2 August 2018

EU aiming for a shorter, less detailed political declaration on the future UK-EU relationship

According to The Guardian, the EU anticipate that the political declaration on the future UK-EU relationship, which is expected to accompany the final Withdrawal Agreement, will be a short document of five to thirty-five pages. One senior EU official told the paper, “It can either be four, five pages, or it could be a bit more elaborate but I think we are in the league of five to twenty-five to thirty-five pages. We have no time to thrash out the details.” The official added, “The weight of [the political declaration] for the future is relative. Should a future UK government change course, we will have to adjust. Yes, there is a value in it but we should not over-inflate the value either.” The political declaration on future UK-EU relations will be non-binding.

Elsewhere, the Financial Times has reported that the EU is willing to “fudge” the declaration on the future agreement in order to avoid a no deal Brexit. The paper reports that while the European Commission, France and Germany have all been pressing for an unambiguous statement of what the post-Brexit trade relationship would look like, concerns about the lack of political consensus in the UK parliament has convinced EU officials to move towards a vaguer declaration. A senior EU diplomat has said, “The priority is to get the Withdrawal Agreement done…The rest we can see after Brexit.” Another EU diplomat said, “As long as you have the backstop, then you say in the new partnership declaration we will strive for a customs partnership that will make the backstop irrelevant.” But they added, “A lot will depend on what line [Prime Minister Theresa] May takes…Does she go for a more granular and detailed version, or [does she] think fudge will help me here as well? The more that they insist on putting certain issues in the text, probably the more we will have to put in conditions.”

According to The Times, the UK has accepted the European Court of Justice (ECJ) as legal arbiter of all disputes regarding the Withdrawal Agreement, including UK payments to the EU and the Irish border backstop. An unnamed negotiator is cited, saying, “It is clear to us that a referral to the court would be automatic if both sides [on the joint committee of EU and UK officials] cannot agree,” with a current EU draft text demanding that the ECJ’s rulings in such cases “shall be binding on the [European] Union and the UK.” This comes as an unnamed UK government official claims, “We have categorically rejected any proposal that would see the court of one side decide disputes.”

Source: The Guardian Financial Times The Times

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Michel Barnier softens opposition to UK “enhanced equivalence” proposals for financial services

According to the Financial Times, the EU’s chief Brexit negotiator Michel Barnier has softened his opposition to the UK’s proposal for ‘enhanced equivalence’ in financial services under a future UK-EU agreement. Barnier had previously rejected the government’s plan, arguing that it would undermine the EU’s decision making autonomy. Equivalence arrangements in financial services are unilaterally granted by the EU to third countries whose financial regulations are deemed to be sufficiently similar to the EU’s. They can only be unilaterally revoked. However, Barnier has reportedly softened his stance on the UK’s proposal following assurances from British negotiators that financial services equivalence decisions would not be subject to joint arbitration. The EU is reportedly seeking more clarity over what role the UK is seeking in influencing future EU rules in this area.

Elsewhere, Politico reports that the City of London has lowered its estimate of Brexit job losses. The Lord Mayor of the City of London, Charles Bowman, suggested between 5,000 and 13,000 jobs may have been relocated by Brexit day in March next year. Previous analysis by the Bank of England estimated Day One job losses of around 10,000. A 2016 report by Oliver Wyman had estimated losses of up to 75,000 in the event of a no deal exit.

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Jeremy Hunt: UK and EU “heading for a no deal by accident”

Foreign Secretary Jeremy Hunt earlier this week warned in talks with his Austrian counterpart Karin Kneissl that Brexit negotiations were currently “heading for a no deal by accident,” adding, “This is not project fear, this is project reality.” He said that such a scenario would be a “huge geo-strategic mistake” which would “have a profound impact on the relations between Britain and EU countries for a generation.” This comes as earlier this weeks he told the Evening Standard, “The probability of no deal is increasing by the day until we see a change of approach from the European Commission.”

Meanwhile, The Sunday Times reports that earlier plans by the government to publish weekly reports on preparations for a no-deal Brexit have been abandoned over fears of negative public reactions. The newspaper also claims that actual preparations are “both patchy and, in some regards, hair-raising,” citing worries about medical supplies, customs checks and airport controls.

Elsewhere, Business Insider claims that the UK government is considering temporarily continuing free movement of EU citizens at the border in case of a no-deal Brexit. Under these plans, which stem from a leaked Home Office document, officials consider asking ministers “to tolerate higher risk for security” by executing “no more checks at the border” in such a scenario. Alternatively plans include “throw[ing] resources” at the border to process all new arrivals under current non-EU citizen standards.

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EU is not negotiating Brexit in good faith, claims Salvini

Italy’s Interior Minister and leader of the far-right Lega party, Matteo Salvini, last weekend called on Prime Minister Theresa May to adopt a tougher line in the Brexit negotiations, arguing, “My experience in the European parliament tells me you either impose yourself or they swindle you.” Speaking to The Times, Salvini also warned May that “there is no objectivity or good faith from the European side” in Brexit negotiations. He added that the UK would need to be ready to leave without a deal, claiming that “on some principles there is no need to be flexible and you should not go backwards.”

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Open Europe publications over the week

In a new blog, Open Europe’s Aarti Shankar questions Michel Barnier’s recent statements on the economic indivisibility of trade in goods and services. She writes, “Barnier’s point is that even if the UK stays fully aligned with EU rules and regulations on goods in order to achieve frictionless trade, its freedom to diverge on services could allow it to become a regulatory competitor by the backdoor.” But she argues, “The services most linked to the manufacture of these goods – engineering, consulting, market research, accounting […] – are regulated largely at the national, rather than EU, level. The EU doesn’t have the perfect regulatory playing field it claims to have – the UK already has freedom to deregulate in key services sectors while Britain is a member state. This would remain the case under the Chequers.” She also notes, “The EU may say that these arguments miss the point – even if services are not fully regulated at the EU level now, the Single Market will develop further…But this has not prevented the EU from striking “goods only” deals with non-EU countries before.” She points out, “The link between goods and services is even more pronounced in Swiss exports, but the EU still agreed to a preferential deal in goods.”

Elsewhere, Open Europe’s Pieter Cleppe and Leopold Traugott take a look at EU27 reactions to gauge in how far Theresa May’s Chequers proposal may increase pressure on EU negotiators to become more flexible. They write, “Despite its flaws, there is a growing sentiment across Europe that the UK’s Chequers plan is a substantial proposal that needs to be taken seriously,” concluding, “Chequers itself may not be the balance of rights and obligations the EU27 are looking for, but there is likely to be increasing pressure from within the EU27 for EU negotiators to engage seriously over what kind of bespoke agreement actually would.”

Meanwhile, Open Europe director Henry Newman writes in The Guardian that a no-deal Brexit would be “a major geopolitical and strategic event. And the prospect of the UK and EU failing to reach agreement on an orderly uncoupling has global implications.” He calls on all EU member states “to look beyond the details of customs arrangements and participation in this or that agency, important though they are, to the bigger canvas: the future shape of this continent.” He concludes, “There’s still time to agree a fair and sustainable new partnership that works for both sides, and avoids the nightmare of a total collapse in the Brexit process.”