Brexit Update 31st January 2020

By February 14, 2020 Brexit Updates

Top 3 developments

  • The UK will officially leave the European Union tonight at 11pm, although it will remain in the Customs Union and Single Market until December 2020.
  • The UK’s relationship with the US hit a roadblock this week after the Government gave the green light to Huawei’s involvement in the UK’s 5G network.
  • Brussels demanded on Tuesday that EU judges should have the power to rule on any post-Brexit agreement with the UK.

UK Update

Goodbye or Good Riddance?

The UK will leave the European Union at 11pm tonight. It took nearly four years, three Prime Ministers two General Elections and one Referendum (but nearly two!) to get to this point, but after all the infighting and arguing and negotiating and planning, it has finally happened. This will fill people with a range of emotions; joy, despair, relief, reluctance, resentment or acceptance, but when the UK wakes up tomorrow, for the first time since 1972 it will not wake up as part of the EU.

For now, not much will change. The UK enters the transition period which runs until the 31st December 2020. This is a period when the UK is not in the political institutions of the EU, but will remain in the Single Market and Customs Union while it negotiates a trade deal with the EU, in order to prevent the ‘cliff-edge’ Brexit that some think would cause chaos at airports, ports and motorways. Apart from the UK MEPs who no longer have a job, not much will change in the daily lives of people and businesses during this transition period. Given Nigel Farage’s final speech in the European Parliament earlier this week, it seems unlikely that anyone has ever been so pleased to lose their job.

Boris Johnson remained uncharacteristically under the radar on the day which he had been dreaming of for the past three and a half years. The man who finally got Brexit done – despite a lot of scepticism about whether he was up to the challenge – did not use the opportunity to bask in the limelight or to gloat at the “naysayers and doom-mongers”. Although he hailed today as a “new act” for the United Kingdom, he only used today to call for a Canada-style trade deal, hardly the topic to get the nation excited about a new dawn as an independent nation. In a sign of how things do carry on regardless of the European question, the Government confirmed today that the first cases of Coronavirus had hit the UK. This was symbolic of the fact that despite the UK Government finally taking the UK out of the EU, life goes on, and being victorious in this objective only means that they have one less thing – and arguably far more important things – to worry about.

Maybe this will be the end of the intense public interest in Brexit, and that now we are out, people are no longer that interested in the finer points of a free trade deal. But equally, now people have invested so much time, energy and emotion into the topic, we may be at the point of no return; where the general public have never been so knowledgeable about Parliamentary procedure, the details of a customs union and the impact of regulatory divergence on British exports. This may bring benefits in years to come, where the general public are engaged in the country’s politics and economy like never before, but for the next 11 months it could cause a lot of headaches for the Government, where our trade negotiations will play out not just in private meetings between the UK and EU, but also in the front pages of the tabloids and across dining room tables across the country. So, as we leave the EU today, there is only one thing that is certain: Although Brexit got done, Brexit is not yet over.

It’s My Way or Huawei

Now that Brexit is ‘getting done’, the UK Government is focusing its efforts on forming strengthened partnerships with other countries, having been unable to make bilateral trade deals as a member of the European Union. One of the main targets of focus for a trade deal is, understandably, the United States. Recent figures from the US Census Bureau have stated that in 2018 UK exports to New York, California, Texas and Georgia were worth more than $5bn per state. Recommendations are now being made to the Government for a state by state trade deal, as well as a bilateral trade deal with America, to ensure a significant increase in revenue for the UK.

Interest has already been registered from the US, with Anne Pardalos, Director of the International Trade and Investment Office at the Missouri Department of Economic Development, announcing that her state would be willing to boost imports of British agricultural technologies and advanced manufacturing products, whilst also adding pressure from below on federal officials to complete the US-UK deal. This would be a noteworthy step for the United Kingdom, in its aim to secure a positive trade agreement with the US, by securing state support to exert pressure on the federal Government and potentially cause Trump to buckle on some of his red line policies.

Whilst it is extremely positive that American states are showing enthusiasm towards a deal with the UK, especially one that would help UK businesses grow and become recognised internationally, the US Government is proving more difficult to come to an agreement, placing strict conditions. This can be seen with the threat from the US over the UK’s acceptance of Huawei’s involvement in the development of 5G and a request to include “Section 230” provisions, which offer legal protections for tech giants and can be seen as an attempt to tie UK minister’s hands as they plan to introduce stricter regulations. These provisions have been included in trade agreements with Canada, Mexico and Japan and can been viewed as a way to export an American vision for internet regulation.

It is currently unclear whether the UK Government will stand its ground in discussions with the US, or whether they will give in to the current US desire to put legal protections for tech giants as part of the trade bill. This would go against the UK’s current agenda to target online harms and crack down on the regulation of big tech. It is notable that Johnson has moved forward with allowing Huawei to be involved in the 5G operation in the UK, considering the opposition from the US. This may suggest that the UK Government will take a tougher stance than expected on the trade negotiations. Additionally, if the UK Government follows recommendations to conduct state by state trade deals, this could act as a safety net if the negotiations for the UK-US trade deal do not come to a resolution quickly.

No Mergin’ for Sturgeon

The First Minister for Scotland, Nicola Sturgeon, has already outlined the SNP’s opposition to continuing with Brexit and now has stated their opposition to the points-based immigration system that has been proposed by the Government. Sturgeon has requested a separate Scottish visa system, with no minimum salary threshold, to boost immigration after Brexit. She has insisted that a new visa was required to support Scotland now that there is going to be an end to the free movement of people.

However, the Home Office and the Migration Advisory Committee (MAC) have rejected this request, outlining that the Government has created an immigration system that would benefit the whole of the United Kingdom, including Scotland. The Migration Advisory Committee stated that Scottish immigration needs are not solely different to England, most notably the North, to warrant a separate immigration system.

Sturgeon’s document has suggested that the Scottish Government would be willing to negotiate with the Home Office on a quota for the number of Scottish visas that could be issued. This suggests that Sturgeon will not relent on her campaign to bring in more migrants to boost the economy. With opposition from both MAC and Home Office, and a strong Conservative majority, it is unlikely that Sturgeon will make any headway in gaining a separate immigration system for Scotland.

EU Update

Once more into the breach (of EU rules)

Brussels demanded on Tuesday that EU judges should have the power to rule on any post-Brexit agreement with the UK. A leaked document revealed that the EU will insist that the European Court of Justice (ECJ) be able to enforce the terms of a trade, fishing and security deal. Their argument is that the ECJ should have a role in ruling whether the UK breaches any EU rules that it signs up to. This document shows that the EU maintains its belief that the UK’s trade deal with the EU will be one based on regulatory alignment, and this paper shows that they believe that only the ECJ can rule upon EU rules.

European officials have admitted that such an approach is unprecedented, but this is an indicator that the UK-EU trade deal will be bespoke – and not a copy and paste job from other trade deals – due to the unprecedented geographic proximity and economic interconnectedness between the two sides. However, they have thought to have sought inspiration from the Withdrawal Agreement, which sees the ECJ having a crucial role in enforcing the terms of the agreement.

The UK has rejected this role for the ECJ, saying that the ECJ were by principle not a “neutral arbiter”.  Such disagreements are inevitably a sign of things to come about how polarising these trade negotiations will become. Brexiteers are already urging the UK to walk away from the negotiations, convinced that the EU is a bad actor that cannot be trusted and that pastures new are better sought with the USA. Equally, Remainers see regulatory alignment as the last gasp attempt to maintain a close relationship with the EU. It is unlikely that these two groups will want to compromise in the months ahead, where difficult decisions will need to be made about what sort of relationship the UK wants with the EU.

It is unsurprising that the UK has pushed the case for divergence more aggressively over the past few days following this announcement, because it is hardly a compelling argument to claim that Brexit will allow the UK to take back control of its laws, when the ECJ would have the final say on whether the UK breached any rules that come under the EU’s remit. Boris Johnson has a difficult decision to make about whether he wants a full or comprehensive trade deal or an arrangement which satisfies the commitments made during the Referendum in 2016.

Take Care, Barnier

The EU’s Chief Negotiator Michel Barnier visited Northern Ireland this week and made headlines when he said that the UK’s choices about a future trade deal make frictionless trade “impossible.” Barnier was referring to the UK Government’s insistence that there will be no alignment to EU rules and regulations following the UK’s departure from the transition period after December 2020. Barnier said that checks on goods entering Northern Ireland from Great Britain would be an “indispensable” consequence of such a decision.

The EU’s Single Market maintains the free movement of goods, services, people and capital – an arrangement that the UK plans to leave after the transition period. But if the UK aligned its rules and regulations to EU standards, then this could permit frictionless trade on the island of Ireland. As the UK has rejected this possibility, Barnier is correct in his claim that checks are inevitable.

However, what is not reported as extensively is that there is more wriggle room here than perceived. An open border is commonly seen as a vital part of the Good Friday Agreement, which was the peace agreement that effectively ended the Troubles. While an open border has been an integral part of maintaining the peace that we have enjoyed over the past 20 years, it is important to clarify that there is very little in the legal text which ensures that there must be an open border. It is very much a part of the spirit of the Agreement rather than the letter.

Upon inspection of the Agreement, the text only makes provisions for the demilitarisation of the border and the removal of security installations, and does not touch upon the economic and regulatory aspects of an open border. This means that while there is a practical benefit to ensuring an open border to maintain peace, there is no actual legal requirement within the Good Friday Agreement to do so. Government lawyers and trade negotiators will know this, and expect them to use the now reformed Northern Irish Executive and Parliament to make provisions to ensure that checks on the border do not face a legal or legislative threat.

The EU does not want the UK to diverge, and they are tough, proven negotiators that will use every asset they have to get their way in the negotiations. While frictionless trade may be economically desirable and politically necessary, it is important to clarify that the EU cannot use the legal text of the Good Friday Agreement as a threat to force the UK into alignment.

Upcoming Key Dates

  • 31st January: Departure date from the European Union.
  • March: Future relationship talks begin.
  • 4th April: Result of the Labour Leadership Contest.
  • 31st December: End of the transition period.

 

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