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Home / Analytics / Forex analysis & forecasts / Forex Fundamental analysis / The negotiations with the EU may drag out. Fundamental analysis for 01.07.2016
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The negotiations with the EU may drag out. Fundamental analysis for 01.07.2016

The Outers always said that new trade agreements with the European Union would be made as soon as possible, because the Europeans themselves were interested in them. However, over the last several days, it’s less and less obvious. Brussels rejected preliminary negotiations until London activates the Article 50 of the Treaty of Lisbon. Later, European leaders, one by one, sent a clear message that London wouldn’t keep the access to the single market if it refused to follow the EU’s migration policy.

It also turned out that there was no one in Britain, who could negotiate and make trade agreements. According to different estimates, there are about five hundred professional negotiators in Brussels, almost the same as in Canada. By the way, negotiations between the European Union and Canada relating to a new trade agreement took almost seven years. However, in the Britain itself, there are about 40 specialists left, who can conduct trade negotiations, the rest of them moved to Brussels long time ago. Taking into account that London will have to negotiate not only with the EU, but with other countries as well, it is likely to require some enormous amount of negotiators – and, in the first place, London must find and train them.

The most essential question is how much time the negotiations relating to a new trade agreement between London and The European Union are going to take? According to estimations of Cecilia Malmström, the European Commissioner for Trade, the worst-case scenario may take up to 10 years. In the Outers’ camp, the answer was – “it’s your loss”, they have already called it nonsense and balderdash. However, when the Outers were demonizing the European bureaucracy during the referendum campaign, they ignored one thing – it is this very European bureaucracy, which they would have to negotiate with about the country’s exiting. And the fact that this European bureaucracy is very unlikely to be interested in boosting the process of negotiations, even compared with the Canadian case.

The negotiators will have two years, and the British politicians are already saying that it is necessary to hold the second referendum, where they offer to listen to the Brits’ opinion about conditions of the agreement with the European Union. Thus, if the Article 50 of the Treaty of Lisbon is really activated, the negotiations will be extended again and again, and it will be a significant bargaining tool for the EU – even without extensions the negotiations will continue, but in this case London will find itself beyond the single market border. Under such conditions, the Britain can’t hope for favorable conditions, and if the Westminster decides to start the brexit mechanism, the pressure on the Pound will be very significant.
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