Thursday, 18 June 2020

Barnier's Speech to the EESC - Some Uncomfortable Home Truths

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Jane Lambert

On 10 June 2020, Michel Barnier, the Head of the Commission's Task Force for Relations with the UK, delivered an important speech to the plenary session of the European Economic and Social Committee ("EESC"). The reason it is important for business in the UK is that it spells out the limits to the concessions that the EU can afford in its negotiations with the British government for a new relationship.  The speech has not attracted much attention from British politicians or media, possibly because the first and perhaps more important part was delivered in French.

Before considering the speech it is worth considering the audience to which it was delivered.  The EESC's website describes the Committee as "the voice of organised civil society in Europe."  The EESC is established by art 300 (1) of the Treaty on the Functioning of the European Union to assist the European Parliament, Council and Commission in their functions.  Art 300 (2) provides that the EESC "shall consist of representatives of organisations of employers, of the employed, and of other parties representative of civil society, notably in socio-economic, civic, professional and cultural areas." The institutions are required to consult it when considering new legislation.  Monsieur Barnier began his speech by saying that for his part he regards the EESC as an important partner in the new relationship negotiations because brexit has consequences for the unions, businesses and citizens that the Committee represents.

He expressed the wish to build a solid partnership with the UK which he described as a "great neighbouring country, friend and ally" and that such a partnership was more necessary than ever in the present economic and geopolitical circumstances.  He acknowledged the history, values and interests that the UK shared with the rest of Europe. His aim was to secure an agreement - but not at any price.  The UK no longer wishes to be a partner in the European project and is positioning itself as a competitor. Monsieur Barnier acknowledged that there is nothing wrong with competition so long as that competition is fair and equitable.  The negotiations over the last 4½ months have been essentially over where to strike a balance between the ambition for a new partnership and the reality that the UK is now a competitor. Because of the size of its economy and geographical proximity, the UK cannot be compared to countries like Canada, Japan and South Korea,  For that reason, it cannot expect a similar free trade agreement.

The negotiations which have been conducted by video conference concurrently on all topics have hit four stumbling blocks, namely:
  • the need for a level playing field
  • fishing
  • judicial cooperation in criminal matters, and
  • future governance of the relationship.
Some progress has been made on those matters but not much.

Monsieur Barnier was disappointed by the UK's lack of commitment in foreign and defence matters, measures against money laundering and cybercrime, and parliamentary and other consultation on matters relating to free movement and social inclusion even though they were included in the Political Declaration which was signed by Boris Johnson.  The EU was not asking for anything more than had already been agreed.

The negotiations are now at a crunch point because important deadlines are approaching. The Britsih government has refused any extension to the transition period even though the EU is willing to agree to one.  On the assumption that there will be no extension, Monsieur Barnier had proposed intensification of negotiations to David Frost to make the best use of the time remaining.

However, his negotiating mandate required any agreement to be fair and equitable in relations to competition.  The terms that had been offered went much further than previous agreements with third countries and covered not just goods but services and investments.  The EU could not allow access to its market of 450 million without cast-iron guarantees of a level playing field.  On this point, he is willing to seek compromises but he was not willing to renegotiate points that had already been agreed in the Political Declaration.

The rest of Monsieur Barnier's speech is in English and contains some uncomfortable home truths.

There can be no cherry-picking of single market benefits.  The UK's financial and professional services industries have done very well out of EU membership.  The country has also benefited from being a certification and regulatory hub and entry point for the single market.  He gave the following warning:
  • "Do we really want to consolidate the UK's position as a certification hub for the EU, knowing that it already controls some 15%-20% of the EU certification market?
  • Do we really want to take a risk with rules of origin that would allow the UK to become a manufacturing hub for the EU, by allowing it to assemble materials and goods sourced all over the world, and export them to the Single Market as British goods: tariff- and quota-free
  • Do we really want the UK to remain a centre for commercial litigation for the EU, when we could attract these services here?"
He added:
"When considering our options, we need to look beyond the short-term adaptation costs, to our long-term economic interests.
Even more so in the context of ensuring Europe's economic recovery after the Coronavirus crisis."
Referring no doubt to Mr Frost's letter of 19 May 2020 which I mentioned in Better Late than Never - The UK Counter Proposals in the New Relationship Negotiations 19 May 2020, Monsieur Barnier said that the UK insists that it is asking for nothing more than well-established precedents but the truth is that, in many areas, it is demanding a lot more than Canada, Japan or any other free trade agreement partners.  In many areas, it is looking to maintain the benefits of being a member state without the obligations of membership.  He gave the following examples:
  • "To maintain almost complete freedom of movement for short-term stays for UK service providers;
  • To maintain a system for the recognition of professional qualifications that is as complete and broad as the one we have in the European Union;
  • To have its customs rules and procedures recognised as equivalent, while refusing to commit to the necessary compliance checks and monitoring, or alignment to EU rules where necessary.
  • To be able to co-decide with the Union on decisions relating to the withdrawal of equivalences for financial services, when they know these are – and must remain – our own, autonomous decisions."
He emphasized that the UK chose to become a third country and cannot have the best of both worlds. The concessions sought by the UK are not in the long term interests of the EU.  Provisions in earlier free trade agreements were the result of negotiations and cannot be extended automatically to an agreement with the UK.  No free trade agreement can ever be as good as EU membership.

Monsieur Barnier also warned of some of the consequences of leaving the EU that will come about on 1 Jan 2021 whatever the outcome of the new relationship negotiations:
  • "UK firms will lose the benefit of the financial services passports.
  • As a third country, the UK will no longer be able to grant marketing authorisations for pharmaceuticals or type-approvals for cars for the EU market.
  • There will be customs formalities for all goods entering the EU customs territory.
....... No FTA – no matter how ambitious – can change this."
He expressed the EU's position as follows:
"Simply: we will never compromise on our European values or on our economic and trade interests, to the benefit of the British economy."
Replying to criticisms that the EU's positions are unreasonable, he said:
  • "But they are only unreasonable for those who refuse to accept that Brexit has negative consequences for the UK.
  • They are only unreasonable if your starting point is that the EU should not have the sovereign power to define its own conditions for giving access to its own market."
In his view, member states were unlikely to change his negotiating mandate and any new partnership agreement would also be contingent on the UK's implementation of the withdrawal agreement, particularly with regard to Northern Ireland and citizens' rights.

Monsieur Barnier hoped that expected high-level discussions with the Prime Minister would provide a new political impetus to the talks.  Discussions between the Prime Minister and Presidents of the Council, European Parliament and the Commission did indeed take place on 15 June 2020.   A communique issued by the Commission on 15 June 2020 accepted the recommendations for intensified negotiations but also emphasized the need for full and timely implementation of the withdrawal agreement.

I have added Monsieur Barnier's speech and the Commission's communique and this article to my page on the future trade negotiations with the EU.  As it seems to me that regardless of the outcome of those negotiations there will be a need to develop new markets, I have updated my page on negotiations with Japan and opened new pages on negotiations with Australia and New Zealand.  Although relations with China have deteriorated lately I hope that British firms may still win some business from the Belt and Road initiative. I have therefore opened a Belt and Road Initiative page.  If British financial services firms lose business in the EU as a result of a loss of passporting rights one possible new market is the Astana International Financial Centre in Kazakhstan which I mentioned in An English Language Common Law Court in Kazakhstan 10 June 2020 NIPC Law. That Centre is modelled on similar financial centres in Abu Dhani, Dohar and Dubai which I cover in NIPC Gulf.

Anyone wishing to discuss this article or any of the topics mentioned in it should call  my clerk Stephen Somerville on +44(0)7986 948267 or send me a message through my contact page

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