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After Brexit: the future partnership

March 2018

Hard facts: what the government, Labour and the EU agree on.

A week of major speeches by the Government – trailed as the Road to Brexit – actually began with the leader of the opposition setting out Labour’s Brexit position but ended with the Prime Minister. So how much clearer are we on the UK’s future relationship with the EU? We’ve looked at the speeches and comments and found the points of agreement as well as the points of difference.

What is perhaps surprising is that for all of the political rhetoric, the government and the opposition remain remarkably close in their desires for Brexit – they say they want to remain close to our European neighbours, to preserve the principles of the Good Friday Agreement by ensuring no hard border in Ireland, and to not erode workers’ rights.

Customs union

“A” customs union, “the” customs union, or “a customs partnership”? Many would argue the subtle differences in these phrases are merely technical but in the world of Brexit they make all the difference.

So what kind of customs union/partnership/agreement do the different sides want?

Who Their position
European Union The EU have tended towards the view that that the UK can expect similar access as that available to others, depending on what they want. So if the UK is seeking membership of the Single Market it would gain similar access as Norway.  If the UK wants a free trade agreement and to have an independent trade policy, it would gain similar access to Canada. If the UK wanted bilateral relationships with different EU member states, it would have similar access to Switzerland. This is based on a desire to respect EU Directives on the single market and customs union.
UK Government The Prime Minister has ruled out being a full member of the EU’s Customs Union in every one of her three major speeches on Brexit. In her first, in January 2017, she referred to a “customs agreement”, and in her latest Mansion House speech (1) referred to a “customs partnership”.

This time she has offered two options:

1) A customs partnership where the UK would mirror the EU’s tariffs and rules of origin for goods arriving in the UK and intended for the EU. However there would be a mechanism for the UK to be able to apply its own tariffs on goods only intended for the UK.

2) A “highly streamlined” customs arrangement that would see goods able to travel across UK/EU borders without a requirement for customs declarations partly by mutual recognition of trusted trader schemes.

The PM concluded that the fundamental principle is that trade on the EU-UK border results in no hard border with Ireland. The UK’s commitment is that UK regulatory standards will remain as high as the EU’s.
Labour Labour wants to respect the wishes of the referendum result, therefore a Corbyn government would leave “the” Customs Union for “a” customs union – virtually copying the current model. “A” customs union would mean that the UK’s external tariffs would be set by the EU, therefore allowing tariff-free access to those markets.

The leader of the opposition did caveat that Labour would only stay in “a” custom union if it had a say in EU trade deals.

“Labour would not countenance a deal that left Britain as a passive recipient of rules decided elsewhere by others. That would mean ending up as mere rule takers,” he said in his speech (2).

The Irish border

All sides are agreed that the integrity of the Good Friday Agreement is paramount. As was set out in the December 2017 joint report^ (opens in a new window) that concluded phase one of Brexit negotiations, the 1998 agreement must be protected.

Labour agree and see their proposal for a customs union as being part of the key to achieving this. The EU remains open-minded and has left it to the UK to produce an acceptable proposal, but has caused controversy by suggesting that if no solution is found that Northern Ireland could remain a member of the Single Market.

The PM in her Mansion House speech recognised that it is up to the UK to come up with a solution that achieves that balance of maintaining peace while taking control of the UK’s borders, but she did also say that we can’t do it on our own, and is working with the Irish Taoiseach to make progress.

Further, she reiterated that there can be no customs or regulatory border in the Irish Sea.

Regulatory divergence/alignment

“We are leaving the EU, but we are not leaving Europe.” – Jeremy Corbyn spoke these words in his speech in Coventry. So too, though did the Prime Minster in her Lancaster House speech. In which ways will we be leaving, and which won’t we?

  What the Government has said What the Opposition has said
Aviation, medicines and chemicals The UK proposes becoming associate members of the European Medicines Agency, the European Chemicals Agency, and the European Aviation Safety Agency.

The UK would therefore maintain the same rules as the EU in these areas, as well as making a financial contribution to these bodies.
The opposition recognise the interconnectedness of manufacturing supply chains – citing a Mini that crosses the channel four times during its production. Therefore, Jeremy Corbyn also favours supporting individual EU agencies “rather than paying more to duplicate those agencies here”.
Energy (including atomic) “On energy, we will want to secure broad energy co-operation with the EU. This includes protecting the single electricity market across Ireland and Northern Ireland - and exploring options for the UK’s continued participation in the EU’s internal energy market. We also believe it is of benefit to both sides for the UK to have a close association with Euratom.”
Corbyn said, “we will want to remain a part of agencies like Euratom, regulating nuclear materials in energy and health sectors”.
Financial services
An area that has never been included in an EU free trade agreement according to the PM, but because of the unique status of the City of London as a global financial centre should be included now. May stated though that she would not  be seeking so-called passporting rights, as that is a part of the EU Single Market. Instead she is seeking a bespoke deal in this area.
While not mentioned in Corbyn’s speech, the shadow chancellor recently told Andrew Marr (3) that he was worried “that if we don't get the passporting rights it will impact upon our financial sector, but also our services sector overall, so that's something we've got to negotiate."
Transport and logistics “On transport, we will want to ensure the continuity of air, maritime and rail services; and we will want to protect the rights of road hauliers to access the EU market and vice versa.”
 
State aid The PM said we may seek alignment here in part because the UK “drove much of the policy in this area and we have much to gain from maintaining proper disciplines on the use of subsidies and on anti-competitive practices.”
A clear difference here as Jeremy Corbyn explained his vision for a National Investment Bank investing in regional communities and how Labour would “seek to negotiate protections, clarifications or exemptions where necessary in relation to privatisation and public service competition directives, state aid and procurement rules”
Digital services and data
The UK will not remain a part of the EU’s Digital Single Market, and as a world leader in this area the PM states it is “important to have domestic flexibility, to ensure the regulatory environment can always respond nimbly and ambitiously to new developments.”

However, in the area of data protection rules (with GDPR taking effect this year) the PM wants to go further than maintaining equivalency with an “appropriate role” for the UK’s Information Commissioner. Given that firms who trade with the EU are required to adhere to GDPR irrespective of where they are based, this would make sense if the UK were to continue to have a say in shaping data protection.
No specific mention of this in Jeremy Corbyn’s Coventry speech, but in the Brexit section of their 2017 manifesto (4), the party wrote:

“Labour is committed to growing the digital economy and ensuring that trade agreements do not impede cross-border data flows, whilst maintaining strong data protection rules to protect personal privacy.”

Vote on the final deal?

The Government have said they will offer a vote in Parliament on the final deal agreed with the EU, which will also be subject to the agreement of the European Parliament.

Labour have called for a “meaningful vote” in Parliament on the final deal, but no one in Government or representing the leadership of the opposition has gone as far as to suggest there should be another referendum.

So this is another area where, so far, everyone is in agreement.

What next?

The EU will set out their negotiation guidelines covering the future state of the relationship with the UK some time in March, following May’s speech. She will be hoping that a generally conciliatory tone will cool tensions, but there is no escaping the Autumn deadline that the two parties have set for concluding the formal negotiations.

However, remember that should the transition (or implementation) period of up to two years be agreed upon, that the EU will only formally negotiate with the UK on the future once we are officially a ‘third country’ and that transition has begun after March 2019.