Brexit Update 16th March 2018

By March 30, 2018Brexit Updates

Top 3 developments

• EU gives ground on UK trade agreements
• Second withdrawal agreement draft published (EU Update)
• Customs Checks at Dover ruled out by Grayling

UK Update

Trading Places: EU to accept UK red line

According to media reports quoting government sources, the EU looks likely to drop its opposition to the UK signing independent trade deals with non-EU states during the transition period. The move paves the way for Liam Fox’s International Trade Department to prepare for formal negotiations after Brexit day. Despite the concession, the UK Government will have its work cut out as it seeks to renegotiate trade deals with up to 70 countries the EU already has agreements with – many of whom may use the opportunity to rebalance trade agreements where trade deficits with the UK exist currently.

The UK will also participate in the World Trade Organisation (WTO) “in its own right” during the transition period under agreed proposals between the UK and EU negotiating teams – with EU27 states continuing to be represented by the European Commission at the top table. Both sides remain cautious however, with the EU stressing that the UK must not work in contradiction to their policies during transition and the UK pawing through the legal text to ensure ambiguities are ironed out.

Customs Checks?! Dover my dead body

Transport Secretary Chris Grayling has stated that the UK will maintain a free-flowing border in Dover and will not impose customs checks, saying “We don’t check lorries now – we’re not going to be checking lorries in Dover in the future”.

The Transport Secretary’s position indicates that the Government is hoping to adopt a system of electronic checks of lorries and goods – similar to the system used at the border between the US and Canada – however the proposals are looked upon with suspicion by the European Commission who have separate rules on governance of the EU’s Schengen area of which France is a member. The intricacies of border governance for the transport of goods is likely to be covered in greater depth within the second phase of negotiations – however it is very unlikely that a complete documented solution is found before the UK’s exit. The principle of this future trade agreement will be taken into the transition period most likely, with an agreement in place for the UK’s full exit from the Single Market and Customs Union.

End of the Road for Davis’s Eurotrip

With the European Council set to meet to agree negotiating guidelines next week, David Davis has now concluded his pre-negotiation diplomatic offensive to gauge the priorities of member states after touring European capitals. The second part of the negotiation, focussing on trade, security and other areas is set to be even more complicated than the first given national priorities and differing views between EU Member States on how much access the EU should give to the UK given it is leaving the Single Market, the Customs Union and the jurisdiction of the ECJ. Davis has described his tour of European capitals as invaluable to the second phase of the talks, whereby Britain can “change tack” in what it offers to curry favour with particular states – denying such a tactic amounted to a “divide and rule” approach to foreign affairs.

Davis is set to meet his opposite number, Michel Barnier, in Brussels on Monday to iron out the final details of the transition agreement before it is taken to the European Council of 27 Member States on Wednesday.

Back to the Future as Brexit Bill runs to 2063

In what might act as a catalyst for Brexiteer sabre rattling over the shape of negotiations, the UK is set to continue financial contributions to the EU until 2063. The Office for Budget Responsibility (OBR) published the projection before the Chancellor’s Spring Statement, with the majority of the estimated £37bn being paid before 2025, with figures in the millions paid thereafter, although at that point the majority of the payments will be towards pension payments for UK staff employed through EU institutions such as MEPs, ECJ judges and those employed through the EU’s civil service.

Power goes to Holyrood?

Despite positive words from all sides, deadlock remains between the UK Government and the devolved administrations over the future of law-making powers transferred back to the UK after withdrawal. The Scottish Government’s own Continuity Bill is currently making its way through the Scottish Parliament amid a push by Holyrood to force the UK Government’s hand to agree a transfer of powers to Scotland in the UK Parliament’s EU Withdrawal Bill. Controversial measures in Scotland’s bill include the bestowing of powers on Holyrood to “keep pace” with EU laws after the UK leaves, including in regulatory areas – something HM Government would prefer to be decided at a national level for an unspecified period. Whatever happens, it remains imperative that a consensus is reached to see off a constitutional crisis.

Matt Hancock app-y

DCMS Secretary (and smartphone app), Matt Hancock MP, has singled out social media regulation as an area of possible post-Brexit divergence with the EU. The Secretary of State pointed to the EU’s e-commerce directive as one that stops the UK from taking a “forward-looking” approach to legislation that supports innovation whilst mitigating better against perceived harms of social media use. He further singled out competition policy in the face of changing technological trends which regularly have zero marginal costs. Any changes in this space are unlikely to be brought forward during this Parliament however.

Rock, paper, scissors, veto

The Gibraltarian government is considering its future response to any attempt by Spain to veto Gibraltar’s inclusion in a future UK-EU trade deal. The consideration comes after the EU set out in its initial Brexit negotiation guidelines that Spain would have the final say on including Gibraltar in any deal. Options include rescinding the rights of Spanish and other EU nationals to live and work in Gibraltar, as well as bringing a legal case against the EU on what it deems an ‘illegal clause’. 800 Spanish citizens currently reside in Gibraltar, with 13,000 EU workers crossing the border from Spain to work every day making the threat a real consideration for the European Commission who is seeking protections for all EU nationals over the transition period and beyond.

Russia blames Brexit as UK responds to nerve agent attack

Following deployment of the Novichok nerve agent against a former Russian double agent and his daughter, NATO allies, the UK, USA, France and Germany have sent a joint response condemning Russia’s silence in explaining the incident. Russian Foreign Minister Sergei Lavrov has condemned the UK’s response as ‘boorish’ and ‘prompted by Brexit’. The solidarity shown by the UK’s NATO allies indicates the continued willingness of EU states to work with the UK on common foreign affairs priorities.

Labour leader Jeremy Corbyn aired caution in condemning the Russian state over the incident, citing previous intelligence mistakes over WMDs in Iraq, in contrast to the many voices on his own benches who agreed with the Government’s response. The Government itself left open the possibility that Russia had lost control of its supplies of the nerve agent, however demanded responses and condemnation of Russia in either scenario given the origin of the nerve-agent.

European Update

No Track Changes: Second Withdrawal Draft published

The European Commission has published its second draft of the Withdrawal Agreement between the UK and EU. The new agreement addresses a number of UK concerns surrounding the ambiguity of wording, as well as the ‘unacceptable’ clause surrounding the status of Northern Ireland in the case of no agreement over avoiding a hard border on the island of Ireland. New measures introduced into the text have introduced a new raft of requests for clarification however with no explanatory notes included over the wording or reasoning behind the measures.

A new ‘good faith’ clause has been added that binds parties to ‘assist each other in carrying out tasks which flow from this agreement’ – signalling that the European Commission is likely to work more closely with the UK to find a solution to the border issue. Other additions include the right of EU states to refuse to surrender their citizens to the UK based on the European Arrest Warrant, the independence of the UK to opt-out of a joint EU foreign policy measure, consultation with the UK on ‘fishing opportunities related to the UK’ and a dispute settlement measure if ECJ rulings during the transition period aren’t enforced.

The European Council is expected to sign off the agreement as well as the transition agreement next week, before publishing its negotiating guidelines for the European Commission to take forward to discussions with the UK over the future relationship. UK PM, Theresa May, is to focus on a “balanced, ambitious and wide-ranging” trade deal, whilst the EU is seeking a comprehensive Free Trade Agreement (FTA), the highest level of EU agreement with a third state beyond that of non-EU members who are in the Single Market or Customs Union.

Commission President Juncker has said the UK will ‘regret’ its decision to leave the bloc, whilst British MEPs have called on the European Parliament to be more positive about the future relationship showing the added complications of negotiations on both sides of the Channel. The final agreement will need the consent of both the European and UK Parliaments – a strong consideration for both UK and EU as they seek a strong binding agreement.

• 22nd – 23rd March – European Council Summit