The future relationship between the UK and EU – what to make of it?

EUUKAbout a week ago, Theresa May has hailed the draft agreement on post-Brexit relations as “right for the whole of the UK” and insisted a deal “is within our grasp”. The political declaration – outlining how UK-EU trade, security and other issues will work – has been “agreed in principle”, the European Council says. London and Brussels have already agreed the draft terms of the UK’s exit from the EU on 29 March 2019. The withdrawal agreement is legally-binding – the political declaration is not. The prime minister told MPs it would deliver the Brexit people voted for…but at the risk of sounding repetitive who knew what they voted for two years ago?

What do I make of this proposal? Well, let me be clear on three counts:

  1. Every single British citizen should be made to read this proposal through a legal obligation. Here is the link to it. There is a legal requirement to fill in the UK census, which brings little benefit in comparison to understanding what people are about to experience with BREXIT. There should be NO EXCUSES to anyone for not knowing the outline.
  2. It sets out broad aspirations for the kind of relationship the UK and the EU will have after Brexit. Most of the wording of it is non-committal and allows both sides to keep their options open. Not much of an agreement that people can vote on.
  3. The UK becomes, and excuse my French, the ‘bitch’ of Europe. I can only quote May: ‘This proposal would ensure that we leave the EU, without leaving Europe‘. Please thank your friends, colleagues, neighbours that have voted leave! Don’t believe me? Chapter 4, section 3.4 paragraph 22, and I quote ‘In areas where the UK commits to a common rulebook (which is pretty much everywhere), where the UK makes a choice to commit to ongoing harmonisation with the relevant EU rules and requirements, it will be important for the UK to be able to share its views with the EU as those EU rules are developed. While the UK would not have a vote on relevant rule changes, its experts should be consulted…’. If you know the RACI methodology you will understand that consulted is not accountable and responsible. Basically, the EU will listen but do whatever they see fit for purpose and for the greater of goods for the EU.

Some of my key highlights, reflexions below. I will keep the structure of the document to make it easy.

Chapter 1 – Economic partnership

Section 1.2 – Goods

  • The EU is the UK’s biggest market, therefore there is a need to establish a free trade areas for goods. Clearly EU has the upper hand in negotiations with just that statement. As stated, the ‘UK CANNOT have all the benefits of membership of the Single Market without its obligations‘. Solution: establish a new free trade area and maintain a common rule book for goods and the introduction of a new Facilitated Customs Arrangements (FCA). Remember my common rulebook statement above

But you would be within your rights to ask what is the FCA. The FCA tries to mirror the EU’s customs approach at its external border. The idea is that goods entering the EU via the UK have complied with EU customs processes and the applicable EU tariffs have been paid. This would be done by the UK customs authorities (which would be the same as currently with UK being an EU member). The thought is, that this would remove the need for customs processes between the UK and the EU, including customs declarations, routine requirements for rules of origin, and entry and exit summary declarations. This means that where a good reaches the UK border, and the destination is clear, the UK tariff will apply if it is destined for the UK and the EU tariff will apply if it is destined for the EU. In case the destination is not clear at the point of import, the higher of the UK or EU tariff will apply. Where the good’s destination is later identified to be a lower tariff jurisdiction, it would be eligible for a repayment from the UK Government equal to the difference between the two tariffs

So what? The conclusion from all of this is, that the UK can only agree FTA’s with third countries which have an FTA with the EU as well. One important Brexit deliverable for the UK is for the UK to conclude its own FTA’s. That objective cannot be reached since the UK’s bottom line choice will effectively be limited to those countries which have an FTA with the EU already. That is the same result as under the alternative of the UK entering into a customs union agreement with the EU. And this is an option that the UK has always refused.

  • The good new is that there is an elimination of tariffs between the UK and the EU in principle.
  • In terms of manufactured goods, the adoption of a common rulebook means that the BSI could not put forward any competing national standards.

What should you ask yourself: who is going to pay for that FCA? and how much it will cost not just the tax payer but also businesses?

What should you think? Well the EU clearly has the upper hand and the UK won’t have much of a say. If it did break away, it would impact seriously its ability to trade with the EU.

Section 1.3.4 – Financial services

Once the UK leaves the EU and Single Market, the UK can no longer operate under the EU passporting regime.

What is a EU passport? It enables financial firms in the UK to sell their services right across the EU. So, for instance, a UK-bank based in London can sell financial services to a company based in Prague as easily as if that company was based in Preston. There are no regulatory barriers. The EU is a huge market of 500 million people and some 22 million firms, so it’s clearly problematic if UK-based financial firms find it more difficult to offer them services. The Financial Conduct Authority regulator says that around 5,500 financial firms in the UK currently have EU passporting rights and the British Bankers Association says UK financial firms exported over £20bn of services in 2014. The Financial Times has reported that some in the City estimate that as much as 20 per cent of UK-based firms’ investment and capital markets revenue (around £9bn) could be disrupted if the UK loses the EU passport. Yet there is no doubting the importance of the overall financial services sector for the UK economy. It accounts for around 7 per cent of total UK economic output and supports around 1 million jobs. Finance is also a critical UK exporter and a major recipient of foreign direct investment. Anything that damages this sector (and losing the EU financial services passport will unquestionably damage it) can be reasonably expected to have serious negative effects on the overall UK economy.

The proposal is to create a new economic and regulatory arrangement with a bilateral framework of treaty based commitments.

What should you ask yourself: how much more administrative burden will this add and will these financial institutions be happy to deal with them? Or will they leave

What should you think? When the UK leaves the European Single Market, financial firms domiciled within the City of London will lose their ‘passporting rights’. This means that many UK-based banks and other financial institutions will need to relocate a significant portion of their operations, capital and staff to alternative financial centres which remain inside the EU. Frankfurt has consistently been identified as one of the potential beneficiaries of this process, alongside Dublin, Paris and Luxembourg.

Section 1.4 – Framework for mobility

It is clear that this proposal ends free movement of people but Irish citizens will continue to enjoy a special status in the UK.

It proposes visa-free travel for EU state members but paragraph 87 states ‘UK  wants to minimise admin burden for those seeking permission to travel, enter and reside in each other’s territories. I am confused, what is it!

the UK wants to continue to be able to use the European Health Insurance Card to receive healthcare.

The UK proposes a UK-EU youth mobility scheme, which I am pleased to see.

What should you ask yourself: is this going to impact my business, especially if I employ low skilled migrants? will the tourism industry suffer from the above, and therefore impact many jobs directly and indirectly?

What should you think? this should satisfy Brexiteers in the main. However, using the EHIC will come at a cost and not knowing exactly the travel visa process remains a key sticky point.

Section 1.7.5 – Electricity and gas

Trade in electricity takes place through interconnectors. There are currently 3 between the UK and EU. The proposal gives 2 options, which have not been thought through yet. One is to leave the Internal Energy Market and the other…not to.

The free flow of energy across interconnectors is necessary to keep “a level playing field that keeps costs down for consumers and ensures decarbonisation and security of supply. Any imposition of tariff or non-tariff barriers to the flows of energy across interconnectors would increase the cost of the low-carbon transition and set back action on climate change. In the event of option 1, then clearly it will drive up your energy bills

What should you ask yourself: do you want your bills to keep going up?

What should you think? Hell no. Why shall I pay more

Chapter 2 – Security partnership

Section 2.3 – Law enforcement and criminal justice cooperation

T. May make a raft of proposals and in the main do make sense to me. However, a statement does alarm me. Paragraph 14. The UK recognises that leaving the EU will have consequences for the nature of the security relationship between the UK and the EU.

There is a lot of common sense about sharing critical and vital information but this comes at a price. Surely no saving here, the bill will have to be paid to the EU

Also, the proposal stipulates that where the UK participates in an EU agency, the UK will respect the remit of the Court of Justice of the European Union (CJEU). Well let me be clear by telling you that under this proposal, the UK will seek to access many EU agencies!

Finally, there is no clear decision made regarding Galileo. Billed as the EU’s answer to the USA’s GPS system, and aimed at giving Europe some degree of autonomy from its American cousins. In the event of no deal being struck with the alliance of European states, the government has admitted the UK would lose access to the encrypted Public Regulated Service (PRS), which will upset the military. UK businesses, academics and researchers will also get a kicking, since they will be unable to bid on any future Galileo contracts

What should you ask yourself: I don’t know about you, but in this day and age I would rather that there is a great relationship and not jeopardise my safety. Also what incremental costs for the UK budget?

What should you think? Overall I am satisfied with the document but things like the above makes me nervous, especially if you have a family! The UK cannot operate effectively alone in terms of security and therefore will need to be part of EU agencies. Therefore surrendering any decision making to the EU.

Chapter 4 – Institutional arrangements

Section 4.2 – A practical and flexible partnership

The new relationship would rely on a new framework, which sees the creation of a Joint Committee. This committee would:

  • Steer the development of the future relationship
  • Manage and monitor the implementation of the future relationship
  • Resolve disputes
  • Provide additional administrative functions

If there is a change in legislation going forward, it will be dealt by the Joint Committee and the UK Parliament will have the opportunity to provide the Government with its opinion. It will only be consulted. If the UK DOES NOT passes the legislation there would be consequences from breaking the UK’s international obligations

What should you ask yourself: Who is going to pay for this? We already have this setup and it is called the EU council.

What should you think? As a European and British, we should be 100% against this framework. All we will end up doing is paying useless politicians to take decisions. It clearly is a mini EU council.

Conclusion

Theresa May did her best. I genuinely believe this. But in my mind, this deal will still not get what 51% of British people that vote Leave want. The deal they want is not possible without suffering huge economic and social consequences.

I will not pretend that I am an expert, but there is a lot of uncertainty in this document. If this was created to re-assure me, well it hasn’t. Saying that, is this deal better than NO deal? Without a doubt YES. Is this deal better than remaining in the EU…certainly not!!!

On a personal level, I would rather it gets rejected but only if a new vote is to be put forward with the ability to kill Brexit once and for all. It is for all to see that there is no good deal possible. People need to wake up and realise that the UK is not that strong nation it once was and that the best deal is to stay in the EU. Don’t be upset, only by being unified will we be able to fight against the US and China.

In any case, you now need to read the full proposal and understand what you are voting for. No one should tell you what to think, you should make up your own mind like I did.

Benoit Mercier

Is a Second Brexit referendum legitimate?

We are now nearing the 2 year deadline, 29th March 2019 at 11pm, and we are in full political and economical turmoil.

EU leaders have approved an agreement on the UK’s withdrawal and future relations – insisting it is the “best and only deal possible”. After 20 months of negotiations, the 27 leaders gave the deal their blessing after less than an hour’s discussion. They said the deal – which needs to be approved by the UK Parliament – paved the way for an “orderly withdrawal”. Theresa May said the deal “delivered for the British people” and set the UK “on course for a prosperous future”. The reaction back in Britain was as anticipated…painful for the PM. Labour leader Jeremy Corbyn responded to Sunday’s summit by calling the deal “the worst of all worlds”. He said his party would oppose it, but would work with others “to block a no deal outcome” and ensure “a sensible deal” was on the table. Former Conservative leader Iain Duncan Smith said he would find it “very, very difficult” to support the agreement as it stood. “I don’t believe that, so far, this deal delivers on what the British people really voted for,” he told Sky’s Sophy Ridge show. “I think it has ceded too much control.” SNP leader Nicola Sturgeon – who wanted to stay in the EU – said it was a “bad deal” and Parliament should consider “better alternatives”, such as remaining in the single market and customs union permanently. And Democratic Unionist leader Arlene Foster – who wants to leave the EU – said her party’s parliamentary pact with the Conservatives would be reviewed if MPs approved the deal.

So in a nutshell, unless a surprise pops up, this proposal should be defeated in parliament. But in the event, it went through what should happen next? Well for me it is clear, there should be a second referendum to ask whether:

  1. Yes I want to leave the EU and accept the deal (based on the fact that it would have been approved by parliament)
  2. Yes I want to leave the EU but reject the deal and agree to a no deal
  3. No I don’t want to leave the EU

Why is a second referendum a necessity and stop feeding me rubbish about being anti-democratic?

Do people understand what they were voting for 2 years ago? The answer is simple NO. Nobody knew, whether you are a remain or leave supporter. Do they now appreciate the consequences? Most likely.  However, have we got a better understanding 2 years on? Again I would argue NOT. Yes we have a bit more specifics but quite frankly nowhere enough to make an educated decision.

So why do I push for a second referendum? More than anything, in order to put the whole thing to bed, kill it once and for all. The whole debacle has come to a high price already. Look at the economic factors, doom and gloom:

  • Since the EU referendum, strong growth relative to other G7 economies has tailed off (NEGATIVE)
  • Remarkable strength of unemployment (POSITIVE)
  • Wage growth has been hit by higher inflation (NEGATIVE)
  • Household have thrown caution to the wind – people are saving not spending (NEGATIVE)
  • Companies are reluctant to invest (NEGATIVE)
  • Investors still mark down UK assets (NEGATIVE)

You do not believe me? Check it out for yourself https://www.ft.com/content/cf51e840-7147-11e7-93ff-99f383b09ff9. A country divided that will not heal its differences.

Because it has been done before, Ireland and Denmark

In the first rounds in both countries, as expected, the No campaign’s arguments tapped into the sensitive subjects relevant to society. In Denmark, the No side argued that the Maastricht Treaty would lead to loss of Danish sovereignty in a new United States of Europe, which would undermine or abolish the Danish currency and Danish citizenship. In Ireland during both the Nice and Lisbon referendums, the No campaigners repeatedly argued that the treaties would change Irish laws on abortion, lead to a loss of sovereignty, undermine Ireland’s military neutrality, and remove its permanent EU Commissioner.

In the second round, however, the arguments changed. The Yes side argued that Europe had listened to the Danish/Irish people and responded with legal guarantees, which were specifically on the themes raised by the No side. With the Edinburgh Agreement, Denmark would have four opt-outs in the fields of European citizenship, economic and monetary union, defence policy, and justice and home affairs. Ireland, on the other hand, gained guarantees concerning its military neutrality with the Seville Declaration after the Nice referendum, and on the Irish commissioner, competency over tax rates, abortion, neutrality, and workers’ rights after the Lisbon referendum.

Because this referendum was not legally binding and is being challenged at the ECJ

Let me remind you that the referendum was only advisory. Its result did not place a legally binding obligation on MPs to get Britain out of the EU. The safeguards that allow for legally binding elections to be re-run in the event of rule breaches did not, therefore, apply to the EU referendum.

The supreme court has dismissed an attempt by the Brexit secretary to derail a European court hearing into whether article 50 – which triggered the UK’s departure from the EU – could be reversed. In a decision released on Tuesday, the justices refused the government permission to challenge a ruling by Scotland’s highest court that the issue should be referred to the European court of justice in Luxembourg. The supreme court’s conclusion came after three justices, including the president of the court, Lady Hale, had considered the written request from the Department for Exiting the European Union. The way now appears clear for the European court of justice to proceed with its emergency hearing, scheduled for 27 November. So watch the space.

Conclusion

In my opinion, this referendum has been a shamble from start to…most likely finish. No one knew what they voted for and we are not better 2 years on. Knowing that this referendum was not legally binding, all it now needs is for the proposal to be rejected and pave the way for a second referendum to put it to bed. It is clear that a second referendum would be democratic through new general elections.

PS: In order to avoid bad behaviour from both camps, their should be a joint paper sent to all households clearly articulating the points for and against. If this gets done and Brits decide to exit, then and only then, will I accept it

Benoit Mercier