🔒 Brexit deal looks good, if Brits agree – The Wall Street Journal

DUBLIN – A final Brexit deal is taking shape at last, and it looks like there is a real path to an orderly Brexit (as opposed to a hard Brexit, in which Britain crashes out of the EU with no deal in place). Like all such deals, this one represents a difficult series of compromises and has left few people happy. Nevertheless, it represents the last, best hope for an orderly Brexit. Unfortunately, or fortunately, depending on your perspective, the deal must still be approved by the British parliament, and lawmakers are not exactly lining up to endorse it. On the contrary, the deal has come under fire from all sides – many Tory members have slammed it and so has Labour. UK prime minister Theresa May’s position has strengthened somewhat over the last few days as an attempt to challenge her leadership fizzled. But the Brexit deal’s path through parliament is far from certain. If parliament doesn’t approve it or May’s government collapses, then a hard Brexit will become likely. And that would be bad news for markets worldwide. – Felicity Duncan

U.K. Takes a Step Toward a Smooth Brexit, but Domestic Opposition Remains

By Laurence Norman in Brussels and Max Colchester in London

European Union and U.K. negotiators agreed on an outline of future U.K.-EU ties, taking Britain a step closer to an orderly departure from the bloc with a document British Prime Minister Theresa May hopes to use to rally domestic support for her Brexit deal.

The draft, which leaves open a range of future economic arrangements, comes about a week after the EU and U.K. reached a so-called withdrawal agreement, a legally binding document that spells out critical terms for Britain’s planned exit from the bloc next March.

EU leaders are expected to sign off on Thursday’s text and the withdrawal agreement at a special summit in Brussels on Sunday, in what would be the culmination of 18 months of negotiations.

The British pound jumped on the news, trading 0.8% higher on the day against the dollar.

The deal still faces a tall hurdle in the U.K., where Mrs. May faces an uphill battle to win parliamentary backing for a plan that would keep the U.K. in the EU’s economic orbit for several years.

“The British people want this to be settled. They want a good deal that sets us on course for a brighter future. That deal is within our grasp, and I am determined to deliver it,” Mrs. May said.

Selling the deal to British Parliament will be a challenge. Opposition Labour leader Jeremy Corbyn called the political declaration “26 pages of waffle” and urged lawmakers to vote down the deal. A series of lawmakers stood in the House of Commons Thursday to criticize both the terms of the U.K.’s departure and the vague wording of the future agreement. “This deal gives even more away,” than the withdrawal agreement, said former U.K. Brexit Secretary Dominic Raab.

Political analysts are bracing for turmoil when the deal is finally put to lawmakers. “Some form of political crisis in the U.K. after the vote now seems almost inevitable,” said Mujtaba Rahman, managing director for Europe at the Eurasia Group.

Last week’s withdrawal agreement lays out the terms of the U.K.’s departure: the billions of euros London will pay to settle budget commitments; the status of EU citizens living in the U.K. and vice versa; and arrangements to avoid a hard border on the island of Ireland. The latter issue will likely entail continuing membership of the U.K. in the EU’s customs union for an indefinite period.

Thursday’s draft is a forward-looking, nonbinding sketch of the long-term relations between the EU and the U.K. regarding security and trade.

But it does little more than fill in some aspects of their future relations, making plain that Brexit will launch a whole series of new and detailed negotiations during the transition period in which EU-U.K. economic relations will stay essentially as they are.

In those negotiations, the dilemma that has haunted the talks until now will reappear: How much political sovereignty is Britain prepared to trade off to the EU to secure vital economic interests?

British parliamentarians still need to ratify both the deal to quit the EU and the agreement over the future relationship for them to take effect. Politicians from both sides of the political aisle have expressed deep skepticism over the terms, saying the U.K. would be tethered to the EU for years.

Mrs. May hopes that she can win over lawmakers by dangling the promise of eventually ending free movement of people from the EU—seen as a key reason voters backed Brexit—along with a close trade deal to mute the economic disruption of leaving the bloc.

The document is critical to Mrs. May’s strategy to encourage lawmakers to ratify the deal. British lawmakers will inspect it closely to see if it delivers on Mrs. May’s promise that the U.K. would have control over its borders and wouldn’t have to answer to the European Court of Justice. Lawmakers are reticent to hand over $50 billion in payments owed to the EU without cast-iron guarantees of preferential treatment once they leave the trading club.

But control comes at a price. In return for control over migration, the U.K. will have to leave the EU’s single market. That means cutting the frictionless access to the rest of Europe that U.K.-based businesses enjoyed for decades.

The future agreement looks to soften that pain by pledging access for goods through an ambitious free-trade deal, in which there will be no tariffs or quotas, but there is little comfort for some service industries. London’s bankers, for instance, have been pushing for a deal that would give British financial services firms a special status outside the EU, and the agreement promises only the type of more-distant relationship the EU has with other countries like the U.S.

Bankers are resigned to accepting the deal to avoid a chaotic “no-deal” departure from the EU. “We have to applaud something that does us deep financial harm,” said one senior banker.

After senior officials from EU member states discussed the draft, diplomats said they were broadly satisfied. However, a potential stumbling block remained over Gibraltar, a U.K. territory on the Iberian Peninsula that the country has squabbled over with Spain for three centuries. Spain wants more explicit language in the draft that a future trade deal won’t apply to the territory unless Spain and the U.K. reach a side agreement on it, the diplomats said.

The declaration says that the future relationship should take account of the close integration the EU and the U.K. have developed during Britain’s membership of the bloc and that as a result, the “scope and depth” of future ties could evolve over time.

Separately, the EU proposed that the post-Brexit transition period, currently due to end in December 2020, will be extendable for “up to one or two years,” according to diplomats. A decision on this will need to be made before July 1, 2020.

—Paul Hannon contributed to this article.

Write to Laurence Norman at [email protected] and Max Colchester at [email protected]

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