After 2017 breakthrough, 2018 is when Brexit gets tough

After months of spats and false starts, Britain and the European Union ended 2017 by agreeing to have an amicable divorce. In 2018, they have to find a way to live together in the future — and that's when things could get complicated.

With the U.K. due to leave the bloc in just over a year, the fates of Britain and of Prime Minister Theresa May depend on whether the two sides strike a friendly deal, a frosty deal or no deal at all.

"This year is going to be messy," said Maike Bohn of The3Million, a group that successfully lobbied to make the rights of EU citizens in Britain one of the dominant issues in the first round of Brexit talks. "Not everything is resolved and there are some big, crucial gaps."

There was a Brexit breakthrough in December, when the EU declared that "sufficient progress" had been made on citizens' rights, Britain's financial obligations and other divorce terms to start negotiating future relations, including trade.

It's a vast task that means setting rules for everything from trade in automotive parts to intelligence-sharing. Time is tight: A withdrawal treaty and an outline of future relations need to be ready by the fall, so that EU member states and the European Parliament can approve them before Brexit day on March 29, 2019. And the two sides have differing — even contradictory — visions.

Britain wants a frictionless free-trade deal with the EU that allows goods to flow freely and the U.K.'s huge financial services sector to keep doing business across Europe.

The EU insists Britain cannot "cherry pick" benefits of EU membership, such as access to its borderless single market, without any of the responsibilities. EU chief negotiator Michel Barnier said this week that the bloc was willing to strike a deal covering "security, defense and foreign policy, as well as justice and home affairs and include some sectors such as aviation and fisheries" — but not financial services.

Meanwhile, neither side has revealed in detail what kind of post-divorce relationship it wants. The British government has not even agreed on a united position. Some ministers want a "soft Brexit" that would see Britain pay for access to EU programs and markets, and keep the U.K.'s regulations broadly in line with those of the bloc.

Others prefer a "hard Brexit" that would leave Britain free to limit immigration, set its own economic course and strike new trade deals around the world, but would mean tariffs and other trade barriers with the EU.

Simon Usherwood, deputy director of the U.K. in a Changing Europe think-tank, said Britain has still not "had that debate about what we want the country to be like. What's the point of leaving?"

"We didn't really have that (debate) in the referendum, we haven't had it since," he said.

As the Brexit deadline approaches, it will also become harder for politicians to defer discussion of difficult issues, or to paper over differences with ambiguous language.

The 27 other EU nations maintained a disciplined unity in the first phase of negotiations, but Usherwood says differences are likely to grow in 2018.

"I think we are going to see disagreements between member states about what they offer the U.K," he said.

There will have to be compromise — and that alarms hard-line Brexit supporters in Britain, who insist that "no deal is better than a bad deal." They say the U.K. must be prepared to walk away from talks without agreement if the EU demands too much. That would mean falling under World Trade Organization rules, which would bring tariffs for British businesses trading with the bloc.

Many U.K. businesses fear such an outcome. Research commissioned by the mayor of London estimated that a "no deal" Brexit could cost the U.K. half a million jobs and 50 billion pounds ($67 billion) in investment.

Brexit-supporting economist Ruth Lea, economic adviser to the Arbuthnot Banking Group, believes pragmatism will prevail.

"I have no doubt there will be tantrums on the way," she said. "But I suspect at the end of the day there will be some sort of compromise and they will agree on some sort of deal on financial services, because it's mutually beneficial."

If the talks don't collapse during 2018, the British government could. May has been a weakened leader since she gambled and lost her parliamentary majority in a snap election last year. She is surrounded by rivals hungry for her job, including Foreign Secretary Boris Johnson.

But many believe she is likely to stay in office until the messy business of Brexit is done.

"It's her problem, so why would anyone else take it on?" Usherwood said. "It's more convenient to let her carry the can for it."

Opponents of Brexit, meanwhile, still hope the decision can be reversed with a second referendum. Former Prime Minister Tony Blair is among those arguing that the British people "have the right to change our mind."

"When we voted in 2016, we knew we were voting against our present membership of the European Union, but not what the future relationship with Europe would be," Blair wrote last week.

"Once we know the alternative, we should be entitled to think again."

He has an unlikely ally in arch Brexiteer Nigel Farage, former leader of the U.K. Independence Party, who said Thursday it might be worth having a second referendum on EU membership to "kill it off for a generation."

Even so, it remains unlikely. Polls suggest relatively few British voters have changed their minds, and both the Conservatives and main opposition Labour Party oppose a second referendum.

"Brexit is going to happen," said Lea. "Yes, it's been a bit of a shambles. But it'll happen."

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