Brexit Views 27 March 2018

This Thursday will mark the halfway point of Brexit. A year since the UK triggered Article 50 and a year until the UK will formally leave the EU. While negotiations may have gotten off to a slow start, the last month has seen a ramping up of activity with numerous speeches, draft texts and even agreement on the Transition Period.
 
The focus last week was on the EU Council Summit on 22-23 March where the leaders of the EU27 agreed on the terms of the transition period and also gave the greenlight for talks to begin on the negotiation of the future trade relationship.
With regards to Ireland, the Taoiseach came under some pressure at home for agreeing to the opening of talks on the future relationship while the issue of the border on the island of Ireland remains unresolved. While politically this may have been a brave position to take, from a business perspective this is absolutely the right call to make. It was not done on good faith alone with clear written commitments from the UK that the “Option C” for Northern Ireland (currently dealt with in the Ireland Protocol of the EU’s draft Withdrawal Agreement) will be given legal underpinning in the text of the final Withdrawal Agreement. This coupled with the EU’s stance that “nothing is agreed until everything is agreed” should provide enough assurance that the Ireland issue will not be forgotten or abandoned in the next phase. It is also worth remembering that Irish issues are still being kept in a separate strand of the negotiations ensuring that the concerns specific to the island of Ireland are not lost or forgotten among the general melee of negotiations.
 
The Chamber’s position remains that the ideal model to address the border issues is through “Option A” – the future framework for UK/EU relations (preferably through a formal customs arrangement built on tariff and regulatory alignment as outlined in the Big Principles). This option can only be explored further with the relevant go ahead from the EU Council that was secured last Friday.
 
From reading the EU’s guidelines for the future relationship, what is proposed is unlikely to provide the solution. These guidelines are proposed on the understanding that the UK will leave both the Single Market and Customs Union. This will, it states, “inevitably lead to frictions in trade”. What is being proposed is a “balanced, ambitious and wide-ranging free trade agreement (FTA) insofar as there are sufficient guarantees for a level playing field”.
 
The guidelines are clear that cherry picking will not be permitted through UK participation in the Single Market on a sector by sector approach. Key points from the guidelines include:
 
  • Maintenance of zero tariffs on trade of goods in all sectors with no quotas applied.
  • Other areas covered include maintenance of existing reciprocal access to fishing waters; customs cooperation; measures on technical trade barriers and sanitary and phytosanitary standards; and protection of intellectual property rights, including geographical indications.
  • On services, it is proposed to allow market access to provide services under host state rules including right of establishment for providers.
  • The guidelines recommend including provisions on movement of people including recognition of professional qualifications.
  • The Council also proposes that the future deal includes provisions on air transport and continued access for the UK to EU programmes (e.g. education, research & innovation and culture) where this will be of mutual benefit to both parties.
  • Data rules should be covered in the new FTA. Personal data protection should be governed by Union rules.
  • There are proposals for future cooperation in law enforcement, security and defence post-Brexit.
  • Measures for designing a governance structure to have oversight of the future relationship.
 
What is worth holding onto is the EU’s declaration that should the UK position evolve, “the Union will be prepared to reconsider its offer in accordance with the principles stated in the guidelines of 29 April and of 15 December 2017 as well as in the present guidelines”. This is important as it clearly indicates that what is being proposed is not the final offer. There is still time and space for the UK to shift its position to one that will help address border issues and deliver the comprehensive trade relationship that the government says it wants.
 
The idea of a formal customs arrangement has been given greater prominence by the UK Government over the past week. On Sunday’s Andrew Marr show, Brexit Secretary David Davis mentioned that such an arrangement could help address the Northern Ireland border issues. Likewise, in her letter to businesses last Friday the Prime Minister also made similar points in relation the UK-EU trade more generally. However, both statements are made in reference to the UK’s paper on customs that was published last summer and has already been deemed unworkable.
 
The final push must now be made to make the UK Government realise that its pursuit of independent trade deals is the final stumbling block to achieving a realistic customs arrangement that can indeed deliver the frictionless trade that the UK seeks. Should this breakthrough be achieved, we might see an even better proposal from the EU on the table which could indeed provide the “Option A” solution for Northern Ireland.