13 July 2018

Open Europe’s Director Henry Newman gave evidence to the House of Commons’ Exiting the European Union Committee on July 11. He discussed the UK Government’s Brexit plan and the progress in negotiations with the EU alongside Allie Renison, Head of Europe and Trade Policy at the Institute of Directors, and Michael Dougan, Professor of European Law and Jean Monnet Chair in EU Law at the University of Liverpool. You can read the full transcript of the session here, or view a recording of the proceedings here.

Commenting on the deal agreed at Chequers on July 6, Newman said that “it is very welcome that the Government has a plan,” adding,

I hope very much that the EU takes this very seriously because, clearly, given the [ministerial] resignations this week, this has been a profound compromise for the Government to have made. They should recognise how far the Government have moved. If they throw it back in the Prime Minister’s face, that could be very difficult. I am worried about how that could then go forward.

Newman explained that similarly to the Government’s plan, Open Europe’s Striking a Balance report “broadly came in favour of an alignment on goods and a managed divergence on services,” adding however,

We didn’t recommend alignment on sanitary and phytosanitary measures. I don’t know why the Government specifically went there but I presume it was motivated solely by the desire to keep the border completely frictionless, rather than as frictionless as possible, between Northern Ireland and Ireland. I think that is the overarching view that the UK has taken and has driven all the extent of the compromises…The Government decided that they were going for a full alignment on agri-food as well as manufactured goods. I can understand the motivations in doing so but it was not one of our specific recommendations.

Discussing the question of whether it is possible and practical to distinguish between rules on goods that provide frictionless trade and those that are not necessary for that purpose, Newman said,

On this point on the harmonised areas versus the non-harmonised areas, one of the things that has been poorly understood coming out of Chequers is that there are many areas where goods regulations are not harmonised and how would that work if the UK was in the sort of relationship that is being discussed…The EU does have some examples of near neighbours that are not necessarily members of the single market but do participate extensively in the single market, Switzerland perhaps being the best example… There is some flexibility, but would the EU be willing to offer to that to the UK? Obviously that is a very big question.

On financial services, Newman argued,

For that very significant area of our economy it would be difficult to leave ourselves bound by rules that will continue to evolve quite quickly in some areas and services but over which we have no control….The question of how those [EU] rules continue to evolve will be problematic and it is something that the Bank of England has also expressed concern about. We felt that the Government’s idea, or Treasury’s idea, of seeking mutual recognition on financial services was unlikely to be achieved and it would be better to go for some sort of enhanced equivalence approach on that basis.

Responding to the question of whether the Government could reach a compromise in negotiations with the EU, especially on the topic of free movement of people, Newman argued,

I think this is one of the very big difficulties. From the EU side, the line that is coming out of the Commission remains that the single market is an all or nothing choice. It is a binary one or zero, and yet at the same time we are being told, “If you soften your red lines a bit, we will also soften”. Well, either it is a binary choice or it isn’t, either there is some point in softening the red lines or you have to abandon the red lines entirely and agree to free movement. If that is the case, we need to be having a very different sort of negotiation from where we are now. The comments from the [Irish] Taoiseach [Leo Varadkar] in this morning’s papers suggesting that they are open to some degree of compromise are interesting but that remains an open question.

He added,

Now that the UK has a plan, it is quite important that we reflect as well on the absence of a plan from the other side. This is something that has avoided attention so far. The EU at the moment is offering a very thin FTA [free trade agreement], Canada style, that would essentially carve out Northern Ireland into a separate regulatory regime and that would be obviously unacceptable for the UK. At the other extreme they are offering a situation that would be a closer relationship than Norway and I think that would be politically unsustainable in the medium term. The UK has taken a very long time to come up with a plan but there is cross-party agreement in the UK that free movement needs to change. Is the EU willing to recognise that?