UK’s friends seek EU third way as Johnson wants all the cake

By Paul Taylor

BRUSSELS (Reuters) – Boris Johnson’s rosy vision of Britain’s future relationship with the European Union after leading the victorious campaign to leave it resembles his declared policy on cake – “pro having it and pro eating it”.

Indeed he seems to think both are Britain’s entitlement, writing in a newspaper column on Monday that he expects to keep free trade with the EU, impose some curbs on migration from EU states and reduce payments to Brussels.

But legal experts say there is no way the UK could continue to have full access to the EU’s single market, especially for financial services, without accepting both free movement of EU workers and substantial payments into its budget.

Behind the public posturing on both sides, wise heads are starting to explore what room there might be for an enhanced partnership between London and Brussels short of full membership that could serve as a template for countries such as Turkey, Switzerland and perhaps one day Ukraine or Israel.

But the EU treaties appear to impose tight constraints.

“There are limits we can’t cross. The more internal market access we give, the more you have to accept the four freedoms,” said Jean-Claude Piris, a French lawyer and former head of the legal service of the council of the European Union.

He was referring to the principle of free movement of goods, capital, services and people, anchored in EU treaties.

“And you can’t participate in decision-taking. That is for members of the club,” Piris told Reuters in an interview. “You can only do what the treaties allow. We’ll never change the treaties to give Britain a special deal.”

Johnson, expected to run for Conservative party leader to succeed outgoing pro-EU Prime Minister David Cameron, set out his idea of the future partnership in The Daily Telegraph on Monday, based on free trade but without EU rules enforced by the European Court of Justice or the costs of membership.

“There will continue to be free trade, and access to the single market,” he said, adding there was “no great rush” for Britain to extricate itself from the EU.

At the same time, Johnson said, Britain would take back control of immigration policy and there would be “a substantial sum of money which we will no longer send to Brussels”.

He also made a series of assumptions that British citizens would be able to live, work, study and buy homes in Europe which will be subject to a negotiation that has not yet begun.

Brussels officials and lawyers say playing for time is Britain’s strongest weapon in the coming battle over the future shape of relations, but it is a double-edged sword.

The EU’s trump card is market access, especially for financial companies desperate to keep the “passport” that allows them to sell services across the bloc from London. Non-EU states such as Switzerland or Canada do not have that right.

In a sign of fast dwindling British influence, European Commission President Jean-Claude Juncker swiftly handed the financial services portfolio to the vice-president in charge of the euro after Britain’s Jonathan Hill resigned on Saturday. Financial firms may start to shift offices or staff away from London rather than endure a prolonged hiatus. Money is already voting with its feet and pouring out of sterling and the UK.

In the dance that prefigures negotiations, each side is displaying its instruments of torture.

Johnson and his allies are saying Britain has all the time in the world and may not need to use Article 50 of the EU treaty notifying its intention to withdraw that starts a two-year countdown to departure. Cameron told parliament on Monday the timing was entirely up to London.

Brussels is pressing for an early notification but officials acknowledge Britain cannot be forced to give notice. Some EU aides point to another treaty article which says member states must “refrain from any measure which could jeopardize the attainment of the Union’s objectives”, though it’s unclear how that could be enforced to make London trigger the exit clause.

“NO NEGOTIATION WITHOUT NOTIFICATION”

“No negotiation without notification,” was the unanimous resolution of senior officials, or “sherpas”, from the other 27 EU states who met in Brussels on Sunday. That means no informal pre-negotiations either, participants said.

In reality, however, there will be a phase of exploratory contacts during which Britain sounds out – in Brussels and national capitals – what kind of deal could be on offer, and its EU partners seek to clarify what concessions London could make.

No one expects Cameron, a lame-duck leader, to trigger Article 50 this week, and most expect his successor as ruling Conservative Party leader, set to take office by October, not to rush to press the button. If there were a British election to give a new leader a mandate, it might have to wait until next year.

However, France and allies such as Belgium are worried that a prolonged period of uncertainty laced with informal talks on a special deal for Britain would be a recipe for unraveling the EU with others making copycat efforts to blackmail Brussels.

“What we need is a clear timetable from the British, to know when things will move forward,” a senior French source said.

A diplomat who attended the sherpas’ meeting said that once Britain gave notice, there would be two parallel negotiations – one on the divorce terms and the other on future relations.

“One could imagine transition clauses in the exit treaty, in which each side would commit not to impose tariffs on the other while talks on a new agreement were under way,” the official said, stressing it would have to be for a limited period.

Away from Brussels, some of Britain’s friends as well as old British EU hands are thinking outside the box about a possible third way between membership and a loose association with few trade benefits.

Oded Eran, a former Israeli ambassador to the EU, developed with colleagues at the Institute for National Security Studies in 2010 a “membership minus” formula to which Israel might aspire if it reached a final peace deal with the Palestinians.

A country like Israel, Turkey or Morocco could participate in most or all EU agencies – such as the Horizon 2020 research program – if it adopted EU rules and standards in those policy areas, without the full benefits or obligations of membership.

“They would take part in decision shaping, but not decision making,” Eran told Reuters in a telephone interview. “They could attend (ministerial) councils in those policy areas and be able to speak but not vote.

“This could be applied much more easily to Britain, which already has all the EU rules on its statute book,” he said. “It all depends in the end whether the EU wish to behave like grown-ups or if they want to punish the UK for good reasons.”

“ONE FOOT IN, ONE FOOT OUT”

Michael Leigh, a former head of the European Commission’s enlargement department who negotiated agreements with a range of eastern partners, some of whom later became EU members, said that while there was only one form of membership, there could be any number of associate relationships.

“We should start thinking constructively about the content of a special relationship, what (German Chancellor) Angela Merkel called a ‘privileged partnership’ in relation to Turkey,” said Leigh, now a senior fellow at the German Marshall Fund. “The UK can expect consultation, where its interests are involved, but not a vote.”

Media have coined other terms such as “associate membership” to describe such a model, although it has no official standing.

“In the think-tank world, it is almost common currency that if the UK were to achieve a new form of relationship, it could become a template for Turkey or Ukraine,” Leigh said.

However lawyers such as Piris and veteran diplomats such as John Kerr, a former British ambassador to the EU who is now a member of the House of Lords, said the treaties set firm limits to special deals for non-members.

“Where is the provision in the current treaty that allows that?” Kerr, who was involved in drafting Article 50, said in an interview with Reuters. “You could create it if you change the treaty, but as of now it doesn’t exist. The Brits will have to fit into an existing box.”

The other possibility is that Britain could delay so long, and talks could be so drawn out and the economic consequences so severe, that in the end the British electorate decides to stay in the EU after all.

Kerr said it would be unwise to try to force Britain’s new leaders to declare their intentions too early in a period of political and financial turmoil.

“It’s not in anyone’s interest to bring things to a head now,” he added.

The prospect of a long, drawn-out and inconclusive farewell prompted French political scientist Jean-Louis Bourlanges, a former European Parliament member, to quip that the outcome of last week’s British referendum would make little difference.

“Before, the UK had one foot in and one foot out of the EU. Afterwards, it will be exactly the opposite,” he said.

(Additional reporting by Alastair Macdonald, Francesco Guarascio in Brussels, Jean-Baptiste Vey and Leigh Thomas in Paris; Writing by Paul Taylor; Editing by Peter Graff)