23 March 2017

First of all, there was the report commissioned by the Dutch parliament, stressing that “any restriction on free trade with Britain would inevitably be at the cost of Dutch exports, prosperity and employment,” while adding that “There’s no reason at all to allow Britain to cherry pick…but there’s also no reason to prevent Britain from receiving trade advantages.”

This looks at odds with the statement of the Maltese presidency, as well as the EU Council’s proposed guidelines for 27 EU member states that the UK should be enjoying less trade benefits as compared to now.

Another report, by the Dutch Advisory Council on International Affairs, is also quite friendly to the British. The report carries some weight, not only because the Council is chaired by former NATO Secretary General Jaap de Hoop Scheffer, but also because the Dutch government is legally obliged to issue a response to it.

The report, of which only an executive summary has been published, mainly focuses on the new trade relation between the EU and the UK after Brexit and calls for taking CETA, the recently concluded free trade agreement between the EU and Canada, as a model and upgrading it into a so-called “CETA-plus model”, an option we’ve looked at more closely before.

The report states:

“It’s politically possible to bring future cooperation in the framework of this model to a higher level, while adding elements from the association agreements the EU has concluded with neighbouring countries. A so-called CETA-plus model not only opens the possibility for free trade in goods but only enables agreements on opening up services sectors.”

The report also notes that “it’s expected that, despite the UK’s desires, it won’t be possible to agree an extensive trade deal within two years,” so it’s “likely and desirable to agree a short transition period in order to enable an orderly transition” after the UK’s exit, supposedly on 30 March 2019, and “before such a trade deal is agreed.”

As to what such a transition arrangement should look like, the Council “considers a temporary extension of [Britain’s membership of the EU’s] customs union with for example three years as the most obvious solution.”

It’s not clear whether the UK government would be willing to stay in the customs union for that long, given that it therefore would also need to wait longer to conclude trade deals with non-EU partners.

In terms of enabling an orderly transition in terms of market access for goods and services, in case there wouldn’t be a ‘CETA-plus’ agreement by 30 April 2019, the Council stresses that the UK should, like Norway, take over the EU’s rules, as it writes:

“For UK participation to the single market in goods during a transition period, it’s required that the internal market acquis is taken over and applied in an equivalent way.” It adds that also “some adequate dispute settlement system will need to be created then,” something which will be discussed in more detail hereunder.

On services, it notes that “equivalence is the most likely and realistic alternative to the loss of passport rights. The Netherlands should argue in favour of a good arrangement during the transition period, so there would be as little damage for companies as possible.”

It goes into more in detail about this issue:

“With regards to financial services, [we think] the priority should be to avoid disruption of the EU’s financial system as much as possible and to mitigate negative effect on the financial services system as much as possible. Decisions to grant equivalence in the framework of third country regimes could thereby be a fall-back position, although it’s not possible to apply this to all financial services while the Commission can also withdraw this again. The advantage however is that the arrangement can be applied to all third countries in principle and is therefore no violation of the ‘most favoured nation’ – principle. It’s also possible to extend the scope of equivalence, which would make this option even more attractive.”

This is along the lines of what Open Europe has been proposing in our research on how to safeguard UK financial services after Brexit.

In terms of freedom of movement of workers, the Dutch advisory body argues that “it’s preferred that both the UK and the EU27 attempt to grant preferential access to each other’s citizens over those from third countries,” adding that “EU countries shouldn’t…link initiatives to make the free movement of workers within the EU better and fairer to Brexit negotiations,” specifically mentioning the EU Commission’s recent proposals to fight “social dumping” by restricting the scope of the posted workers directive.

Furthermore, the Council makes some suggestions for a possible system of dispute settlement, stating:

“The tough British stance to refuse any kind of legal power for the European Court of Justice is very problematic. A special aspect of this is the position of the Court during the transition period. It’s not certain whether the British idea of ‘a special joint court’ would also be acceptable to the EU. How the tailor made solution endorsed by the UK would need to look like is unclear for now. The option to create a special chamber within the ECJ which would be the only one able to decide on interpretation and application of the transition arrangement … may be hard to sell for PM May.”

It adds that “a dispute settlement system modelled on the WTO Dispute Settlement System or comparable models in existing FTAs” may be yet another option, especially for the transition stage.

On the exit deal itself, it stresses that “the Dutch government should prioritise the position of citizens on both sides… as well as the size of the exit bill“. With regards to these financial liabilities for the UK, the Council notes that Brexit “can have big consequences for the Netherlands,” urging that the Dutch government “together with other net payers should investigate the possibility to lower the EU budget” so to keep the Dutch contribution “equal and certainly not higher.”

Last but not least, the Council recommends continued police and justice cooperation between Britain and the EU, mentioning that “the role of the ECJ is still an unresolved issue here”. Also, “bilateral ties” in terms of “European military cooperation” need to be safeguarded, “given the great importance of the UK’s close [military] involvement,” which “shouldn’t be damaged by possible frictions between the EU and the UK on trade policy.”

It concludes that “the UK the Netherlands were natural partners on a number of issues (internal market, trade, defense cooperation)”, so after Brexit, “the Netherlands will need to orient itself more than before on other possible coalition partners”, specifically citing “Germany” as “the most influential member state”, noting however that also ties with “North-West European countries, in particular Sweden, Denmark and Ireland, but also …Belgium and Luxembourg)” ought to be intensified and “apart from that, ad hoc coalitions are desirable, amongst others with France and Spain but also (when it comes to security, for example) with Central and Eastern European countries.”