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Grayling's Brexit Bulletin - 20 April 2018

20th April 2018


The BREXIT Bulletin: A soft-er Brexit on the way?


Is the prospect of a hard Brexit softening?

Ever since Theresa May's Lancaster House speech in January 2017, we have been preparing for the hardest of hard Brexits - out of the Single Market and out of the Customs Union.


This week saw two developments, neither alone capable of entirely turning the Brexit ship around, but both together succeeding in throwing two rather large spanners into the faltering Brexit machine.

In London, the House of Lords convincingly voted through a non-binding amendment calling for the UK to remain in a Customs Union with the EU post-Brexit. 

Almost simultaneously, in Brussels the UK's Chief Brexit diplomat Olly Robbins was taken to task by Sabine Weyand, the EU's Deputy Brexit Negotiator, on the UK's proposed solutions for the Irish border. 

Neither development comes as a major surprise.

The Lords, being unelected, do not have to worry about electoral fallout from their decisions, and the EU has long rolled its eyes at the UK's "magic" solutions to the border - but they throw into even sharper relief the problem facing both parties, namely how to solve the Irish border. 

Since a hard Brexit was Theresa May's idea, so the narrative goes, she owns it, and therefore needs to solve it.

With another vote due next week in Westminster on the Customs Union, the odds of the UK actually staying in a Customs Union due to political pressure must have shortened. This would solve the Irish border issue, but would also be a source of relief to most businesses who have been lobbying hard to demonstrate the impact a hard Brexit would have on their supply chain.

It may mean the UK can no longer negotiate its own trade deals, but as recent developments have shown, this has not proven quite as easy as hoped. 

The main casualty would surely be Theresa May - the UK and EU would have something to gain from remaining in the Customs Union, but would she have to fall on her sword?

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

This week's contents:


The highlights from the UK

The highlights from Brussels

The highlights from the Commonwealth

The highlights from the UK

Commonwealth meeting overshadowed by Windrush and Lords
Theresa May had planned for this week’s Commonwealth Heads of Government Meeting to serve as an opportunity to promote the UK’s post-Brexit future, to evidence the trading opportunities available around the world, and to show the UK’s continuing commitment to environmental protection. Instead, the Windrush scandal regarding the treatment of those who arrived in the UK from Caribbean countries between 1948 and 1971 has dominated the papers and forced UK Prime Minister Theresa May and Home Secretary Amber Rudd into apologising and promising to create a task force to assist those affected.
If it were not for the Windrush scandal, the various manoeuvres being made in the UK and EU on the issue of the Customs Union might have featured more prominently in the papers. On Wednesday the House of Lords voted by 348 to 225 in favour of an amendment to the EU Withdrawal Bill calling on Ministers to seek a Customs Union with the EU. Some are attempting to utilise the vote to force the UK into a change of position, and some "Remain" activists have expressed hopes that the size of the majority will make it harder for the House of Commons to overturn the decision.
However, the Government has responded by dismissing the amendment, arguing that “this amendment does not commit the UK to remaining in a Customs Union with the EU, it requires us to make a statement in Parliament explaining the steps we've taken. Our policy on this subject is very clear. We are leaving the Customs Union.”
The pressure on the government has also been increased by the announcement of a plan by the Liaison Committee to force a vote which calls on the UK to remain in “an effective customs union”. The Liaison Committee is made up of the Chairs of Parliament’s select committees, and ten of the Chairs have already put their name to the motion. If passed, the vote would not be binding on the government, but MPs and commentators are noting increased pressure on a u-turn on the Customs Union, and overtures from Brussels on the issue have not been missed.
The Grayling view
The Windrush Scandal had been building for months, with a number of papers writing pieces covering the issue, and the Prime Minister infamously turning down a meeting request to discuss the issue with Commonwealth leaders. In the same week in which further warnings were issued regarding civil service capabilities, some will also be questioning her capacity. The scandal has also seen aspersions cast on the Home Office’s ability to properly process whatever agreement is concluded on the rights of EU nationals – a concern which is being echoed by MPs on all sides of the House of Commons. The timing of reports that the UK’s chief negotiator, Oliver Robbins, has indicated that the UK might discuss labour mobility as part of a future trade deal is striking.
Regarding the developments on the Customs Union, although neither the amendment nor the motion will necessarily legally tie the hands of the government, there is a clear increase in pressure being exerted by MPs, Lords, and outside interest groups. Perhaps in retaliation, there has also been a notable increase in briefings against remain voting MPs and certain Cabinet members over the last few days.
Next week might provide another notable crunch moment for the government, and it will be interesting to see whether it decides to whip MPs to vote against the Liaison Committee motion, or whether it simply encourages MPs not to attend or abstain. Whichever decision is made by the government, the fallout is unlikely to be pretty, and we can probably expect a number of sensationalist headlines. However, the real challenge is likely to come later in the year when the Withdrawal Bill reaches its final stages. Before then, proponents and detractors of the Customs Union still have the time to make their case.


The highlights from Brussels

Better Regulating for a Better Brexit
The Financial Times (FT) have reported this week that the European Commission is preparing a raft of “emergency” legislative proposals aimed at Brexit proofing 30-40 pieces of EU legislation between now and the end of July.
In publishing its series of Brexit preparedness notices the Commission has shown that it is serious about preparing the EU-27 and the business community for a ‘no-deal’ Brexit and that it is not averse to leveraging its preparedness in the negotiations.
The Commission is now ramping up its preparations, with the EU-27 having discussed preparedness and the sharing of best practice on 12 April, in order to reduce uncertainty for businesses.
According to the FT, vehicle type-approvals and agricultural tariff rate quotas will be the first issues on which the Commission will publish Brexit-proofing proposals.
The Grayling View
Brexit-proofing isn’t a new phenomenon, with the Commission having taken action to protect the EU’s Emissions Trading Scheme in late 2017. Indeed, the Brexit Bulletin has covered the issue in some detail in past editions. It is important to note that Brexit-proofing, in respect to the current red lines, will be needed irrespective of a ‘no-deal’.
What is most striking is the way that the Commission is going about its preparations for drafting Brexit-proofing proposals. When asked by concerned businesses, the European Commission has refused to provide indications of its intended approach and clarification on the scope of the EU’s body of law on which it is considering taking action.
The concern must be: where is Better Regulation in the context of Brexit? Where is the publicly available evaluation/fitness check? Where is the impact assessment? And where is the open stakeholder consultation?
Much criticism has been levelled at the level of implementing powers over Brexit that the UK Government is seeking to obtain in the context of its Withdrawal Bill. The Commission’s request for “emergency powers” is eerily similar.
The Commission may say - in the context of sensitive negotiations with the equivalent to a third country - that to purse Better Regulation could undermine its negotiating position. Indeed, it is possible that the UK, at least until 29 March 2019, would by law be privy to discussions that may need to be undertaken to Brexit-proof vehicle type-approvals, for instance.
However, Better Regulation has been applied to the EU’s trade policy, e.g. a 2016 consultation on the future of trade and economic relations with Australia and New Zealand which helped shape the draft negotiating mandates for negotiations.
It is concerning that Better Regulation has to date not been fully extended to Brexit. Yes, Michel Barnier has kept his door open to representations from business. However, applying Better Regulation, especially open stakeholder consultation, would make this more transparent and contribute to further improving the quality of any Brexit-proofing. Business and EU citizens deserve a ‘Better Brexit’.

The highlights from the Commonwealth 

‘She must always choose the open sea’?
The Commonwealth Heads of Government Meeting took place this week in London and Windsor, with British Monarch Queen Elizabeth calling for a need to rejuvenate the Commonwealth as a trading bloc in her opening address. London hosted the summit for the first time in 20 years, just as the UK is seeking out its future trading partners as Brexit draws ever nearer.

Theresa May pushed for improving trade relationships across the group, with the UK positioning itself as a champion of global trade. She called for the Commonwealth to "develop through trade, pushing back against protectionism, for a more prosperous Commonwealth".  As part of this, the UK government announced a Commonwealth Standards Network, which will support developing countries to better meet existing international standards, as well as a Trade Facilitation Programme to support selected Commonwealth countries in implementing the World Trade Organisation’s Trade Facilitation Agreement.

Prior to the summit, it was hoped that the Queen’s charm would stir up support for this vision of a global Britain, as she addressed her former colonies. This year’s summit welcomed India’s Prime Minister, Narendra Modi for the first time, with the UK and India laying the foundations for a possible post-Brexit bilateral trade deal. As part of this, they signed off on a series of commercial agreements worth up to £1bn.
The Grayling View
This meeting of the Commonwealth Heads of Governments marked a significant moment for the UK government in determining its trading future post Brexit. Whilst there were positive outcomes from the meeting, particularly with regard to cooperation with the Indian government, the UK is still far from securing its position as a leader of global trade. As we have discussed before, there are many issues such as immigration, food quality standards, and copyright negotiations which could pose stumbling blocks to negotiations.

It shouldn't be forgotten that the Commonwealth makes up a relatively small part of UK trade. According to the National Office for Statistics, around 9% of total UK exports went to the Commonwealth in 2015, against 44% to the EU. No doubt the aim is to increase the former with an expected reduction in the latter, although there are few signs so far of how this will concretely be achieved.

Dates for your diary

1 July 2018 - Austrian Presidency of the Council
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



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