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Leaked details of the plan Theresa May will present to her Cabinet at a meeting at Chequers this Friday suggest the Prime Minister is heading for “the softest Brexit possible,” according to ITV’s Political Editor Robert Peston. On customs, May will propose a “third way” that would represent a mix of the previous two options, the customs partnership and the “max-fac” option. The model would involve the UK collecting duties at its borders on behalf of the European Union, while combining this with enhanced technology to minimise friction. The UK would also align its product standards for goods and agricultural products with the EU, although with a role for an international court to settle disputes. On services, the UK would seek to maximise access, but retain independence.
Writing in The Guardian, Open Europe’s Henry Newman states, “After Brexit, EU goods trade will cross a customs frontier. If efficiently managed – as much global freight already is – declarations can be completed electronically before goods arrive… Future EU trade should be no different.” On alignment with the single market, Newman writes, the UK should seek alignment “with EU goods regulations (which many British industries will choose to do anyway).” Yet, he acknowledges that the issue of rules of origin remains. To help solving this, he suggests that for “certain industries – cars and chemicals for example – the government could commit to matching some of the EU’s own external tariffs and relevant aspects of its trade policy for a time-limited period after Brexit. The purpose would be to achieve, in return, the most liberal and light-touch regime possible on rules of origin for those sectors,” adding, “Some will worry that committing to match EU tariff levels on some industries would limit our ability to negotiate trade deals. But this compromise approach, which would work alongside other options to facilitate trade, is clearly preferable to a full customs union.”
Robert Peston Facebook BBC News The Guardian
Austrian Chancellor Sebastian Kurz yesterday told the European Parliament, “We need sound political and economic relations with the United Kingdom…We will do our best to support [EU chief Brexit negotiator, Michel Barnier] and also preserve the unity of the 27 in these matters.” Austria took over the rotating presidency of the European Council this month.
Also speaking at the European Parliament, European Council President Donald Tusk said, “The sooner we get a precise UK proposal on the Irish border, the better the chance of finalising the Brexit negotiations this year…We cannot make progress unless a solid backstop is presented by the UK and accepted by our Irish friends.” European Commission President Jean-Claude Juncker warned, “We will not accept that the Irish issue is isolated in such a way that it is the only issue not resolved at the end of these discussions.”
Separately, in a meeting with Prime Minister Theresa May yesterday, Dutch Prime Minister Mark Rutte said, “We urgently need clarity about every aspect of the future relationship between the EU and the UK.”
Meanwhile, Sir Rob Wainwright, the former head of the EU’s law enforcement agency Europol, has said it would be “unthinkable” for there not to be a post-Brexit UK-EU deal on security.
Prime Minister Theresa May has urged the Conservative Party to “stand together” over Brexit, saying, “The stakes are high. Perhaps higher than we have ever known in our political lifetimes. We each have a choice to make,” and adding, “Will we come together and stand together as a party, as a government and as a country? … Or will we be divided and allow the scale of the challenge, the complexity of the questions to overwhelm us?”
Elsewhere, writing in the Daily Telegraph, former Conservative party leader William Hague warned Brexit-supporting cabinet ministers to avoid pushing divisions too far, saying that Parliament could force a “watered-down” Brexit. He writes, “Flouncing out, just when the going gets tough but when the EU Withdrawal Act has been successfully enacted, will look like evading responsibility for choices that were inevitable just when important progress has been made.”
The Daily Telegraph
Speaking yesterday ahead of a crucial Cabinet meeting scheduled for later this week that should contribute to set out the Government’s position on Brexit, Chancellor Philip Hammond said, “I think the views of business, which is the great generator of employment and wealth and prosperity in our country, should always be taken very carefully into account,” adding, “We have to… make sure that we deliver a Brexit which delivers the needs of business.”
Separately, the Professional and Business Services Council, which is made up of representatives from the services sector, has addressed a letter to the Prime Minister, calling for the Brexit deal to include mutual recognition of regulations and regulatory bodies, court judgments, professional qualifications and operating licences, as well as arrangements for data sharing and movement of professionals. The letter warns, “Failing to negotiate these elements in a final deal would impair our ability to provide our services with the same range, depth and speed our clients around the world experience today, damaging their business and putting our sectors at a distinct competitive disadvantage.”
Elsewhere, in an interview yesterday Business Minister Richard Harrington said that “it would be completely disastrous for business in this country” if the UK and the EU failed to reach a deal, adding that businesses “got every right to say that [they are worried].”
Meanwhile, Sky News reports that key government documents shared with businesses acknowledge that a post-Brexit customs model could take between three and five years to be established.
According to the Financial Times, the EU is considering opening talks on a deal to cut car tariffs with global car exporting nations including the US, South Korea and Japan. This could prevent a trade war with the US, and comes ahead a meeting later this month between European Commission President Jean-Claude Juncker and US President Donald Trump.
Elsewhere, Reuters reports that EU officials have rejected a call from China to issue a joint statement against US aggressive tariff policies at the upcoming China-EU summit. In return, Chinese Vice Premier Liu He had reportedly offered greater access to China’s market. But EU officials have instead proposed making general commitments to multilateral trade.
Separately, a report published by France’s Council of Economic Advisers has warned that the effects of a full trade war “would be comparable to those of 2008-2009 recession,” defining this as circumstances under which import tariffs between major economies rise by 60 percentage points. It calls on the EU to “put in place a defence strategy” by imposing retaliatory tariffs on US imports, and ensuring this is coordinated with allies such as Canada and Japan. It also recommends pursuing free trade agreements as an “insurance policy” against the impact of a full trade war.
Environment Secretary Michael Gove is expected to publish a white paper today on UK fisheries policies post-Brexit, which he described as a “blueprint for taking back control” and which reportedly will outline his vision for the UK “as an independent coastal state.” The paper will give the UK government control over fishing rights, and end the practice of discarding certain caught fish back into the ocean. The paper will not devolve exclusive fishery rights for Scottish waters to Holyrood, but will bring all decisions under control of a four-way administration council. This drew criticism from Scottish fisheries secretary Fergus Ewing, who said, “There is not a UK fisheries policy and to suggest so is misleading. There are legitimately different regimes for different regional fisheries, and fishing is fully devolved… The near lack of formal engagement presents a significant and continued risk to the current devolved settlements and is totally unacceptable.”
The trade union Unite, the Labour party’s largest backer, has said it will try to force an early general election later this year if it does not like the government’s Brexit deal. The motion, backed by delegates, stated that it is unlikely the deal struck between the UK and the EU will satisfy Unite and the Labour Party’s criteria. This comes after speculation that Unite would come out in favour of a referendum on the Brexit deal. Instead, delegates backed remaining “open to the possibility” of a referendum, but this “depends on political circumstances.”
The German Social Democrats (SPD) yesterday openly attacked the proposal by its coalition partner, Chancellor Angela Merkel’s conservative bloc of Christian Democrats (CDU) and Christian Social Union (CSU), to create “transit centres” for asylum seekers at the border with Austria. SPD Deputy Chair Ralf Stegner called the plan “an empty shell, supposed to cast the deep conflict between [CDU and CSU] on the SPD,” with SPD Secretary General Lars Klingbeil adding, “Our decision stands: we don’t want any closed camps… I have never experienced such unprofessionalism on the hands of a governing party as during those last days [by CDU and CSU].” This comes as a new poll shows that 69% of German citizens think that CSU-leader and Interior Minister Horst Seehofer, the key driver behind this new concept, should no longer remain in office.
Meanwhile, the European Commission’s legal service is investigating whether the CDU-CSU plan on transit centres is compatible with European law. European Commission President Jean-Claude Juncker said he had not looked at the concept yet in detail, though he would not expect it to go against EU law.
Elsewhere, Horst Seehofer is supposed to meet Austrian Chancellor Sebastian Kurz on Thursday in Vienna to discuss the implementation of his proposal. He will also meet the leader of Italian far-right Lega party on 11 July.
Open Europe’s Leopold Traugott is quoted in The Atlantic, saying that by pushing too hard on the refugee question the CSU may well have acted against its own strategic interests, “The majority of German citizens, including Bavarian citizens, think the CSU is going too hard on this one.”
Writing for ConservativeHome, Open Europe’s Henry Newman argues, “Open Europe’s view remains that the offer we laid out of aligning on goods was close to the maximum the UK could accept. If Brussels is not interested in discussing that sort of arrangement, then the UK will reluctantly have to seek a looser relationship, modelled on a more traditional free trade agreement.” Newman also writes, “Some are also suggesting that the UK will have to soften its red lines around the European Court [of Justice]. Aligning with EU goods regulation would mean accepting relevant new European law and indirectly the court’s interpretation of it. But after Brexit the Luxembourg court must not be able to exercise its jurisdiction directly over the UK. Either a new dispute resolution mechanism will be required, perhaps similar to that which the EU has with Canada, or the UK could dock into part of the EFTA court to resolve disputes over goods.” He concludes, “If Theresa May succeeds in getting her polarised Cabinet to agree a compromise plan it deserves to be taken seriously by Brussels. They should recognise that the UK would not be attempting to ‘have its cake and eat it’ as the trite expression has it. In fact the UK would be explicitly accepting that it would lose rights including on services trade and capital movement.”