Brexit Update 21st February 2020

By March 5, 2020 Brexit Updates

A Frosty Start

Despite negotiations not having started, even the build up has proven feisty and demonstrates the difficult period that is likely to lie ahead. Both sides are eager to frame the discussions in their favour and have the upper hand heading into the negotiations. Over the past couple of weeks, Boris Johnson, Michael Gove and chief Brexit negotiator David Frost have clearly stated that the UK is seeking a Canada style trade agreement with the EU. In a speech on Monday, Frost made it explicitly clear that the UK was heading into the negotiations with determination and that under no circumstance would he be submissive during the negotiations. In his speech he claimed “independence does not mean a limited degree of freedom in return for accepting some of the norms of the central power. It means independence. Just that.”

This is a stark contrast to the position set out by Michel Barnier who has stated that the Brexit deal is a ‘different ball game’ to the agreement with Canada. Barnier has so far been persistent that the trade deal must include extra provisions to guarantee effective enforcement powers, with the availability of sanctions, and fair competition standards. If this was to be agreed, Britain would be committed to the EU’s state aid and competition rules which aim to promote fair competition and avoid the possibility of the UK supporting firms by giving them a competitive advantage. However, the story from Brussels isn’t unanimous. In contradiction to Barnier’s comments, Phil Hogan, the EU’s trade commissioner, has suggested that a Canadian style deal does have ‘legally binding and enforceable’ rules on fair competition. This comment will give the British negotiating team an extra degree of confidence as the tough negotiations begin next month.

There will be many sticking points ahead as the two parties attempt to conjure up a deal ahead of the new year deadline. Potential zones of conflict will surround topics including, but not limited to environmental protections, labour laws, fisheries, criminal justice co-operation, the role of the European Court of Justice and data protection.

Away from the EU, the Prime Minister continues to push for free trade agreements around the world. An prominent issue in this area remains that of Huawei and its potential impact on trade talks with the US. On Wednesday, Mick Mulvaney, Trump’s acting chief of staff, met with Downing Street’s senior advisors Dominic Cummings and Sir Edward Lister to discuss Huawei and future trade deals. There have been contradicting summaries provided of the meeting, however, the likelihood of Trump using Huawei as a leveraging tool in future trade deals seems highly likely given his traditionally tough stance and rigidity in negotiations.

Going Dutch

Despite the Government’s commitment to lessen the UK’s ties with Europe, businesses themselves are hoping to stay close. It has been reported that 140 companies have relocated or moved part of their business to the Netherlands since the UK decided to leave the UK after the referendum in 2016. According to the Netherlands Foreign Investment Agency 78 of those 140 companies had made a move last year. The reason for such extensive moves can be attributed to companies wanting to protect the European side of the business amid uncertainty since the 2016 referendum to the beginning of this year, but also from the uncertainty of a trade deal. Whilst negotiations have not begun, reports suggest that this will be an extensive negotiation process to have an agreement in place by December 2020, with both sides already stating several opposing red lines.

Alongside the statistics of companies that have already relocated, the Netherlands Foreign Investment Agency has stated that it is in conversation with 425 other businesses that are waiting for clarity on Brexit before committing to such a move. This is extremely positive for the Netherlands as the significant number of companies moving is expected to deliver 4,200 jobs to the country and €375 million in investment. However, the exodus of companies may not be as positive for the UK’s economy. It remains to be seen how many of the 425 companies relocate or whether the trade deal negotiations can offer businesses the certainty that they need to remain in the UK.

Upcoming Key Dates

  • March: Future relationship talks begin.
  • 4th April: Result of the Labour Leadership Contest.
  • 31st December: End of the transition period.

 

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