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The Times reports that Prime Minister Theresa May is preparing to propose a second transition period until 2023 covering customs and regulatory alignment in order to avoid a hard border in Ireland. This would mean the UK continuing to apply EU external tariffs, the Union Customs Code and the same regulatory requirements for industrial goods during this time. This will extend transitional arrangements for two more years, after the end of the first interim period in December 2020.
Elsewhere, Conservative chief whip Julian Smith yesterday announced that the EU (Withdrawal) Bill, which was heavily amended in the House of Lords, will be brought back to the House of Commons next month for MPs to vote on the amendments. These include amendments to make a post-Brexit UK-EU customs union and single market membership formal negotiating objectives of the UK. May had been expected to delay the votes in the Commons.
Separately, Bloomberg reports that May will force her cabinet to decide in June which customs proposal the UK should pursue. The cabinet is currently examining plans for maximum facilitation and a customs partnership.
The Times Bloomberg
Brexit Minister Suella Braverman yesterday told the House of Commons Exiting the European Union Select Committee that Parliament will have to vote on the UK’s Brexit financial settlement before the legal text of the future UK-EU economic relationship is finalised. She said that the agreement on the financial settlement in the Withdrawal Bill doesn’t contain “conditionality” clauses, but stressed, “There is agreed a duty of good faith… The prime minister has made very clear that the offer on the financial settlement is made as part of a broader package relating, and in the spirit of our future partnership the two will be connected when we vote in October.”
Elsewhere, the Prime Minister’s spokesman said, “We are clear that we intend to agree the future framework at the same time as the Withdrawal Agreement. Article 50 sets out that the Withdrawal Agreement should take account of the forms of the departing state’s future relationship with the EU. This means Parliament will vote on the Withdrawal Agreement at the same time as the terms of our future relationship with the EU.” Foreign Secretary Boris Johnson commented on a similar line, “Article 50 makes it absolutely clear that the terms of the withdrawal have to be seen in the context of the future relationship,” reminding that “the basic fact of negotiations… is that nothing is agreed until everything is agreed.”
Germany and France are reportedly split on whether to allow the UK access to the secure system of the EU’s satellite navigation programme, Galileo, after Brexit. Germany supports the Commission in seeking to deny Britain access to Galileo’s encrypted system for government and security use. However, France has joined Spain, Sweden, the Netherlands and the Baltic states in objecting to the UK’s exclusion. One European diplomat said Germany was using security as a “‘pedagogical exercise’ in showing the benefits of EU membership and the cost of leaving. This comes after Martin Selmayr, the German Secretary General of the Commission, wrote to the UK’s ambassador to the EU, Sir Tim Barrow, on the end of Britain’s participation in Galileo without proper consultation with member states. Another official said, “There is sympathy for Britain at being treated in this peremptory way.”
According to The Daily Telegraph, UK negotiators have suggested Britain would be willing to apply all EU data protection rules in domestic law after Brexit in order to maintain cross-border intelligence-sharing and trade. In particular, UK officials said the UK could transpose the EU General Data Protection Regulation (GDPR) into a British act, under the strictest interpretation of the regulation. The UK has also called for its national data protection authority, the Information Commissioners’ Office (ICO) to remain on the EU’s Data Protection Board, which helps interpret and enforce the EU data rules.
The Daily Telegraph
Her Majesty’s Revenue and Customs (HMRC) Chief Executive Jon Thompson yesterday said that the UK Government’s “maximum facilitation” customs arrangements model could take up to three years to implement and could cost businesses between £17bn and £20bn per year. Giving evidence to the House of Commons Treasury Select Committee, Thompson said, “You need to think about the highly streamlined customs arrangement [“maximum facilitation” model] costing businesses… somewhere between £17bn and £20bn. And the primary driver here is the fact that there are customs declarations.” Thompson said that the “customs partnership”, the other model currently discussed, could instead take up to five years to implement and could cost up to £3.4bn a year or a net cost of £0 if businesses reclaim tariffs. He also mentioned that a “functioning [UK-EU] border” could be ready by the end of the transition period in 2020, but that it would not be “fully optimal.”
Elsewhere, Brexit Minister Robin Walker commented, “There is work going on across the whole of Whitehall where a number of government departments are being challenged to look at both of these options and to ensure that, where there are timelines for delivery that look on the longer side, they are absolutely meeting the challenge of bringing those down.” Separately, Downing Street’s spokesman said, “The Prime Minister has asked for work to be done on both customs models. That work is ongoing and therefore any speculation about implementation is just that.”
Exiting the European Union Committee
The Italian President of the Republic Sergio Mattarella yesterday asked Professor Giuseppe Conte, the candidate suggested by the Five Star Movement and the League, to form a new government. Accepting the mandate, Conte said he will act as “the defense lawyer of the Italian people,” but also stressed he was “aware of the need of confirming Italy’s European and international standing.” Conte will now have to draw a list of ministers, which Mattarella will need to approve.
Elsewhere, the European Commission yesterday said Italy was last year “broadly compliant” with the “preventive arm” of the EU’s stability and growth pact, which requires member states to work towards reducing their debt below 60 per cent of GDP. However the Commission also cautioned that Italy will have to take further steps to reduce its public debt. Valdis Dombrovskis, the EU Commissioner responsible for the Euro said, “Our political message is very clear. Italy needs to continue to reduce its public debt which is indeed second highest in the EU after Greece.”
Former UK Permanent Representative to the EU Sir Ivan Rogers yesterday criticised the Government’s policies of leaving the EU Customs Union and Single Market, adding that ruling out other options such as the Norway or Switzerland models for the UK’s future relationship with the EU “before truly understanding what either meant, or whether variants on them might be viable, was…simply an act of folly.” Speaking at the University of Glasgow, Sir Ivan also said, “If we are seeking aggressively to open third country markets for UK services via making offers on other issues, the losers from this will be in very different constituencies from the gainers…In a post-Brexit UK trade policy debate, we need to think hard, rigorously and honestly about this, and not produce buccaneering blather.”
The European Commission yesterday recommended ending France’s excessive deficit procedure, with the Commissioner for Economic and Financial Affairs, Pierre Moscovici, saying France’s “deficit reduction path is strong and clear.” France’s public deficit last year fell to 2.6% of GDP, the first time below the EU’s 3% threshold since 2007. French Economy Minister Bruno Le Maire, and the French Minister for Public Accounts, Gerald Darmanin, released a statement saying that the Commission’s proposal “is clear support for the [French] government’s economic strategy.”
In its latest Convergence Report released yesterday, the European Central Bank (ECB) said that none of the seven countries seeking to adopt the euro meets all the accession criteria, despite the progress achieved over the past two years. The conclusions represent a setback for Bulgarian hopes of applying for membership of ERM-2, the two-year “waiting room” for euro adoption, by the end of June. The ECB also stressed, “Bulgarian law does not comply with all the requirements for central bank independence, the monetary financing prohibition, and legal integration into the Eurosystem.”
Writing for CapX, Open Europe’s Pieter Cleppe argues, “Switzerland offers some valuable lessons for Brexit,” stressing, “[Switzerland] isn’t a member of the European Union, the single market or a customs union. It’s also a country that trades heavily with the EU.” However, he also points out that “Switzerland accepts freedom of movement… has a much smaller financial sector than the UK,” and at the time its deals were negotiated, there was the “lingering hope of EU membership.” On the other hand, he also notes that “the UK has a much bigger economy,” it “trades less with the EU than Switzerland does” and “is a geostrategic and security player.” He concludes, “Switzerland shows you can ‘have your cake and eat it’,” adding, “The Swiss agreed to some restrictions in market access, especially on financial services, where they have refused to adopt EU rules. The EU in turn agreed to grant market access for areas where the Swiss were happy to align or even go further than EU regulations.”