Brexit Update 1st June 2018

By June 14, 2018 Brexit Updates

Top 3 developments   

  • New Customs Arrangement Considered
  • Bank of England confirms Brexit contingencies
  • Farmers seek assurance over post-Brexit settlement

UK Update

MAX-FAC 2

New options are being considered for a post-Brexit settlement for Northern Ireland with a 10-mile wide buffer zone being touted as a possible solution to cross-border trade issues, similar to the dual regulatory regime in Lichtenstein. The ‘special economic zone’ would be for local traders such as dairy farmers who make up around 90% of cross-border trade, who would share the same trade rules as the EU, giving it a dual UK/EU status, with a need to comply with both trade regimes. If it sounds complicated, it’s because it is, with the plans unlikely to gain favour with either the DUP or Brexiteers who fear Northern Ireland being treated differently to the rest of the UK, a DUP red-line, whilst having to comply with EU regulatory standards and possibly aligned tariffs. This second iteration of maximum facilitation forms part of wider discussions to solve the current impasse and is an evolution of the two original options touted by cabinet insiders. May will need to take the Cabinet, Parliament, the EU and Northern Ireland with her with any plan finally agreed for the negotiation to be deemed a success – no mean feat – however the current proposals look likely to gain more traction as the Government looks closer to agreeing its favoured position.

Bank of England fears grow at Treasury action

The Bank of England is reported by the FT as being fearful that HM Treasury is about ‘to give it all away’ in negotiations, meaning restrictions for UK financial services in exchange for protections for the UK’s wider services sector. The fears come amid increasing pressure on Philip Hammond to protect manufacturers who rely on current customs arrangements, including aligned regulations, to provide streamlined supply chains. The UK has been arguing for months for the EU to sign up to a mutual recognition agreement which would largely protect financial services, but with red lines over the single market, a reluctance to give into UK demands, and pressure from potential benefactor countries of the UK’s exit, the Commission has dug its heels in on its rejection of the proposal.

Man the Border

Police in Northern Ireland have requested to recruit up to 400 new police officers in preparation for operations along the border after Brexit. The move follows similar plans in the Republic of Ireland, where the Garda (Irish Police) have called for additional Armed Support Units (ASUs) along the border with access to automatic weapons at border stations in the event of escalating tensions. Whilst no plan has yet been agreed on the future of the border after Brexit, both sides are determined to avoid a hard border, with less intrusive means of checks, such as cameras for identifying number plates also likely to be ruled out given hostility to such moves. In the event customs officials are introduced within the border region, it will be the responsibility of police on both sides to protect officials and ensure civil unrest does not ensue.

Sowing the seeds of unity

Over 100 organisations across the UK farming industry have come together to sign a manifesto urging the Government to publish a white paper as a matter of priority setting out how it will ensure UK businesses will still have access to EU agricultural labour post-Brexit. Other demands are that the UK maintains frictionless trade with the EU, going one step further than the Government’s plan for as “frictionless as possible” trade, whilst the manifesto also seeks an agricultural policy that promotes food production, includes an “efficient and proportionate” regulatory system and maintains existing high standards. National Farmers Union president Minette Batters said a Brexit that failed to champion UK food producers “will be bad for the country’s landscape, the economy and, critically, our society”. The Government’s Agriculture White Paper is expected later this year alongside other key Brexit legislation.

Hard, Soft, Red White and Blue, Sensible

Three former Cabinet ministers have met with the Prime Minister to call for a ‘sensible’ Brexit, saying that the party was largely in favour of such an outcome. The three former remain-supporting MPs form part of a wider movement that remains resistant to many of the proposals given by eurosceptics within the party, including those involved in the European Research group, headed by Jacob Rees-Mogg. Rees-Mogg has said he has “doubts” about Theresa May’s appetite for leaving the EU, with a series of votes when Parliament returns likely to have a large impact on her ability to remain in post. If May loses a key vote on customs, it is likely to bring about questions on her future, given embedded policy positions, leaving little time for politicians on all sides to react. The intervention of Amber Rudd, Justine Greening and Damian Green therefore piles even more pressure on the PM as a sign of growing divisions.

EU UPDATE

EU regret at America trade action

Following last ditch attempts by EU trade negotiators to gain permanent opt-outs from the US’s new raised tariffs on steel and aluminium imports, at 25% and 10% respectively, the EU will now take the dispute to the WTO and impose counter-measures on US goods. The unilateral action by the US has been criticised by other states, with Donald Trump seeing the moves as fulfilment of his pledge to focus on what he sees as poorly balanced trade deals with China and other international partners. Donald Tusk and Jean Claude Juncker both expressed their regret at the US’s unilateral actions, countering that the EU would act accordingly, ushering in a new phase in EU-US diplomatic relations.

EU Academics up

New Higher Education Statistics Agency data has shown an increase in the number of EU academics at UK universities in the 2016-17 academic year, where uncertainty over the future of EU citizens at the time was expected to lead to a decline. EU citizen rights of nationals living in the UK for a period of 5 years or more by the end of 2020 at least, will be assured, adding greater certainty in the new academic year. The results show the largest increase at the University of Cambridge (16.3%), City University (12.8%) and Queen Mary (12.7%).

Never gonna give you up, never gonna let you go

Just when you thought the UK was on its way out, the EU has pulled it back in. Following a formal request by EU member states for the UK to be involved in discussions over the future EU budget, the UK has accepted, to the disappointment of both the European Commission and Eurosceptics in the UK. The 2021-2027 £1 trillion budget is currently under negotiation and with the UK seeking to gain access to several programmes after it leaves and several EU member states unwilling to fill the void left by the UK’s departure, the move can be seen as a dual attempt to gain from each side. The Commission is said to be furious at the plan devised by the EU Council, which represents member states, believing that the UK will seek to change the rules to allow it to join research, science and other programmes after it leaves. Eurosceptics on the other hand see it as a chance for the 27-member states to gain considerable contributions from the UK as it walks into talks outflanked and with pressure running high to fill the budget gap.

Italian Drama Pours into Commission

The European Commission came under fire this week following comments from Commissioner Gunther Oettinger and Commission President Jean Claude Junker over the Italian political crisis as parties seek to form a Government. Juncker was quoted by the Guardian at a closed event saying that Italians should do “more work” with “less corruption” to take care of the poorer regions of Italy. Whilst Oettinger suggested that financial markets would show Italians how to vote. Both comments are deemed unwarranted and unwanted by many Italians, further fuelling eurosceptism at a critical time for the EU, as it grapples with gains by populist parties across the Europe, trade tariffs from the US and Brexit. Italy’s new coalition government is likely to bring a new dynamic to the European Council, whilst Juncker’s departure early next year is sure to be an interesting affair as member states and the European Parliament jostle to elect a new President to lead a very different EU.