The Government's negotiating objectives: the White Paper Contents

Conclusions

Introduction

1.This report focuses on the Government’s negotiating objectives and not on the potential benefits and opportunities that arise from the United Kingdom leaving the European Union. (Paragraph 8)

2.We welcome the Government’s decision to publish a White Paper in response to a recommendation in our First Report. This document has provided some further detail on the Government’s negotiating objectives. However, as the Secretary of State has indicated, “this is likely to be the most complicated negotiation of modern times” and its outcome is far from certain. (Paragraph 9)

Certainty and clarity

3.We will examine the Government’s plans for converting the acquis into domestic law by taking evidence on the “Great Repeal Bill” White Paper when it is published. This will be a complex task for both the Government and Parliament and will need appropriate resource and time to be allocated. We intend to invite Ministers from departments other than the Department for Exiting the European Union to give evidence. We note that the Secretary of State for Environment, Food and Rural Affairs has acknowledged the scale of the technical challenge ahead. The importance and complexity of ensuring legal certainty in the UK on the day after Brexit must not be underestimated. (Paragraph 17)

4.The “Great Repeal Bill” is expected to entail the delegation of very significant powers to Ministers, whether of the UK or devolved governments, to bring forward legislation to ensure that the body of EU law being transposed into domestic law both fits the UK’s legal framework and keeps pace with the UK’s negotiations on its exit deal and its future relationship with the EU. In our scrutiny of the Bill, while understanding the pressure facing Ministers, we will want to be confident that the delegation of powers is sufficient only for the limited job required and does not become a means of passing significant new legislation without the higher level of scrutiny that primary legislation requires. (Paragraph 22)

5.A major justification for Brexit was to enhance Parliamentary sovereignty. Leaving the European Union should not therefore result in a shift in power from Parliament to the Executive. The Committee believes it is essential that Parliament plays a full role in all Brexit-related legislation including the “Great Repeal Bill”. (Paragraph 23)

6.Once the European Communities Act 1972 is repealed, UK courts will no longer be bound by decisions of the Court of Justice of the European Union (CJEU). However, the extent to which UK courts continue to take account of CJEU case law remains to be decided (Paragraph 30)

7.We welcome the Secretary of State’s assurance that Parliament will have a vote on any final deal reached under Article 50 and any agreement on the UK’s future relationship with the EU before the European Parliament votes on it, but we also believe that Parliament must have a vote in the event that there is ‘no deal’. Leaving the EU without a future trade deal and in doing so defaulting to World Trade Organisation (WTO) rules is no less an important decision for the UK’s economic future than the terms of any future Free Trade Agreement between the UK and the EU. It is therefore essential that such a step is not taken without Parliament having a vote on the matter. (Paragraph 33)

8.Ending the jurisdiction of the CJEU over the UK is one of the Prime Minister’s “red lines” in negotiations. The European Communities Act 1972, which the Government is planning to repeal, provides that rulings of the CJEU are binding on UK courts. Whilst the UK is likely to move away from the jurisdiction of the CJEU on exiting the EU, the terms of the UK’s future relationship with the EU may entail continuing regulatory conformity in certain areas, such as certain product standards or data protection. Where regulatory conformity provides the basis of the continuing relationship, this may necessitate agreeing dispute resolution procedures, in trade and other areas, which require continuing account to be taken by UK courts of CJEU case law, just as in any similar agreement with another country the UK courts would take account of the other country’s rulings. (Paragraph 41)

A stronger Britain

9.The Government says that it wants the deal between the UK and the EU to work for the whole of the UK, and that it will be developed with the full engagement of the devolved administrations. There are clearly significant differences in the negotiating priorities of the different parts of the UK. If the future deal is to be acceptable to the whole of the UK, then these differences will need to be discussed, negotiated and common ground agreed upon. Differing priorities reflect, in part, differences in the economies and demography of different parts of the UK. The Government must ensure that it understands these differences and takes them into account when it begins its negotiations with the EU. (Paragraph 70)

10.We recommend that the UK Government respond formally to the Welsh, Scottish and Northern Ireland legislatures regarding each of their options papers. It must do so as a matter of urgency given that negotiations to leave the EU will start imminently. (Paragraph 71)

11.The legislation required to implement the UK’s exit from the EU will affect the competences of the devolved administrations and it is expected that it will require their legislative consent. We note the Supreme Court’s statement that “the Sewel Convention has an important role in facilitating harmonious relationships between the UK and devolved legislatures.” The devolved administrations will require adequate time to conduct the appropriate scrutiny and consultation required before consent can be given. It is likely that the devolved administrations will need to pass their own additional legislation, in turn requiring time for proper consideration in the devolved legislatures. The Government will need to take account of the timescales of the devolved legislatures in its planning. (Paragraph 72)

12.The repatriation of EU powers to the UK raises questions about how the framework for devolved policy areas will evolve. The Welsh and Scottish governments are clear that any future UK framework for devolved policies should be a matter for consultation and intergovernmental negotiations. Notwithstanding the Government’s commitment that “no decisions currently taken by the devolved administrations will be removed from them”, the devolved administrations will be looking to ensure that legislative competences which are currently held by the EU which relate to matters which have been devolved are repatriated as devolved competences. (Paragraph 73)

13.The Government has established a Joint Ministerial Committee for EU Negotiations (JMC (EN)) for consulting the devolved administrations on their priorities for Brexit and it aims to use this forum to agree a UK approach to, and objectives for, negotiations, and to consider proposals put forward by the devolved administrations. The evidence we heard indicated that these meetings have not been effective from the point of view of the devolved administrations. The Government must establish a more effective process for engaging the devolved administrations in developing the UK’s negotiating position. If the Government’s asserted wish to fully engage the devolved administrations is to be credible, it must share more information and discuss options before decisions are reached. A successful exit from the EU will be measured not just in terms of achieving a good deal with the EU but also whether it “works for the whole of the UK”. (Paragraph 74)

14.We welcome the UK Government’s recognition of Gibraltar’s specific concerns, expressed in the White Paper and through the establishment of the Joint Ministerial Council (Gibraltar EU Negotiations). We were encouraged by the Chief Minister’s confidence that Gibraltar’s views were being heard and that the UK Government would find solutions to the challenges that leaving the EU presents for Gibraltar. This will be very important to avoid any damaging consequences for Gibraltar. We encourage the UK Government to maintain a high level of dialogue and engagement with the Government of Gibraltar throughout the Article 50 negotiation process. (Paragraph 83)

15.The UK and Irish economies are deeply integrated and mutually important. Disruption to the Irish economy would not only be damaging for Ireland itself, but would have consequential effects on the economy in Northern Ireland and the rest of the UK. Were the UK to exit the EU without a deal on tariff-free trade, the impact on the agri-food industry on both sides of the border in Ireland would be extremely serious and damaging. (Paragraph 109)

16.The UK has deep and close historical, economic and cultural ties with the Republic of Ireland. The Government has a responsibility to consider how its future relationship with the EU will affect both Northern Ireland and the Republic. Politicians and businesses we met in Dublin were concerned about the UK’s future trading relationship with Ireland and the impact on trade of the re-introduction of customs checks on cross-border trade. Maintaining freedom of movement throughout the island of Ireland and the wider UK is also extremely important, both for many businesses and for many UK and Irish citizens. The border between Northern Ireland and the Republic will become one of the EU’s external borders when the UK leaves the EU. Ensuring that this change does not disrupt flows of trade and people will be a complex challenge. (Paragraph 110)

17.Cross-border cooperation in combating crime is highly valued by both the UK and Irish Governments. With goodwill on both sides, it should be possible to work out a way of ensuring that this cooperation can continue. However, the Irish Government does not see this as a straightforward task and some arrangement would need to be reached to ensure that cooperation can continue the day after the UK leaves the EU even if no permanent deal had yet been reached. (Paragraph 111)

18.It is important to ensure that in implementing Brexit everything is done to maintain and build upon the considerable progress made as a result of the peace process. The Good Friday Agreement was not just a single event but was a critical step in the normalisation of social and economic relations over a period of time. Many in Ireland are deeply concerned that the introduction of new and visible border check points would provide an opportunity and focal point for those who wish to disrupt the peace and feed a sense in some communities that the Good Friday Agreement was being undermined. Irish politicians welcome the Government’s aspiration of maintaining a seamless border, but, at present, do not understand how this can be achieved in practice, given the obligations which Ireland will have as an EU Member State bordering a third country. With the goodwill that currently exists on both sides of the border, we hope that a mutually acceptable solution can be found. This must be at the top of the list of the Government’s negotiating objectives. (Paragraph 112)

A fairer Britain

19.We agree with the Secretary of State that immigration from the EU has made an important contribution to many sectors of the economy in different parts of the country and that, while reducing net migration remains an objective of the Government, this should not be done in a way that damages the economy. The Government’s objective is to secure control of EU migration and this may not entail reducing numbers. Future policy will be an important element in the forthcoming negotiations, given the linkage frequently made between ‘free movement’ and access to the Single Market. We look forward to scrutinising the proposals once the Immigration Bill has been published. (Paragraph 122)

20.We urge the Department for Exiting the EU to continue to make the argument in Government that the future system for EU migration needs to be flexible enough to meet the needs of the economy across the UK. This includes a broad range of different sectors, both high and low skilled, including scientists, bankers, vets, care workers, health service professionals and seasonal agriculture workers. That flexibility should include considering whether immigration should be managed on a geographic basis. We also note with concern the tendency of some employers to rely on importing skilled labour from abroad rather than training up UK employees. (Paragraph 123)

21.The status of EU nationals in the UK and UK nationals living elsewhere in the EU cannot be left unresolved until the end of the two-year period for negotiations. We reiterate the conclusion of our earlier Report that it would be unconscionable for the more than four million people in these groups to find themselves living in a state of uncertainty about their futures until negotiations are complete, and, therefore, that the Government “should now make a unilateral decision to safeguard the rights of EU nationals living in the UK”. We note that, to date, Ministers have not taken this step. The debate around whether “no deal is better than a bad deal” has focussed on the trade aspects of the future relationship. If the negotiations were to end prematurely without an agreement on the rights for the four million, this could put them in an uncertain position. (Paragraph 130)

22.We recommend that an agreement between the UK and EU27 is reached as a matter of priority once negotiations formally start. That agreement should be concluded as a stand-alone and separate deal which is otherwise not dependent on any other exit or future trade deal being agreed to between the parties. (Paragraph 131)

23.We welcome the intention of both the Secretary of State and Michel Barnier, the European Commission’s Chief Negotiator for Brexit, to meet representatives from the EU nationals in the UK and the UK nationals who are resident across Europe in advance of the negotiations. This is an important development and we hope it is a positive step towards an early resolution of the uncertainty and anxiety of the four million across Europe. (Paragraph 132)

24.Notwithstanding the Government’s commitment to maintain protections for workers after the UK leaves the EU, it is likely that levels of protection for workers will diverge in future. Although regulations will be aligned on the day that the UK leaves the EU, thereafter, regulatory power will return to the UK. We note the General Secretary of the TUC’s concern that the UK should not become the “bargain basement” of Europe in this respect and therefore welcome the Secretary of State’s commitment that the Government has no intention of looking to undermine workers’ rights. (Paragraph 138)

A truly global Britain

25.In approaching the negotiations, the Government needs to recognise the strength of the view in the EU27 that, as Michel Barnier has emphasised, the ‘four freedoms are indivisible’. (Paragraph 169)

26.The Government should seek a UK–EU Free Trade Agreement (FTA) which covers both goods and services and retains the mutual recognition of standards and conformity assessments. The Government should also seek to maintain the right of establishment and mutual recognition of qualifications in a UK–EU FTA. The Government should maintain the maximum possible flexibility in its negotiating approach to achieve these outcomes. (Paragraph 170)

27.Notwithstanding the Government’s plans to enshrine EU law into domestic law through the “Great Repeal Bill”, over time the two bodies of law may diverge as the Government seeks to change or repeal regulations. The Government should provide clarity on how it will address divergence in rules and standards and disputes that may arise as a result, outside of the jurisdiction of the CJEU. (Paragraph 171)

28.London is a pre-eminent global financial centre and the financial services industry supports a large number of jobs in London and even more across the rest of the UK. It is in both the UK’s and the EU’s interests to ensure there is minimal disruption to financial services when the UK leaves the EU. As part of negotiations on a UK–EU FTA, the Government should seek to secure stable and predictable equivalence arrangements or a bespoke system comparable to the EU system of “passporting” which will ensure the stability of cross-border financial services between the UK and the EU. (Paragraph 177)

29.Financial and professional services will require time to adjust to any new trading arrangements. The Government should seek to agree a phased process of implementation for the sector early in the negotiations to provide certainty for businesses in preparing for Brexit. (Paragraph 178)

30.The digital industry is an increasingly important sector to the UK economy and relies on the stability of data flows across UK and EU borders. The Government must seek to maintain uninterrupted UK–EU data flows by securing a data adequacy agreement with the EU before the end of the Article 50 negotiations. (Paragraph 182)

31.The broadcasting industry, like many aspects of the UK creative industries, is a success story. International broadcasters base themselves in the UK to broadcast across the EU and the Audio Visual Media Services Directive enables broadcasters in one Member State to do so if they have a licence from the domestic regulator—Ofcom in the UK—and comply with the regulatory requirements in that Member State. This has helped the UK to become Europe’s leading broadcasting hub. In the event of an exit without alternative arrangements in place, international broadcasters could fall back on the Council of Europe’s Convention on Transfrontier Television (CTT), however, it is an inadequate replacement: on-demand broadcasting is not covered, six Member States are not signatories, and it cannot be effectively enforced. International broadcasters could seek to access the EU market through subsidiaries, but this would require them to relocate a significant proportion of their workforce to the EU and for most of their editorial decisions to be made there. Neither of these options are attractive to the sector. The Government must therefore ensure that a future FTA between the UK and the EU retains the ability of broadcasters based in the UK to continue to operate across the Single Market to the same extent once the UK is no longer a Member State. Securing continued access to this market is a priority. (Paragraph 186)

32.In seeking to negotiate its own preferential trade agreements with non-EU countries, the Government has said that it will not continue to observe the Common Commercial Policy (CCP) and Common External Tariff (CET) of the EU customs union. However, it will seek to negotiate a new customs arrangement with the EU to minimise the “frictions” in cross-border trade between the UK and the EU27. The Government has been vague as to the characteristics of such a customs arrangement. The Government must provide more clarity as to the features of its preferred customs arrangement with the EU and how it will differ from a customs union. (Paragraph 198)

33.There is, however, a risk that, on trade, the EU27 will decline to allow the UK to both leave the CCP and the CET and yet retain existing tariff and barrier free trade. (Paragraph 199)

34.Notwithstanding the Government’s ambition to secure a UK–EU FTA, there is a risk that the UK might reach the end of the Article 50 process without a deal and have to fall back on trading under WTO rules. It is imperative that the Government undertake an economic assessment of the scenario whereby the UK leaves the EU without a deal. The Government must also set out what contingency planning is taking place across Whitehall and the mitigation being considered for a ‘no deal’ outcome. (Paragraph 210)

35.Similar to negotiating a UK–EU FTA, embarking on negotiations for FTAs with non-EU countries is entering into the unknown. It is unclear whether the UK’s smaller and more focussed market will be an advantage or a disadvantage in trading negotiations. What is clear, however, is that the UK needs to urgently develop resources and expertise for trade negotiations. The Government should identify resourcing needs and prioritise countries which provide opportunities for developing expertise in trade negotiating. The Government should also prioritise those countries with which the EU has preferential trade agreements and seek early clarity on whether the UK can ‘grandfather’ those FTAs after Brexit. (Paragraph 218)

36.The success of the Higher Education sector in the UK owes much to its ability to attract international skills and talent. The UK Government must design a future immigration system that does not make it difficult for such talent, both students and staff, to come to the UK. It must also send a strong and consistent message that the UK is a welcoming place for people to come and study. The Government should make clear that it wishes to continue to take part in the Erasmus+ student exchange programme. (Paragraph 224)

37.The UK has benefitted from being part of Horizon 2020. The Government has made a clear commitment to underwrite research funding commitments while the UK is a Member State, even if the project continues after the UK leaves the EU. However, the Secretary of State has told us that he does not know what ongoing relationship the UK will have with Horizon 2020. The Government needs to make an explicit commitment that it wishes to continue joint research with the EU27 on the basis of the Horizon 2020 framework, and its successor. (Paragraph 227)

38.The UK needs to be clear what kind of relationship it wishes to pursue with Euratom. It is important that whatever the relationship is, it does not reduce the ability of the UK to pursue international cooperation in the civil nuclear industry and collaborative research in the future, including Horizon 2020 and its successor. (Paragraph 231)

39.The Government will be looking to conclude a bespoke arrangement for continuing involvement with Europol. The UK has been a leading force in Europol’s development. If negotiations progress in a spirit of goodwill towards agreement, there should be scope for an imaginative solution to enable the UK to continue some level of involvement with Europol for the benefit of all European citizens. However, the technical obstacles that will need to be overcome for this to happen will be significant and it is unlikely that the UK will be able to retain the leading role that it currently enjoys. (Paragraph 245)

40.Across the range of Justice and Home Affairs data-sharing instruments, there is a strong operational argument, in the interest of both UK and EU27 law enforcement, for the UK retaining access to data. However, the extent to which this will be possible is likely to be determined by commitments that the UK is able to make in relation to ensuring that its data protection provisions remain aligned with those of the EU, and the governance arrangements that can be agreed around the databases. The access agreed is likely not to be of the same level currently granted. (Paragraph 264)

41.The value of maintaining participation in the European Arrest Warrant, or at least securing an analogous agreement, has been commended to us. We note that the UK comes from the position of having extradition processes already in line with those in the EU. We also note that there are precedents for agreements with the EU analogous to the European Arrest Warrant that do not involve remaining within the jurisdiction of the CJEU. (Paragraph 271)

42.The Secretary of State has said that the Government wants “as far as is possible to replicate what we already have” in respect of Justice and Home Affairs Cooperation. It is to be hoped that the UK’s relationship with the EU when outside it will be one of partnership on the basis of shared values and cooperation. Continuing deep levels of Justice and Home Affairs cooperation represents a test of whether this will be possible. The technical challenges are significant but, we believe, not insuperable and the prize of continued close cooperation is too valuable to lose. We note that, as the Prime Minister acknowledged, a “phased process of implementation” may be required if agreement is not possible within two years. (Paragraph 272)

43.We welcome the Government’s commitment to continuing co-operation with the EU27 on foreign policy and defence matters. This is an area of considerable mutual interest and must be prioritised during the negotiations. We look forward to the Government setting out in more detail its proposals for how such cooperation can be made to work in practice, including the institutional and decision-making frameworks that would underpin it. (Paragraph 276)

A phased approach

44.It appears clear that negotiations will have to take place in a timeline shorter than the two years provided for in Article 50 TEU. Michel Barnier has said that, once Article 50 is triggered, the UK would have just 18 months to negotiate its exit from the EU in order to give the EU institutions enough time to ratify the agreement within the two-year period afforded by Article 50. On both occasions he has given evidence to us, the Secretary of State has agreed with this timetable. (Paragraph 282)

45.There is no precedent for the conclusion of a major, comprehensive bilateral or multilateral FTA covering goods and services within two years, although there is also no precedent for the negotiation of a major FTA between countries that are already convergent in legal and regulatory terms. It may be that starting from this position of convergence enables the terms of a future trade deal to be negotiated more quickly than comparable agreements such as CETA. It is not yet evident, however, that the two-year timetable for achieving this is realistic. (Paragraph 283)

46.Negotiations around the UK’s outstanding and future financial liabilities to the EU will form a very important part of the negotiations which will need to consider liabilities, assets and, potentially, payments by the UK for continued participation in certain EU programmes. It will be essential also to ensure that discussions about money do not get in the way of simultaneous negotiations on the UK’s future relationship with the EU27. (Paragraph 289)

47.We note the Foreign Affairs Committee’s recent conclusion that a ‘no deal’ scenario “represents a very destructive outcome leading to mutually assured damage for the EU and the UK”. We share that view. It is, therefore, very important that both the UK and the EU avoid reaching the end of the two-year negotiating period without an agreement. The Government has talked about walking away from a bad deal, but has not yet explained what terms would be demonstrably worse for the UK than ‘no deal’. The Government should therefore conduct a thorough assessment of the economic, legal and other implications of leaving the EU at the end of the Article 50 period with ‘no deal’ in place. This should be published. The public and Parliament have a right to the maximum possible information about the impact of the different future trading options being considered, including the possibility of no FTA being reached. (Paragraph 293)

48.Without an economic assessment of ‘no deal’ having been done and without evidence that steps are being taken to mitigate what would be the damaging effect of such an outcome, the Government’s assertion that “no deal is better than a bad deal”, is unsubstantiated. Parliament must be in an informed position to decide whether a proposed deal is, in fact, better or worse than ‘no deal’. (Paragraph 294)

49.As the Government has suggested, the extent of disruption caused by leaving the EU is likely to vary across sectors, depending on the terms of the final withdrawal agreement. In some areas, adjustments are likely to be minimal. Where changes in trading arrangements or market access may be more substantial, however, the Government should seek to establish frameworks for implementation phases as early as possible in the negotiation process. It should communicate the terms of those agreements promptly and clearly to businesses and the public, in order to ensure adequate time for planning. (Paragraph 299)





3 April 2017