will hold a special Leaders Summit specifically to discuss Article 50. The 27 members (obviously no UK!) will look to agree and adopt the guideline for Brexit negotiations. This is the next major step in the road towards Brexit. 

A lot to do! 

Regulations over the working and residential rights of EU and UK citizens, trade treaties and agreements, access to financial and service markets and untangling EU and UK law are merely the starting points. In this context, preparing for full exit in two years is a hard task, especially since there will need to be a period prior to agreement to allow for final negotiations and ratification. The process of leaving will then follow. This is why there are so many reports suggesting that full separation may take up to 10 years.

How much?

UK and EU have made a lot of mutually binding agreements and many were under the Multi-Annual Financial Framework (the next to be negotiated for 2020-2016). The commitments to long-term infrastructure and social plans cannot be rapidly exited. The effective costs involved are being referred to as a “Divorce Settlement”. The amount which UK will have to pay range from EUR20bn-EUR60bn. Given the complexities involved in the unravelling, cancelling and forward planning suggest that this is very much a moving target.

SO? 

The triggering of Article 50 is unlikely to create an immediate sea of change. This is the start of the beginning of the negotiations. Once initial bargaining position details start to ping between EU and UK and are dissected by the media and markets, the enormity of the task ahead may start to weigh confidence and markets, not just in UK but also in EU.

Thorny issues over the status of Scotland, Northern Ireland and the United Kingdom as a State may further complicate the current negotiations.

This journey has a long path to follow which will no doubt involve multiple changes in direction, dead ends, false starts and uncomfortable hurdles to surmount. Hopefully it will be conducted with dignity and understanding. Otherwise, this might be “another fine mess you gotten me into Stanley”.