16 May 2018

Government White Paper on future UK-EU relationship to be published next month

The UK Government announced its plans to publish a White Paper outlining its positions for the post-Brexit UK-EU relationship ahead of the European Council summit in June. Brexit Secretary David Davis yesterday said that the document “will include detailed, ambitious and precise explanations of our positions,” adding, “It will communicate our ambition for the UK’s future relationship with the EU, in the context of our vision for the UK’s future role in the world.” The paper is expected to include a plan for future customs arrangements which would avoid a hard border on the island of Ireland. This comes as the Brexit Cabinet sub-committee yesterday has not reached an agreement on which of the two customs arrangements options it would back.

Elsewhere, the Times reports that David Davis has raised the concern of the “customs partnership” model violating international trade law with Prime Minister Theresa May. Open Europe’s Henry Newman is quoted saying, “My understanding is that the possibility that the partnership would not be legally watertight is currently being considered in Whitehall.”  The attorney-general’s office has been asked to provide a legal opinion on both customs arrangements options before the Brexit Cabinet sub-committee takes a decision. A government source is reported saying, “There are potential legal problems with both plans as they stand,” adding, “The attorney-general has been asked to provide an assessment that will be then fed into the cabinet discussions.”

Separately, RTÉ News reports that the UK is considering a “third option” for customs arrangements, where the whole of the UK remains aligned with the EU Customs Union as the backstop solution for the Irish border question. Both Ireland and the EU are reportedly open to the idea, but the UK would also need to align with the rules of the Single Market to achieve frictionless trade across the Irish border. According to RTÉ, the EU is wary of the UK using the backstop to selectively participate in the Single Market, and would require the UK to comply with all aspects, including freedom of movement of the jurisdiction of the European Court of Justice.

Discussing the post-Brexit customs arrangements on the BBC Radio 4’s Today Programme yesterday, Open Europe’s Stephen Booth said, “The big problem with the [post-Brexit customs arrangements] debate we are currently having is that we are not focused enough on the detail of what might the compromises be in some of the individual sectors…Customs is probably not the biggest barrier to trade with the EU. The issue will be about regulation as well. We go around in circles on customs when there are actually more important things to talk about.”

Source: The Guardian BBC News The Times RTÉ BBC Radio 4 Today Programme

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Labour Party to call for publication of Brexit Cabinet papers

The Labour Party yesterday stated that it will today “force a binding vote in the House of Commons requiring the Government to publish Cabinet papers on the two customs options being considered by ministers to help break the deadlock in the Brexit negotiations.”  Speaking ahead of the Parliament debate, Shadow Brexit Secretary Sir Keir Starmer said, “The Government’s Brexit strategy is in complete and utter deadlock… There is a majority in Parliament, business and the trade union movement that supports Labour’s call for a comprehensive customs union with the EU after Brexit,” adding, “If Theresa May is too weak to take that decision, then she should give Parliament the information to let it decide.”

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British public favours leaving Customs Union, new poll suggests

A new ICM poll commissioned by The Guardian suggests that, when faced with the options to either fully leave, fully remain, or seek a partial arrangement with the EU customs union, the largest share of the public (35 percent) support leaving the customs union “so the UK can strike its own trade deals.” 24 percent support for staying in the customs union “so firms can trade with the EU more easily,” and 26 percent prefer “some sort of compromise, perhaps along the lines of the customs partnership.”

The same poll also suggests that 43 percent of the British population oppose an extension of the Brexit transition period, with 38 percent in favour. Sentiments on the transition period contrast strongly between those who backed Remain in the 2016 referendum (59 percent support an extension) and those who backed Leave (67 percent oppose an extension).

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Scottish Parliament votes against EU Withdrawal Bill

Members of the Scottish Parliament have yesterday voted by 93 to 30 in favour of not giving Scotland’s consent to the EU (Withdrawal) Bill and its proposals for devolved powers after Brexit. During the debate in Parliament, Scottish Brexit Minister Michael Russell said, “It is our job to ensure that [the progress on devolution in Scotland] is not cast aside because of a Brexit which Scotland did not vote for and which can only be damaging to our country.” The Parliament also passed a Labour amendment calling for “cross-party talks in an attempt to broker an agreed way forward.” The UK Government’s Scotland Secretary, David Mundell, commented, “Obviously there’ll be the opportunity for debate and discussion in parliament, but also I hope between the two governments. I still think we can resolve this issue, and that remains my objective.”

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Employment grows in the UK, but number of EU workers falls

The Office for National Statistics (ONS) yesterday published the latest employment figures for the first quarter of 2018, revealing the largest quarterly growth in employment since late 2015. The UK’s employment rate rose 0.4 percentage points to 75.6%. Figures also show regular wage growth outstripped inflation, with regular pay up 2.9% compared to a year ago. Once inflation is accounted for, real regular pay grew 0.4% on last year. ONS figures also show a drop by 1.2 percent in the number of EU nationals employed in Britain, the most significant drop in percentage terms in eight years. Commenting on the figures, senior ONS statistician Matt Hughes said, “The growth in employment is still being driven by UK nationals, with a slight drop over the past year in the number of foreign workers. It’s important to remember, though, that this isn’t a measure of migration.”

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Brexit will create opportunities for Turkey and the UK, says Turkish Economy Minister

Turkish Economy Minister Nihat Zeybekci yesterday said Turkey and the UK were working towards “a very wide free trade agreement including services, agriculture, public procurement, e-trade and all industrial goods,” with the aim to have it in place by 2020. He added, “Brexit is going to create opportunities for Turkey and the UK. After December 2020, trade relations between Turkey and the UK are going to be much wider and much deeper.” Zeybekci said there was the “potential” for the UK to develop into Turkey’s main trading partner. Zeybekci aso mentioned that Turkey was unhappy with its current customs union arrangement with the EU, complaining that it “is not acceptable for an independent country” to have the EU negotiating away access to its market without Turkey receiving reciprocal access to the EU’s trading partners’ markets. He added, “That is an agreement signed 21 years ago and we are renegotiating this.”

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Former head of UK civil service says the government’s Brexit plans are “undeliverable”

Former head of the UK civil service Lord Kerslake told Business Insider, “We haven’t sorted out a deliverable version of the ‘end state’ of Brexit because there isn’t a deliverable version.” Casting doubt on both of the government’s customs arrangements options, Lord Kerslake explained that the ‘max-fac’ model “will not work…Even if you back a technological solution to customs, the systems wouldn’t be reliably ready. On that count alone, the transition period isn’t long enough.” On the other hand, he continued, the ‘customs partnership’ model “probably could in time be made to work,” however “The problem with it is that it’s not politically acceptable.”

Elsewhere, according to KPMG, businesses remain sceptical that either of the government’s customs models could be implemented before December 2020. KPMG Brexit Director Bob Jones said, “Amongst customs professionals the consensus seems to be that 2022 or 2023 would be a more realistic target – once you take into account the highly detailed and technical work that needs to be undertaken by business and government.’’

Separately, the British Ports Association’s chief executive Richard Ballantyne said that the government’s customs partnership model could be a workable solution, explaining, “We have been somewhat surprised at the criticism levelled at the partnership proposal in recent weeks, even from some ministers. The customs partnership model is not perfect and the challenges of tracing goods and digital paperwork still need to be worked out … [But] there are some real attractions with this model.”

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Thomson Reuters Corp to move foreign exchange derivatives trading to Dublin

Thomson Reuters Corp (TRC), one of the world’s largest trading platforms in the global foreign exchange market, yesterday announced its decision to transfer its foreign exchange derivatives trading business away from London before Brexit by establishing a new legal entity in Dublin. But the company’s co-head of trading, Neill Penney, reassured that there is no intention to move personnel away from London, adding, “It doesn’t matter for our customers which European city we are in… From a technology front, the technology is remaining where it is, which is in London and New York.”

Elsewhere, European Commission Vice President in charge of financial stability Valdis Dombrovskis told Politico yesterday that the financial services sector should be prepared for a “no deal” Brexit scenario. Dombrovskis said, “What we are emphasising is that market participants should prepare for all different [Brexit] scenarios,” adding “We know that there is a political agreement on a transition period, but this is subject to agreement on withdrawal, which is still open and under discussion.”

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Five Star Movement and League clash with EU over possible Italian government programme

The leaders of the Five Star Movement and the League yesterday clashed with the European Commission over the potential programme of the future Italian government. Following comments by Commissioners Dimitris Avramopoulos and Valdis Dombrovskis, who urged the future government not to fundamentally change policy on immigration and reducing the country’s public debt, League leader Matteo Salvini talked of an “intolerable interference.” The leader of the Five Star Movement, Luigi Di Maio, echoed him speaking of “unelected Eurocrats against us” and calling for a revision of EU rules. Meanwhile, a leaked draft of the government contract, which the two parties stressed was outdated, reveals plans for “making leaving the Euro possible” and to ask the European Central Bank to cancel €250bn in Italian bonds bought via quantitative easing.

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Poland urged to solve rule of law dispute with European Commission by June

European Commission Vice President, Frans Timmermans, has urged the Polish government to settle its dispute over the independence of its judiciary with the EU, warning that if no progress is achieved by the end of June, the Commission would move to the next step of the Article 7 enforcement procedure, which could remove Poland’s voting rights in the European Council. Timmermans said on Monday that “The main issue remains how much political control can you have to be able to say that the judiciary is independent. We [the Commission] have some concerns there,” adding that there is a possibility that “we don’t advance at all anymore and we have to ask the Council to engage in the follow-up phase of Article 7.”

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Aarti Shankar: How “special” will the UK-EU security partnership really be?

In a new blog, Open Europe’s Aarti Shankar argues, “The broad ambition – expressed by both the UK and EU – for a strong post-Brexit defence and security relationship has faced its first encounter with reality in the ongoing row over Galileo. How this is resolved will set the tone for negotiations on other security issues, including information-sharing, the EAW and cooperation with EU agencies, and will likely determine just how “special” the UK-EU security partnership will be.” She adds, “Negotiations on the economic deal and the broader strategic partnership cannot easily be separated…The fight over Galileo has already undermined political goodwill on both sides…If this dispute is not resolved, it risks having a knock-on effect in broader Brexit negotiations.”

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