EU, UK Debate Next Steps as Key October Summit Approaches

26 July 2018

Last week, European ministers convened in an EU27 format in Brussels to discuss for the first time the UK’s “white paper” proposal for a post-Brexit partnership. Chief Brexit negotiator Michel Barnier later presented the meeting’s conclusions, with safeguarding the EU’s negotiating principles and protecting the bloc’s economic interests at the core.

Barnier separately met with Dominic Raab, the newly appointed UK Secretary of State for Exiting the EU following David Davis’s resignation, to take stock of progress on the withdrawal agreement and review the white paper. (See Bridges Weekly, 12 July 2018

The two sides are eyeing an agreement by October 2018, in order to steer away from a “cliff-edge” Brexit in which no deal is reached before the UK’s withdrawal in March 2019. The European Commission says that if this “no deal” scenario occurs, then the two sides would not employ the planned “transition period” and that the bloc’s laws would no longer apply to London. 

EU response to Chequers

The UK’s “Chequers” white paper outlines a proposal for the country’s departure from the EU’s single market and the customs union, laying out a new economic cooperation framework that proponents say is aimed at minimising disruption to trade between Britain and the EU. 

In a statement released following the EU27 ministerial meeting, Barnier noted that there are “several elements [of the white paper] that open the way for a constructive discussion,” adding his support for the proposal for a free trade agreement that would be at the “core of our future economic relationship.” 

However, he also raised questions about whether the white paper is fully in line with some of the principles underpinning the EU’s negotiating mandate. 

“First of all, are the proposals in the White Paper compatible with the principles that the 27 Heads of State and Government have defined since the beginning of this negotiation – principles which the foreign ministers recalled today? They are: the integrity of the Single Market and Customs Union and our Common Commercial Policy; the indivisibility of the four freedoms; the autonomy of the European Union's decision-making,” he said. 

The UK’s blueprint would see an end to the free cross-border movement of people between the UK and the European bloc, and EU negotiators have long held that access to the bloc’s single market is contingent on respecting its four freedoms of goods, capital, services, and labour. 

The proposals were also evaluated from the perspective of EU economic interests, noting that EU firms could face “unfair competition” where services are not included in the “common rulebook” that would apply to goods, leaving the UK in a position to “diverge.” 

Furthermore, the statement takes issue with the practicality of implementing select proposals, stating “Brexit cannot, and will not, be a justification for creating additional bureaucracy.” 

In this respect, Barnier highlighted the proposed combined customs territory, through which either UK or EU tariffs would be applied to goods entering the UK depending on whether they were destined for the UK or European markets, respectively. He noted that it could have the potential of creating new risks of fraud as well as new financial and administrative burdens for businesses and customs agencies. 

In addition, the statement questioned the legal viability for the bloc to apply customs rules to a non-member outside of its governance structures. 

“This White Paper is the fruit of an intensive – and necessary – debate in the United Kingdom,” read the statement, suggesting that much work remains to be done. “Everybody can see that this debate is not yet over.”

Independent trade policy

The Chequers white paper further aims to set the stage for an “independent trade policy,” through which the UK would be able to set its own trade policy course and strike new international trade agreements with non-EU partners during the transition period. (See Bridges Weekly, 19 July 2018)   

Last week, a Trade Bill also passed in the UK Parliament’s lower chamber, aimed at guiding the transition of existing EU trade agreements. 

The Bill also proposes to establish an independent UK Trade Remedies Authority, which would permit the UK a measure of autonomy in applying its own trade remedy measures in a context of mounting global trade tensions. 

“With rising global concern over protectionism and unfair trading practices, a key component of the Bill is ensuring the UK is able to defend its industries,” said Liam Fox, one of the bill’s co-sponsors in a 20 July statement, adding that membership in the European bloc means that UK industry interests are currently balanced against other member state needs.

The Bill also includes provisions for the UK’s accession to the plurilateral WTO Government Procurement Agreement (GPA) in order to secure continued liberalised access to foreign government contracts. The UK presently benefits from the agreement through its EU membership. The legislation is being processed in the House of Lords and will undergo a second reading in September. 

In Geneva, negotiations are ongoing on how to extricate UK commitments from those of the wider European Union, given that the EU bloc notifies its commitments collectively rather than by member state. The UK has also formally requested to join the GPA post-Brexit and recently submitted a market access offer on the same terms as those enjoyed by the European Union, which GPA parties are currently considering. 

Talks are also ongoing in Geneva to allocate what proportion of EU tariff-rate quotas, previously shared by the bloc, will belong to the UK post-Brexit, as well as resolving its goods and services schedules. 

Last week, the UK notified its draft schedule for goods commitments to the WTO, which officials say replicates the country’s current schedule under EU membership. The schedule has since been circulated to WTO members for review and certification, kicking off a three-month period for discussion and clarification. 

The draft schedule is being notified under the “1980 Procedures for the modification and rectification of Schedules.” Should no members disagree with the changes over the coming review period, the schedule will be treated as final, according to a WTO summary of the process. 

“The schedule provides the foundation for future UK independent trade policy [and] FTAs,” said Julian Braithwaite, UK Ambassador to the WTO, on social media site Twitter on 19 July.

Next steps

The EU and UK aim to finalise a deal before the European Council Summit scheduled for October 2018 in order to provide enough time for ratification in the relevant legislatures.

The deal would provide for a 21-month transition period, as previously announced, during which time the UK would still be subject to EU laws, though without any stake in decision-making. UK officials stress, however, that they are laying contingency plans in place should the talks fail to produce an agreed outcome.

“We’re going to be increasing the preparations for no deal, but we’re focused above all on the negotiations to get the best deal,” said Raab following his meeting with Barnier in Brussels, noting that 80 percent of the withdrawal agreement has already been agreed. Barnier has similarly indicated that the bulk of the withdrawal issues have been resolved.

The two sides may continue talks through the summer, including through usual break in August.

“We’ve only got 12 weeks really left to nail down the details of the agreement, so I set out our proposals, and offered to meet with Michel Barnier throughout the summer to intensify negotiations, to get some energy, get some drive and get some heat on them to make sure we can conclude this agreement in good time,” Raab said, according to comments reported by the Guardian.

“I’m sure in good faith, if that energy and that ambition is reciprocated, as I’m confident it will be, we will get there,” he added.

ICTSD reporting; “Barnier dismisses Theresa May's Brexit white paper demands,” THE GUARDIAN, 20 July 2018; “Brexit: Countries begin difficult talks on dividing up Britain’s EU trade quotas,” THE INDEPENDENT, 26 June 2018; “Barnier welcomes Raab by stressing urgency of Irish border deadline,” THE GUARDIAN, 19 July 2018; “Michel Barnier questions Theresa May's Brexit White Paper,” BBC, 20 July 2018; “Liam Fox MP: The Trade Bill will provide continuity and security to UK business beyond Brexit,” POLITICS HOME, 20 July 2018.

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