EU Signals U.K. Trade Talks Are Still Months Away

By Laurence Norman and Valentina Pop Markets Dow Jones Newswires

The European Union adopted its core negotiating positions for the coming Brexit negotiations Saturday, making it clear to Britain that talks on a future trade agreement remain months away. 

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EU leaders laid out their priorities for the talks, stressing that while they want to secure a close future relationship with Britain, their first objective was to carve out a clear understanding on the divorce terms, including the future rights of EU citizens in the U.K. and British acceptance that it must pay tens of billions of euros worth of spending pledges to the bloc. 

EU officials have said that means discussions about a post-Brexit trading agreement with the U.K. would likely begin only toward the end of the year. 

That would leave less than a year to discuss the future relationship since the EU's chief negotiator, Michel Barnier, has said he wants the talks wrapped up by October 2018 to leave time for the ratification of a deal. 

"Some are estimating, in a positive scenario, that [talks on a trade agreement] could happen by the end of the year," Romanian President Klaus Iohannis told reporters, stressing that complex divorce issues must be resolved first. 

Saturday's meeting was the first formal summit meeting of EU leaders without U.K. Prime Minister Theresa May. It comes a month after the U.K. government formally notified the bloc it was leaving, the opening salvo of two years of negotiations before Britain's planned March 2019 departure. 

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The first direct talks will take place after June 8, the date of snap elections Mrs. May called earlier this month. Opinion polls currently point to Mrs. May's Conservative party winning the vote comfortably. 

Mrs. May has called for Brexit negotiations to shift quickly to focus on the future relationship, which she hopes will lock in close security and economic ties and protect the U.K.'s powerful financial-services industry. 

However, the EU's negotiating partners have said those discussions can only take place when sufficient progress is made on the divorce terms. They have repeatedly said a future trade agreement can only be finalized once Britain has left the bloc. Some officials predict it will take years. 

In a sign of the EU's unity up to this point, leaders agreed to adopt their negotiating guidelines for the Brexit talks within a minute of the meeting's start. 

"Guidelines adopted unanimously. EU27 firm and fair political mandate for the #Brexit talks is ready," European Council President Donald Tusk said on Twitter. 

Among the key points in the guidelines is that the U.K. cannot gain sector-by-sector access to the single market, that any post-Brexit transitional deal must be time-limited, and that EU courts must continue to have a role in Britain after Britain's exit from the bloc. 

They emphasize the importance of ensuring no hard border is re-established between Northern Ireland and the Republic of Ireland and even touch on issues like the future legal status of Gibraltar, a small British territory subject to a centuries-old territorial dispute with Spain. 

The U.K.'s main business lobby group, Confederation of British Industry, responded by urging that trade talks take place as soon as possible. 

"With well over EUR600 billion worth of trade every year between the U.K. and EU, the economic case for making rapid progress on a trade agreement is crystal clear," it said. 

In recent days, some EU leaders have raised questions about the British readiness to make the necessary compromises to ensure the talks end in a deal. German Chancellor Angela Merkel told lawmakers Thursday she is concerned that some in Britain still have "illusions" that the U.K. can leave the bloc and still enjoy many of the benefits of EU membership. 

However, on Saturday, Luxembourg Prime Minister Xavier Bettel said he hoped Mrs. May would arrive at the negotiating table after the British election with the flexibility to face down those in her party unwilling to make any major concessions to Europe. 

"I think it's an internal problem she wants to resolve in the Conservative party to have not hard Brexit nor soft Brexit, but Theresa's Brexit so she needs support from the population," Mr. Bettel told reporters. 

Still, there was recognition that whatever the election outcome, the months ahead would involve some tense, difficult discussions. 

It is likely that the U.K. "will do everything to divide the 27 countries. That is a trap we should avoid falling into," said Belgian Prime Minister Charles Michel.

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