22 November 2018

Prime Minister Theresa May today announced that the UK and the European Commission have agreed the terms of the Political Declaration on future UK-EU relations. A leaked version of the declaration sets out a spectrum of possibilities for the future partnership, ranging from a “Canada-plus” comprehensive Free Trade Agreement, to what might be termed a “Chequers-minus” deal. Where the final agreement falls on this scale will depend broadly on how far the UK is willing to align with EU rules, and, correspondingly, how much it would accept in terms of level playing field obligations and an indirect role for the European Court of Justice.

The text does not provide a clear path to a Norway-plus agreement, where the UK remains integrated in the four freedoms of the EU single market. For instance, explicit reference is made to the fact that a future agreement should “ensure the sovereignty of the UK and the protection of its internal market…including with regard to the development of its independent trade policy and the ending of free movement of people.”  However, the inclusion of an evolution clause does allow the UK and EU to go beyond the structure of cooperation set out in the declaration, if both sides decided it was in their mutual interest to do so.

The Political Declaration does not signpost the economic elements of the UK government’s Chequers proposal. In particular, no reference is made to achieving “frictionless” trade in goods between the UK and the EU or a “common rulebook.” This is a concession for the UK government, but it helps to set discussions on a realistic path. Frictionless bilateral trade was not an achievable goal as long as the UK maintained its position to exit the EU’s single market and obtain an independent trade policy, given the EU’s principle of the “indivisibility of the four freedoms.”

However, questions remain as to how such a future partnership would interact with the Irish backstop, and whether it would be available to the whole of the UK – including Northern Ireland. The commitment to consider whether “facilitative arrangements and technologies” help address the Irish border is a concession to the UK – but it is unlikely to offer any additional reassurance to the Democratic Unionist Party that the Northern Ireland-specific elements of the backstop would not enter into force.

Open Europe considers some of the key points of the Political Declaration below.

Movement of goods

  • Both sides “envisage comprehensive arrangements that will create a free trade area, combining deep regulatory and customs cooperation.” The objective is for a relationship that is “as close as possible,” rather than the “frictionless” trade the Prime Minister had previously suggested. Nor is there any reference to the government’s Chequers proposal for a “common rulebook.”
  • The latest version of the declaration suggests the UK and EU would “build and improve on” the single customs territory set out in the backstop as regards tariffs, “in line with the Parties’ objectives and principles above.” The reference to the Parties’ principles refers back to “respecting the integrity of the Union’s single market and the customs union” and “recognising the development of an independent trade policy by the United Kingdom.” This is an adjustment from the previous draft that suggested only that the future customs arrangement would “build on” the backstop – a provision that former Brexit Secretary Dominic Raab felt went too far.
  • Elsewhere, the declaration also notes, “The Parties envisage making use of all available facilitative arrangements and technologies” as part of the future customs agreement, including in order to address the Irish border. This leaves open the possibility of considering a deep customs facilitation agreement, or a modified version of the UK government’s Maximum Facilitation proposal, in negotiations on the future relationship.
  • Similarly, it notes that the future economic partnership should “ensure the sovereignty of the UK and the protection of its internal market…including with regard to the development of its independent trade policy.” This is seemingly in tension with a long-term UK-EU customs union.
  • On regulation, the document notes the potential for UK alignment with EU rules in relevant areas, in particular to allow for cooperation with the European Medicines Agency, the European Chemicals Agency and the European Aviation Safety Agency.
  • In all, the declaration notes a “spectrum of different outcomes” for checks and controls on bilateral trade in goods is possible. While a Chequers-style agreement on goods is not signposted, the declaration suggests that that the UK and EU could ensure fewer barriers to market access if the UK agrees to align with EU rules.

The backstop and customs

  • It is not clear whether the proposals for an economic partnership set out in this document would meet the criteria necessary to supersede the backstop – and therefore whether the future economic partnership would be available to the whole of the UK, including Northern Ireland.
  • The document states both sides’ “determination to replace the backstop solution on Northern Ireland by a subsequent agreement that establishes alternative arrangements for ensuring the absence of a hard border on the island of Ireland on a permanent footing.” The language has strengthened slightly – the previous outline declaration noted both sides’ “intention” to replace the backstop. It also states that trade and investment facilitation should respect the integrity of the UK’s internal market.
  • It notes that “facilitative arrangements and technologies will also be considered in developing any alternative arrangements for ensuring the absence of a hard border on the island of Ireland on a permanent footing.” The leaves a path for the UK to offer technological solutions, in the vein either of its Maximum Facilitation proposal or its Facilitated Customs Arrangement, to ensure an open Irish border – potentially offering a route away from the backstop arrangement on customs. However, this is unlikely to offer sufficient reassurances to Unionists in Northern Ireland that they would not be treated differently to the rest of the UK under the future partnership.
  • No further role is set out for Northern Ireland institutions in determining whether or not the conditions for replacing the backstop have been met.

Services

  • As expected, the Political Declaration broadly sets out traditional third country arrangements in services. It states both sides’ intention to “[build] on recent Union Free Trade Agreements,” but is thin on detail.
  • In financial services, both sides commit to assessing equivalence before the end of June 2020 – the intention is therefore for an equivalence regime to be ready to be phased in at the end of the transition.
  • The declaration allows for a data adequacy decision for the UK, and aims to ensure this can be adopted by the end of 2020 – again allowing for this framework to be phased in at the end of the transition.
  • Both sides commit to establishing a Comprehensive Air Transport Agreement, ensuring “comparable market access” for road transport, and agreeing bilateral agreements on rail transport.

Level playing field

  • Provisions included in the outline political declaration to “build on” the level playing field commitments agreed in the Withdrawal Agreement have been maintained. It notes that these commitments should “have regard to the scope and depth of the future relationship” – this allows a route for the EU to scale up level playing field obligations if the UK pursues deeper regulatory alignment.

Fishing

  • A future agreement on fisheries, covering access to waters and quota shares, will be established “within the context of” the overall economic partnership. However, this does not mean that fishing rights will be negotiated as part of the trade agreement, and falls short of the “no fish, no deal” commitment that some EU member states were reportedly pushing for.
  • The declaration notes that the UK and EU will “use their best endeavours” to conclude the fisheries agreement by July 2020 – the same deadline as is required for a decision to extend the transition period, as per the Withdrawal Agreement.

Law Enforcement and Police Cooperation

  • The document states, “The closer and deeper the partnership, the stronger accompanying obligations” for the UK. It notes that the UK has agreed to remain a party of the European Convention of Human Rights (ECHR), and to respect the jurisdiction of the ECJ in the interpretation of EU law.
  • Both parties are aiming for continued UK operational cooperation with Europol. The government’s previous proposals sought to go beyond such an operational agreement, which would not grant the UK a direct access to Europol databases. The Political Declaration does not make it clear whether this is possible or not.
  • The document mentions maintaining cooperation in relation to exchanging Passenger Name Records (PNR) and Prüm databases (to which currently non-Schengen countries do not have access). But there is nothing on possible UK access to Schengen Information System (SIS II), or the European Criminal Records Information System (ECRIS), which the Prime Minister indicated would be addressed in further negotiations.
  • In line with previous EU statements, the UK will no longer be a part of the European Arrest Warrant, but both sides state their commitment to a streamlined and time-limited extradition procedure.

Foreign policy, security and defence

  • Both parties plan for the future relationship to “enable the UK to participate on a case by case basis in CSDP missions” through a Framework Participation Agreement (FPA).This would allow the UK to second staff to missions/headquarters, but not take part in decision-making.
  • The UK will also be allowed to take part in projects of the European Defence Agency (EDA), the European Defence Fund and the Permanent Structured Cooperation (PESCO) on “an exceptional basis.” It is important to note that the conditions for third party participation in PESCO have not been yet agreed. European diplomats have reportedly decided to postpone the decisions until negotiations over the terms of the UK’s withdrawal are concluded.
  • Both parties agree to consider “appropriate arrangements” for the UK’s participation in the EU’s space satellite programmes, reflecting continued disagreement over the UK’s access to Galileo’s secure system.

Free movement of people

  • The declaration specifically notes “the ending of free movement of people between the Union and the United Kingdom.”
  • The provisions on mobility remain thin, recalling commitments to “non-discrimination” between member states, and “full reciprocity.” The Common Travel Area between the UK and Ireland remains protected, however.
  • The declaration also aims to ensure “the temporary entry and stay of natural persons for businesses purposes in defined areas.”
  • Both sides aim to provide visa-free travel for short-term visits, and consider different conditions to entry for study, research and youth exchanges.

Governance

  • The document states that the overarching institutional framework for the UK-EU partnership could be an Association Agreement – this was a clear ambition of the European Parliament. The declaration leaves open the possibility that some discrete bilateral agreements could sit outside this structure, subject to other governance arrangements.
  • The governance architecture of the future relationship is broadly expected to follow that set out within the Withdrawal Agreement.
  • The bilateral relationship will be supervised by a UK-EU Joint Committee. Both parties can also refer to the Joint Committee for dispute resolution.
  • Where the Joint Committee cannot decide a dispute, it may refer this to an independent arbitration panel, whose decisions are binding on the UK and EU. However, if a dispute raises a question of EU law, the interpretation of the EU law should be decided only by the ECJ – not independent arbitration.
  • This governance structure was largely to be expected. In any economic relationship with the EU, the UK cannot expect fully to insulate itself from the role of the ECJ, given the EU’s stated legal autonomy. However, under this system, the ECJ would not have direct jurisdiction in the UK, and would only have authority to decide in areas where the UK agreed to apply EU law. The less regulatory integration between the UK and EU, the more restricted the role of the ECJ.

EU member states must still give their endorsement before this is formally signed off – this is expected to happen at this Sunday’s special EU summit. It will then be for UK parliamentarians to consider the text alongside the Withdrawal Agreement, before it heads to the European Parliament. The direction of travel set out today may help the Prime Minister secure the support of some of her Eurosceptic backbenchers, but it is far from clear that enough has been done to win over the DUP, or otherwise ease the passage of the Withdrawal deal through parliament.

While the Political Declaration remains a non-binding text, it will serve as an important steer in negotiations on the future relationship. As it currently stands, this document envisages an ambitious free trade relationship between the UK and the EU, but one much less integrated than the status-quo. The important question will be whether such an arrangement will be on offer for the whole of the UK – including Northern Ireland.