Signals from government: laying down the markers for Brexit trade negotiations
August 24, 2017
Trading goods is fundamental to the UK’s relationship with the EU at present and will remain so in the future; so it is no surprise that two of the recent ‘position papers’ published by the UK government have focused on how we might manage UK/EU trade between ‘Brexit Day’ in March 2019 and the negotiation of a final agreement, which may continue for a number of years.
Last week the paper on ‘Future Customs Arrangements’ with the EU-27 set out a choice for the interim period: either a streamlined system to minimise the costs and other burdens (which our departure from the Customs Union would otherwise require); or an ‘unprecedented’ partnership under which the UK would maintain EU rules, thus removing the need for a formal customs border.
Under either scenario, from late March 2019 the UK would start negotiating trade deals with countries outside the EU, which cannot be done while we are within the EU Customs Union. This is the political prize the UK wishes to secure, since the sooner these negotiations can start the better: this imperative explains why ministers are not choosing the simpler administrative option of staying in the Customs Union (or the Single Market) until a final trade deal is agreed with the EU-27.
My colleague Matthew Clark highlighted some of the key issues for business last week – firstly, there is big change coming and businesses need to recognise that by engaging on the issues; secondly, either approach (and most other options), if agreed, will require extra data and put significant pressure on the IT systems used to collect, analyse and share information with UK and EU authorities, and other parts of the supply chain; the compliance requirements will also change.
This week’s paper on ‘Continuity in the availability of goods’ delves deeper into the practical issues which will affect businesses and consumers in the immediate aftermath of Brexit: the most obvious issue will relate to ‘goods which are placed on the market before the date of withdrawal, but cross the UK/EU border after exit’, as the paper highlights. The UK seeks to codify key principles which would allow: unhindered circulation of goods, mutual recognition of standards compliance, ongoing monitoring arrangements and continued acceptance of ‘associated services’ (such as maintenance) without which, for instance, the goods will not sell or function.
This detail matters to business and is an example of the government’s desire to have a ‘smooth and orderly withdrawal’, by ‘provid[ing] legal certainty and avoid[ing] disruption’. The principles set out in this paper help inform the scenarios for regulatory change arising from Brexit. With increasing information available to them, businesses now need to:
- Understand the sources of regulation affecting them;
- Consider how the EU negotiations and UK legislative processes may change that regulation;
- Monitor the EU and UK processes; and (taking these 3 points into account) include regulatory change in the organisation’s overall Brexit impact assessment.
Beyond the operational proposals and principles in these papers, there is a broader purpose, to lay down markers about the new trade deal which will govern the future relationship with the EU. The scene setting in the papers is thus as important as the detail, seeking to balance the domestic requirement to ‘take back control’ over trade arrangements, domestic law and much else, with the aspiration to maintain as many of the existing benefits of EU membership as possible. The latest paper therefore highlights the high level of convergence in technical standards, the high degree of self interest in maintaining existing levels of trade and the precedents within other EU international arrangements which would support the UK’s suggested approach.
And here is the crux: the UK is beginning to define the ‘landing zone’ it sees for the final trade deal and is being careful, with its focus in these papers on the detail of transition, to lay out arguments which will serve its negotiating purpose, and be consistent for both the transition and the final agreement.
We need to remember, however, that there is a long way to go on this: these are called ‘position papers’ for the very reason that they are the position of one side as it prepares for negotiations. The EU has begun to set out its position, too: what will be negotiated and agreed remains unclear.
For business, there are two clear imperatives during this period of uncertainty: one, as this new paper underlines and illustrates, businesses need to understand the source and impacts of current regulation and how changes may affect them, and two, businesses should take up the government’s invitation to engage on priorities, to equip them with the data, examples and solutions needed to support ongoing negotiations.