Thursday, 26 April 2018

Withdrawal Agreement - Not a done deal yet

Hanover from space
Author NASA/Chris Hadfield
Licence Copyright waived by copyright owner

Jane Lambert

Monsieur Barnier was is Hanover last Monday and he gave a speech at the 8th EU Policy Reception: How hard will Brexit be for industry?. A transcript appears on the Commission's website (see Speech by Michel Barnier at Hannover Messe 23 April 2018). In it, he sketched out the sort of trade relationship that he hopes to negotiate with the British government but he also warned of the difficulties that could destroy the progress that has already been made and that "companies must waste no time, and prepare for all scenarios now" including a disorderly Brexit.

The vision that he sketched out would suit most people in the United Kingdom very well:
"Even with the UK's current red lines, our intention is to reach an ambitious and wide-ranging free trade agreement with:
  • Zero tariffs and no quantitative restrictions on goods;
  • Customs cooperation to facilitate goods crossing the border;
  • Rules to limit technical barriers to trade and protect food safety [sanitary and phytosanitary measures];
  • A framework for voluntary regulatory cooperation to encourage convergence of rules;
  • An open market for services, where companies from the other party have the right of establishment and market access to provide services under host state rules – I repeat, under host state rules;
  • Access to public procurement markets, investments and protection of intellectual property rights."
The future relationship could even extend to such fields as coordination of social security and the recognition of professional qualifications, air transport, and participation by the UK in programmes in the field of research and innovation, where participation of third countries is allowed.

However, such a relationship will be possible only if there is an agreement on the terms of the UK's withdrawal from the EU. Monsieur Barnier noted that there had been a lot of progress in the negotiations of those terms but nothing is agreed until everything is agreed. There are plenty of potential stumbling blocks such as the border between the Irish Republic and Northern Ireland and the governance of the withdrawal agreement.

During the referendum campaign and at various times since, proponents of British withdrawal have argued that our market is so important to German car makers, Italian white goods manufacturers and French farmers that they will force their governments to make concessions.   Monsieur Barnier gave two reasons why that is unlikely in his speech.  First, the trade of the remaining member states with UK may be big but but not all that big:
"Let me remind you that, for the EU27 today, 6% of trade in goods is with the UK, while 60 % of this trade is inside the EU27 Single Market. Ten times as much!"
Secondly, the single market and the principles on which it is founded matter more to the remaining member states than trade with the UK.  Professor Grey suggested a possible third in Business gets vocal about Brexit 12 April 2018 The Brexit Blog.  If the supposedly pro-business government of the UK refuses to pay heed to business interests in its own country, why should  the Commission that represents the whole EU be any more inclined to listen to the voices of business leaders of individual member states?

We may get a 20 month implementation period to allow the UK to adjust to its new status in accordance with the draft withdrawal agreement (see The Draft Withdrawal Agreement: Getting Down to Business at Last 3 March 2018) but then again we may not.  My advice to British business is the same as Monsieur Barnier's in Hanover.  Hope for the best but prepare for the worst.

Anyone wishing to discuss this article or Brexit in general should call me on 020 7404 5252 during office hours or send me a message through my contact form.

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