Brexit Update 2nd February 2018

By February 15, 2018 Brexit Updates

Top 3 developments  

  • Disagreement on rights of EU migrants arriving during transition
  • EU strategy paper warns of limited influence over UK post-Brexit
  • Leaked Brexit impact study to be released

UK Update

Negotiations to resume as disagreements over transition rights emerge

Negotiators are to meet next week to discuss the transition, withdrawal issues, and the island of Ireland. The meetings are the first of the year and mark the resumption of Brexit negotiations, and will include a wrap up by Michel Barnier and David Davis on the Friday, with a further update on the UK’s vision of the future relationship.

Disagreements on the rights of EU citizens who arrive in the UK during the transition period has been identified as an area of contention. The EU wants a continuation of the current regime that exists on residency rights as part of its plan for the UK to have the obligations of EU membership, without representation in its institutions. Theresa May in turn has ruled out such a move, with citizens arriving during the transition period having the additional responsibility of registering their arrival, meaning they are likely to become subject to UK immigration rules after the transition period ends, including on work and residency rights. The UK proposals were previously set out in September 2017, with new disagreements coming after both sides found agreement in the first phase of negotiations on the continuation of rights of citizens who reside in the UK and EU prior to the UK’s exit. The Prime Minister is under pressure to draw a line on a number of key issues due to the increasing frustrations of some within her parliamentary party…

EU strategy paper warns of limited influence over post-Brexit Britain

Concerns over the future of the EU-UK trading relationship have been put on show this week following the publication of an EU strategy paper outlining the UK’s size and proximity as a threat when it becomes a third-state. Regulatory changes, tax breaks, environmental standards and customs agreements have all been identified as ways in which the UK could undercut its EU neighbour, threatening its competitiveness. The paper outlines that the EU can do little to limit some of the changes at the UK’s disposal, however suggests that the EU has several options to consider, including sanctions, to stop it moving too far from the standards set by the EU.

The EU acts as a normative power across the region and uses possible future membership as a motivation for neighbouring states to align with EU social, economic and political standards. If the UK continues down a path to forge a new future detached from these standards then the sheer size of its economy and position within the international system could undermine the EU’s influence in this area. The paper sets out that keeping the UK integrated within the EU’s regimes is in the bloc’s interest, with the UK demanding that ‘special trade access to the EU’s markets’ must therefore be given to limit the ‘special restrictions on the UK’s competitiveness’.

Brexit Speech delayed

Theresa May was due to deliver a speech next week following her return from China, outlining the end state the UK will be aiming for as it enters negotiations with the EU on its future relationship in March. The speech, expected to be as significant as her Lancaster House and Florence speeches, was delayed, many believe, due to differences in Cabinet about what that end state is. Other reasons may include disagreements about the depth of the detail in the speech. Conservative MPs are currently incredibly sensitive to the use of certain words being used following Philip Hammond’s use of ‘moderate’ to describe the future changes in the trade relationship between the UK and the EU. May is likely to be going over any future speech with a fine-tooth comb, ensuring that it is ambitious enough to placate the hard Brexiteers in the party but cautious enough to not weaken the chances of a close relationship with the EU being formed post-Brexit.

Commission rebuffs financial firm proposals

The European Commission has rebuffed an advance from financial firms from the City of London, following a meeting to discuss a future plan to keep financial services operating on a cross-border basis after the UK leaves. The City sought to propose a guarantee that it would maintain regulatory standards in line with the top international standards, maintained through cooperation between UK and EU regulators and financial policymakers. The proposal was backed by David Davis, the Brexit Secretary, and its rejection is a blow to negotiators who will need to draw new conclusions and consider what it has to offer as a response. The rejection also marks a second setback for the City of London, who had originally been hoping for a continuation of ‘passporting rights’ after the UK leaves the EU. A failure to reach a more comprehensive agreement on financial services could see City firms being able to access through equivalence measures, however these have wide ranging limitations and would operate under uncertain circumstance given they can be revoked with little notice.

The Commission has no plans to allow financial services to operate on the same terms as it enjoys within the Single Market and is likely to be a point of contention as negotiations commence in March. Philip Hammond has ruled out a trade in goods without the inclusion of services, the latter of which runs at a UK surplus bringing an additional estimated £40bn into the UK economy. As a British red line, the EU is likely to be considering what restrictions and control it can place onto the City in exchange for limited access.

Government agrees to allow MP’s access to Brexit impact report

Following an opposition motion to publish a leaked report that forecasted that the UK would be worse off under every post-Brexit trade arrangement considered, the Government has given in. It is making the report available for the head of the Brexit Committee, Hilary Benn and will be planning for the report to be seen confidentially by MPs wishing to view it.

The source and contents of the leaked report have taken the interest of Parliament and the UK media. Conservative Brexit Minister Steve Baker apologised after a wrongful account of a conversation he had with Charles Grant, an EU policy expert, was given to Parliament. Baker brought the integrity of the Civil Service into disrepute after declaring that Grant had alluded to Brexit analysis being distorted to increase the chance of the UK staying in the Customs Union. Grant denied the accusation, and an audio recording of the dinner they were at has since shown that Baker had misrepresented the comments made by Grant. Prior to the correction, Downing Street gave Baker their support. He has also been criticised for calling civil service forecasts ‘always wrong’, which is likely to add to concerns over his effectiveness in working with Civil Servants in his role as a minister.

Anti-Hard Brexit Groups form Coalition

The Grassroots Coordinating Group (GCG) representing 500,000 members who oppose a hard Brexit has been launched to coordinate activities under the leadership of Chuka Umunna. The group also includes those that are opposed to Brexit, including many MPs. Coordination is seen as the best way of influencing the Government’s position on areas such as the Single Market, as well as limiting the influence of those in favour of a full withdrawal from the European Union, its institutions and regulations. The power of the group is yet to be realised, however with critical negotiations over the future relationship set to begin in a month, the group stands well placed to comment and drive one side of the debate in what is sure to be a fractious time for all sides.

European Update

Dutch seek clarity on UK fishing plans

The Dutch have called for the UK position on its post-Brexit plans for the fishing industry and waters to be published. Michael Gove, the Environment Secretary, previously announced a white paper would be released before Christmas 2017, but is now more likely to be released early this year. The UK is currently bound by the Common Fisheries Policy, but is set to leave, with plans to make the sector more profitable given the opportunities that exist in expanding quotas. European negotiators have taken note of many countries’ concern over the UK adopting an independent policy on its fishing waters, with any restriction to EU vessels likely to damage the economies of states that rely on its stocks.

EU set to release plans for accession of Balkan states

Following a vision set out last year by European Commission President Juncker to expand the bloc, a paper is set to be released setting out plans to expedite the accession of six Balkan states. Such a move would be the largest expansion of the EU in two decades, with Serbia and Montenegro singled out as the two states most likely to meet requirements for membership, known as chapters, first in 2025.

If actioned, the move would represent a reinvigoration of the enlargement process, with Croatia being the last state to join in 2013. Many EU states are reluctant on further expansion, seeing the need for a consolidation process following the exit of one of its largest members and several crises that have hit the bloc, both social and economic. Little has been said officially of the plans yet, however the support of all states is needed if it is to go ahead. Every member state has a veto over the accession of new states, meaning diplomatic initiatives are likely to be launched by both the Commission and Baltic states wishing to join in the coming weeks.

Macron questions Commission election process

Emmanuel Macron has questioned the process that saw Jean Claude Juncker elected as President of the European Commission, the executive body of the European Union. Unlike previous nominations for President which were handled by member states through the European Council, Jean Claude Juncker was nominated by the European Parliament and was picked from the largest group, the European People’s Party.

Macron’s reluctance is said to be due to his French Party, known commonly by its old name En Marche! not sitting in any European Parliamentary Group, limiting influence over the nomination process. Additional concerns have been raised about the politicising of the Commission role, with Parliament holding a more active role in the likelihood of a ‘one-of-us’ candidate fulfilling the role, and in turn Parliament’s vision for the European Union. It is as yet unclear how much influence Macron will have over any changes in the process given reluctance from Germany and others to alter the precedent now set. The UK stood alone, with some support from Hungary, when it opposed the nomination of Jean Claude Juncker. The European Council is unlikely to want a repeat of such public opposition from within its ranks, meaning a more integrated selection process between the Council and Parliament could be launched to ensure a consensus candidate is found.

Timeline

  • 6th – 9th February – Start of transition negotiations between the UK and EU
  • 23rd February – Informal meeting of EU27 Heads of State/Government
  • 22nd – 23rd March – European Council Summit

 

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