LEADING THE WAY OUT OF THE EU

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Thursday 22 November 2018 

In her political declaration, Theresa May has failed to extract a cast-iron commitment to “frictionless trade”. The larger version released today leaves us with more answers than questions.

The political declaration, an accompaniment to the withdrawal agreement, sets out the limits of the eventual permanent trading arrangement the government hopes to arrange with the European Union. Lacking binding power and intended to provide hope to Brexiteers that Britain will once again become sovereign and to Remainers that the umbilical cord will not be severed after all, the document makes for particularly sticky political fudge, a speciality of modern times. Difficult issues are skirted around, exposing glaring contradictions. In accordance with that ignoble tradition of fudged thinking mixed messaging reassures neither constituency, although there is a clear loser, the Leave side. The text, drafted between the UK and the EU27 is a failure. It was never going to be a success.

A huge amount has been left out. Even the quickest reading of reveals the document is comprised of two texts, one authored in London, the other in Brussels. This is political prose in every sense of the word. Case in point, paragraphs 18 and 22.

18: The Parties will retain their autonomy and the ability to regulate economic activity according to the levels of protection each deems appropriate in order to achieve legitimate public policy objectives such as public health… 

One for the Brexiteers, we shall get our legislative (and therefore one would presume judicial) independence back.

22: However, with a view to facilitating the movement of goods across borders, the Parties envisage comprehensive arrangements that will create a free trade area, combining deep regulatory and customs cooperation, underpinned by provisions ensuring a level playing field for open and fair competition.

It is noteworthy that this key paragraph comes after and therefore supercedes paragraph 18. The underlying message is clear, we will have autonomy, but we shall choose to align with the EU on everything – independence in name only.

The point is hammered home in 23: With ambitious customs arrangements that, in line with the Parties’ objectives and principles above, build and improve on the single customs territory provided for in the Withdrawal Agreement which obviates the need for checks on rules of origin.

Improve only in the sense that it will ensure Britain continues to integrate with the EU as the becomes a deeper and depper federation. Note also that (unsurprisingly) paragraph 19 re-affirms the backstop and the absence of border infrastructure in Ireland. As we are well aware, Brussels and Dublin will never accept a border on the island of Ireland no matter how imperceptible it is, no matter how advanced the technological solutions we put forward are.

Through this lens, the withdrawal agreement and this declaration are basically the same document, coloured only in slightly different shades of  BRINO (Brexit in name only). The only obvious difference is free movement should end after the transition period and we won’t have a bill to pay. However, we will continue to pay into research projects (12), a premium no doubt. Similarly, there are to be no agriculatural quotas, which implies that, at the very least, we will continue to subisidise our agriculture along the lines of the  Common Agricultural Policy.

24 and 25: 24 sets out how complex Britain’s regulatory alignment is with the EU before stating in 25 that: In this context, the United Kingdom will consider aligning with Union rules in relevant areas.

30: …Trade in Services, the Parties should aim at substantial sectoral coverage, covering all modes of supply and providing for the absence of substantially all discrimination in the covered sectors

This is deeply worrying, it implies powerful judicial oversight for the EU – see paragraphs 132 and 134.

35: …Parties should establish a framework for voluntary regulatory cooperation in areas of mutual interest, including exchange of information and sharing of best practice…(48 makes similar noises about open Government procurement)

Paragraph 38 presents the vehicle for keeping our regulations in the EU’s slipstream. The previous paragraph goes through network sectors like telecoms which the EU is using to justify continued alignment. Paragraph 37 makes a similar point about financial services and repeats the statement in the original draft about “taking equivalence decisions in their own interest”. Again, even though UK-based banks have set up subsidiaries in the continent to avoid the need for equivalence/passporting rights, the EU and the UK government are looking for ways to retain those rights for the purposes of wider regulatory alignment. This point is deepened in 38 where it says the two sides should discuss their equivalence regimes – under “regulatory equivalence” financial products can be sold into the European Single market provided the selling market is regulated to a similar level.

The EU is clearly worried about Britain taking a more liberal approach to regulation and attracting investment and deposits from partners the EU’s stringent rules would not permit. 43 then goes on to say Britain will be part of the EU’s free movement of capital and payments regime, a very bold statement considering “free movement of capital” is one of the EU’s four freedoms.

41The Parties should provide, through sectoral provisions in telecommunication services, for fair and equal access to public telecommunication networks and services to each other’s services suppliers and address anticompetitive practices.

This might have been insisted upon by Britain’s negotiators fearing the more protectionist attitudes of EU countries. Having said that, it’s difficult to escape the notion both sides are wedded to firm alignment forever more. Another troubling thought for Brexiteers. Because there is no means for unilateral termination of the backstop in the withdrawal agreement, the EU will only agree to do so provided the status quo, or as near to it as possible, is assured. We’re damned if we do, damned if we don’t. We’re damned.

Fisheries

75: Within the context of the overall economic partnership the Parties should establish a new fisheries agreement on, inter alia, access to waters and quota shares.

76: The Parties will use their best endeavours to conclude and ratify their new fisheries agreement by 1 July 2020 in order for it to be in place in time to be used for determining fishing opportunities for the first year after the transition period.

This was always coming, and the concession doesn’t seem to have stopped Spain trying to get Gibraltar. Everyone is right to be fearful of staying in the Common Fisheries Policy. It is Inconceivable that such a system would function without large quotas for foreign fleets. This paragraph was immediately struck upon by Britain’s embattled Fisheries.

Level playing field 79The future relationship must ensure open and fair competition. Provisions to ensure this should cover state aid, competition, social and employment standards, environmental standards, climate change, and relevant tax matters, building on the level playing field arrangements provided for in the Withdrawal Agreement and commensurate with the overall economic relationship. The Parties should consider the precise nature of commitments in relevant areas, having regard to the scope and depth of the future relationship. These commitments should combine appropriate and relevant Union and international standards, adequate mechanisms to ensure effective implementation domestically, enforcement and dispute settlement as part of the future relationship.

This is classic political declaration material. The reader can choose to be worried about it or not, but like the rest of the document’s repeated mentions of cross-border concerns like climate change, this list of shared commitments goes to the heart of the EU’s paranoia that Britain will deregulate, boosting competitiveness. Who knows when we’ll be in a position to do so, but we should not underestimate Brussels’ preoccupation with preventing such a course of action.

Years from now, with the Irish border still unresolved, the EU will be finding ways of keeping us in its orbit principally for this reason. If the British government of the time provides enough assurances, the backstop may cease sooner rather than later, but not without huge concessions over market regulation. The EU doesn’t want a Singapore next door. Incidentally  Singapore’s manufacturing sector as a percentage of GDP is around the same as the UK’s.

Law enforcement and judicial cooperation 73

The closer and deeper the partnership the stronger the accompanying obligations. It should reflect the commitments the United Kingdom is willing to make that respect the integrity of the Union’s legal order, such as with regard to alignment of rules and the mechanisms for disputes and enforcement including the role of the Court of Justice of the European Union (CJEU) in the interpretation of Union law. 

The EU is keeping the parameters wide open for a pro-EU populous in the UK to magically replace the existing Eurosceptic one, this carries troubling ramifications for judicial independence.

Defence capabilities 104

The future relationship should benefit from research and industrial cooperation between the Parties’ entities in specific European collaborative projects to facilitate interoperability and to promote joint effectiveness of Armed Forces. In this regard, while both Parties should preserve their respective strategic autonomy and freedom of action underpinned by their respective robust domestic defence industrial bases, the Parties agree to enable to the extent possible under the conditions of Union law.

Here the dreaded PESCO, an EU structure dedicated to member states pursuing integration of their armed forces, rears its ugly head via the European Defence Fund, which post-Macron has scaled up its resources significantly. This is straight out the European-integration-via-the backdoor playbook, the idea being that if we develop defence tech and equipment together we will eventually evolve into a single military force.

In spite of all the caveats above, the commitment – highlighted in bold – is pretty solid. No surprise though, this concession was delivered by May a while ago at the Munich security conference. For years, Brexiteers were dismissed as conspiracy theorists for fearing the EU would one day militarise, they can be dismissed no more.

Structure 120 and 121:

The future relationship should be based on an overarching institutional framework covering chapters and linked agreements relating to specific areas of cooperation, while recognising that the precise legal form of this future relationship will be determined as part of the formal negotiations. Where appropriate, the Parties may establish specific governance arrangements in individual areas.

The Parties may also decide that an agreement should sit outside of the overarching institutional framework, and in those cases should provide for appropriate governance arrangements (121).

Like 73, the is door left wide open to permanent vassalage. Paragraph 124 forwards third party arbitrated dispute resolution. 123 adds, “The Parties should provide for the possibility to review the future relationship,” thereby crucially leaving the door open for us to return to the EU, not that we will have ever left.

132 and 134The Parties will base the arrangements for dispute settlement and enforcement on those provided for in the Withdrawal Agreement. To that end, the Parties should first make every attempt to resolve any matter concerning the operation of the future relationship through discussion and consultation. If either Party deemed it necessary, it should be able to refer the matter to the Joint Committee for formal resolution.

Should a dispute raise a question of interpretation of Union law, which may also be indicated by either Party, the arbitration panel should refer the question to the CJEU as the sole arbiter of Union law, for a binding ruling. The arbitration panel should decide the dispute in accordance with the ruling given by the CJEU (134).

This is a trap. Under the banner of economic stability and frictionless trade, the UK will continue to align with EU regulations. As mentioned above, that will mean reams of Union law on British statute books for the ECJ will preside over.