Insights

/ Insights / Grayling Brexit Bulletin - 13 July 2018

Free thinking from Grayling people

Grayling Brexit Bulletin - 13 July 2018

13th July 2018


The BREXIT Bulletin: The Grayling view on the White Paper - and how the EU may react
 

We must start this week’s edition of the Brexit Bulletin with an apology for failing to publish an edition last week. As you may have expected the Grayling Brexit Unit has been rather busy in the past fortnight, and with Brexit a moving target over this period, it was felt that our analysis would be more insightful with the dust having semi-settled.

By now you will know that we have a penchant for concrete written statements, and now that we finally have one from the UK Government on the future relationship we feel obliged to start with the White Paper.

Of course the White Paper translates the Cabinet-level political agreement hammered out at Chequers on 6 July into more technical detail.

The headline is the Government’s decision to ask the EU for a ‘free trade area in goods’ to be underpinned by a ‘common rule book’ covering the regulations necessary to provide for frictionless trade at the EU/UK border.

On services, which you may be tired of hearing by now covers 80% of the UK economy, the Government indicates that it will not be seeking similar access. Instead, the UK will pursue regulatory flexibility, clearly stating that the current level of market access will not be maintained.

The UK implies that the ‘common rule book’ would be sufficient to ensure regulatory mutual recognition and therefore the avoidance of product compliance checks at the EU/UK border.

However, whilst ceding a role for the Court of Justice of the EU (CJEU) via an arbitrational reference procedure, the governance of the agreement is to be founded on the principal that “the court of one party cannot resolve disputes between the two”.

It is the CJEU’s legal primacy that enforces trust between the Member States and thereby facilitates mutual recognition within the Single Market. 

As such the UK’s proposal on governance will be considered as insufficient to facilitate EU/UK mutual recognition. On this basis we can expect the EU to reject the proposal, irrespective of the fact that it is unlikely to be supportive of carving goods away from a Single Market that integrates services and goods.

Whilst the services sector has already voiced its displeasure that the Government appears to be willing to appease product manufacturers and to sacrifice services on the altar of a ‘harder’ Brexit, it is probably the services chapter that points a more realistic way forward for the future relationship.

The UK Government calls for a unilateral equivalence decision from the EU on financial services, the long-term maintenance of which would be promoted by regulatory cooperation mechanisms that would seek dialogue on regulatory direction and between supervisory authorities.

With precedents existing for such arrangements in the EU’s relationships with third countries, the EU is likely to be extremely receptive to these suggestions.

The EU has yet to comment on the White Paper, and indeed the EU-27 have been advised to avoid public statements. We must therefore wait until the General Affairs Council Art.50 meeting on 20 July for a response.

We can expect it to reject the ‘free trade area in goods’, but welcome the UK’s implicit indication that it is willing to remain voluntarily aligned on the EU’s regulation on goods. The EU will stress that this will not avoid compliance checks at the EU/UK border but will limit the risk that manufacturers will have to produce to two different standards to access the respective markets.

However, beyond the UK’s ambitious opening gambit, the skeleton of an agreement on goods can be discerned amid the dazzle camouflage.

Language has been included referencing the mutual recognition of testing carried out by conformity assessment bodies; for which again there are precedents.

Language has also been included on the mutual recognition of international regulatory standards; again with precedent and the form in which the ‘common rule book’ could end up being given effect.

In summary, we can finally see the outlines of the where the EU/UK relationship will land. What is amusing and will no doubt raise eyebrows in Brussels is that this shape looks remarkably like that which the European Commission has consistently stated is the possibility available within the red lines.

As such it can be summarised best as another domestic public relations exercise by the UK Government to spin the possibilities as choices. 

The unpalatable elements in Brussels can be expected to be ‘negotiated’ away in the give and take of the negotiations leaving the UK with the precedents. Having moved first the UK Government can thus spin the precedents as wins.
 



If you have any suggestions about the Brexit Bulletin or want to find out more about a specific aspect of Brexit, please do let us know. Please visit the Grayling Brussels website, follow us on Twitter @TheEULobby, and don't forget to check out our Brexit Papers

If you'd like to subscribe to the Brexit Bulletin or Grayling's other intelligence and information newsletters, please click here

 



This week's content:

The highlights from the UK
The highlights from Brussels
The highlights from the UK

Chequers agreement could be seminal moment for May
Theresa May’s attempts to fudge her way through the Cabinet impasse over Brexit could only ever get her so far. Now that road has run out, with the resignation of two of the most senior Government ministers, Boris Johnson and David Davis over the Chequers’ agreement, announced by the Prime Minister last Friday.
 
Davis’s repeated resignation threats had become something of a long-running theme in the Westminster village, while Johnson’s repeated insubordination appeared to have given him a Teflon armour. In explosive letters, both outlined their reasoning: any deal that would effectively see the UK agree to mirror the EU customs regime on goods begins to look like Brexit in name only, and would severely hamper the ability of the UK to strike ambitious trade deals with other nations and trading blocs, a key tenet of the Leave campaign, and until now, the Government’s own stated position.
 
But as Davis himself stated in a BBC interview with John Humphries, it wasn’t so much the substance of the Chequers proposal to which they so vehemently objected, but rather, that this ‘softer’ Brexit would be the UK’s opening position in negotiations over a future deal with the EU, meaning that further concessions from this already compromised position would be virtually inevitable. This is what Johnson, Davis and the ERG group of Brexiteer MPs cannot swallow.
 
Although there have been a few further resignations from Junior Government and Conservative Party positions, May looks safe – for now – from a leadership challenge. The more pressing question is whether she can progress with Brexit-related legislation such as the Trade and Customs Bills. With the Government’s latest White Paper on Brexit now published, both Remainers and Brexiteers are finding more reasons to oppose May’s Chequers compromise at every turn.
 
The Grayling View:
These resignations are the natural conclusion of months of Cabinet in-fighting over Brexit that could only ever have been resolved with one side falling on its sword. However, that May’s compromise has been  limited to two resignations from an already weakened DExEU and Foreign Office, has left her standing to fight another day.
 
What Chequers has ultimately shown is that the Prime Minister and her key Brexit advisor, Olly Robbins, have heard the cries of UK manufacturers in recent weeks, and have judged that, for all the Cabinet anguish likely to result, the risk of chaos for industry in the event of major friction at the border would be too much to bear. But this is a short term solution that ultimately kicks the can down the road once more to a now distant day of reckoning when the UK will have to choose between a free trade agreement with a non-EU partner and retaining existing Customs Union access. Furthermore, although the White Paper provides a good deal of detail, as a “political” rather than “legal” text, it still leaves plenty of questions unanswered.
 
The ‘promise’ of Brexit in the form of a newly independent British trade policy may now never materialise in the way that it was sold to the public at the 2016 referendum. It is these fears and this language of ‘betrayal’ that we can expect to colour the Brexit debate in the weeks and months ahead. Others will argue that remaining in the EU would be better than making so many compromises.
 
All the while, time is running out, and Theresa May seems to feel that ticking clock more acutely than anyone else. Her heavy-handedness at Chequers this week reflects that urgency and represents a welcome decisiveness from the Prime Minister that has been absent from the Government’s Brexit strategy for some time. But that decisiveness comes at a cost, as these events have demonstrated. That may ultimately work out in May’s favour, but the only avenue left to her now is to dare Tory MPs to defy her on the Chequers proposal and to point to the spectre of a Corbyn government waiting in the wings. That is a gamble, and one that Tory MPs may yet conspire to prevent the Prime Minister from taking. 
 
 

The highlights from Brussels 

EP Brexit Group welcomes White Paper
“We told you this would happen”. This summarises, more or less, the response of the European Parliament’s Brexit Steering Group (BSG) to the UK Government’s White Paper published earlier this week.
 
The Parliament has been pushing for an Association Agreement for a while, so it came as no surprise that the BSG welcomed this objective “which would place the future EU-UK relationship in all its dimensions - economic, sectoral, security, foreign policy - on a firm footing within a coherent governance structure."

But first things first – “negotiating a new relationship with the UK post-Brexit is conditional on an orderly withdrawal of the UK from the EU on the basis of a Withdrawal Agreement (WA)”, so states the BSG. This means agreeing a credible “back stop” provision for the Irish border, the governance of the WA,  and to “safeguard the integrity of the single market.”

The BSG also restated its position for “the closest trade and economic partnership possible while respecting among others the principles of the non-divisibility of the four freedoms.”
 
The Grayling view
The European Parliament – it shouldn’t be forgotten - has a binding say on the WA, so what the BSG has to say matters, even if MEPs are relative bystanders in the actual negotiations. This response to the White Paper nevertheless seems to represent a positive step towards overall acceptance of the final destination – an Association Agreement – though the Irish border conundrum remains. Perhaps though there is a light at the end of the tunnel , and if the Parliament seems well-disposed to the White Paper, it perhaps also suggests that it may more readily accept the WA, which would facilitate a rapid transition to discussions on the future relationship.

 

A Single Use Statement 
This week’s NATO summit brought some lively chaos to the streets of Brussels, with the arrival of President Trump. As expected, there was no lack of controversial statements, with Trump calling for the NATO nations to double their defence spending from 2% GDP to 4%. Amidst this, he was quick to comment on the recent Brexit developments in the UK, ahead of his first official visit to Britain.

From arguing Boris Johnson would be a great Prime Minister to criticising Theresa’s May’s Brexit negotiating tactics, he was sure, as ever, to create a scene, in a statement to The Sun newspaper.  Most significantly, where Trump and his aides had previously suggested the UK would have been a priority in terms of trade, he is now arguing that if the EU-UK deal ends up looking like May’s suggested proposal as outlined in the White Paper, a UK-US trade agreement would be off the cards. If the US were to pursue a deal within such lines they would favour the EU over the UK.

In true Trump fashion, he was quick to backtrack over his comments, calling the Sun interview fake news. Attempting to calm the storm, the White House also issued a statement explaining "the President likes and respects Prime Minister May very much."
 
The Grayling View 
Trump’s visit to the UK was always going to be controversial, with 100,000 people protesting against his visit and a ‘Trump Baby’ balloon leading the crowds. However the fact that the Sun’s article was published during a dinner hosted by May to welcome Trump only serves to ridicule her position further. When in many ways her decision to welcome the President had centered on a vision for a global Britain, post-Brexit, which would be turning towards its traditionally special partner, the US, Trump’s comments make a mockery of this. Perhaps, it merely shows that May must be wary of relying on such fickle friends. 

 

Dates for your diary

18-19 October 2018 - EU Summit and deadline for negotiations on Withdrawal Agreement 
1 January 2019 - Romanian Presidency of the Council
29 March 2019 - UK expected to leave EU
31 December 2020 - Expected end of transition

 


 

Grayling Brexit Unit

Our Grayling Brexit Unit brings together the very best consultants from across the Grayling network and includes those who have direct experience of working alongside the leading political figures charged with negotiating Brexit in London and Brussels.

The Grayling Brexit Unit is here to support, guide and inform the success of your business and identify how the political dynamics will change as a result of Brexit in both London and Brussels. We are your Brexit experts.

Please contact Robert Francis Tel +32 2739 47 34 (robert.francis@grayling.com) in our Brussels team or Jonathan Curtis (Jonathan.Curtis@grayling.com) in London for more information, and check out our brochure.


Grayling Team

Latest Insights

30th November 2018


Event - European Competitiveness in a Post-Brexit World

Read More

27th November 2018


Europe Leads the Way in the Fight against Plastic

Single use plastic has become something of a ‘hot topic’, not only in Brussels but across Europe. In response to the growing amount of plastic and marine litter in oceans and seas,...

Read More

27th November 2018


Smart cities: Europe wants to be at the forefront

Rapid and unprecedented urbanisation across the world is seeing cities faced with higher demand for housing, water, electricity, municipal services, transport and public administration. Innovative...

Read More