The progress of the UK’s negotiations on EU withdrawal: December 2017 to March 2018 Contents

Conclusions

Draft Withdrawal Agreement

1.We welcome the progress that has been made on protecting citizens’ rights so far. Both sides have taken a largely pragmatic approach to protecting those rights. However, the citizens’ rights strand of the negotiations has not concluded and many issues remain to be agreed in Phase 2 which are some of the most sensitive in the negotiations. These must be resolved with transparency and speed. (Paragraph 16)

2.We recommend that the Government commit to repeating its offer to allow an unlimited return for EU citizens in the UK if UK citizens in the EU retain free movement, alongside the associated rights that flow from that, including recognition of professional qualifications and the right of establishment. The EU’s position on EU citizens’ rights in the UK has been to insist on no diminution of rights. UK citizens in the EU should be able to expect the same treatment. (Paragraph 17)

3.The Joint Technical Notes have been a valuable resource for citizens affected by Brexit. We recommend that the Government seek to work with the Commission to publish a new Joint Technical Note which sets out the outstanding citizens’ rights issues for agreement in Phase 2, with the respective UK and the EU positions on each. This should be done immediately after the European Council meeting in March when the Phase 2 talks are expected to begin. Joint Technical Notes should also be published after each negotiating round. (Paragraph 22)

4.There is considerable scepticism that the Government’s online system for Settled Status and temporary status will be operational in time to start processing applications later this year. Furthermore, depending on the outcome of transition negotiations, there could also be a system to register EU citizens arriving during the transition period. Concerns have been raised by EU citizens in the UK and by the European Parliament about the efficiency and effectiveness of the Home Office’s processes. It is important that the Home Office ensures the online system for settled status and temporary status is operational by the end of this year, although past experience indicates that this may be a challenge for the Department. (Paragraph 30)

5.The current proposals define ‘residence’ by reference to the provisions of the Free Movement Directive. The Directive does not cover a range of vulnerable categories of people who will be experiencing anxiety over their legal status in the UK. As a matter of priority, the Government must ensure that there are specific provisions and flexibility for such people to ensure eligibility for Settled Status that will cover vulnerable children and adults, particularly women who have had caring responsibilities or have been temporarily unable to work because of domestic abuse. The Government should also ensure that different types of part-time or irregular work are considered fairly and plans detailing this should be published as soon as practicably possible after the March negotiating round. (Paragraph 33)

6.The draft Withdrawal Agreement would allow EU Member States to require UK nationals in the EU to apply for a new residence document to ensure that their rights are protected beyond a transition/implementation period following the UK’s exit from the EU. While the negotiations on citizens’ rights are ongoing it is unclear whether any Member States are considering the introduction of such a requirement, should free movement for UK citizens in the EU by the Specified Date not be agreed and it becomes an option that is desirable to Member States. The Government should continue to push hard for continued free movement rights for UK citizens in the EU by the specified date and for an EU Member State equivalent to “settled status” for UK nationals living and working in the European Union after the United Kingdom has withdrawn from the EU (Paragraph 36)

7.We agree with the Government’s proposal to establish an Independent Authority to “champion” the rights of EU citizens in the UK. We recommend that the Government publish draft proposals on how the Independent Authority will carry out its work. There are a number of important ways in which Parliament can have a role in ensuring the independence of those in charge of public bodies. A number of roles are subject to pre-appointment hearings with departmental select committees. For example, the Treasury Select Committee has a statutory veto over the appointment and dismissal of the Chair of the Office for Budgetary Responsibility. The appointment of the Chief Executive of the Financial Conduct Authority is also subject to a pre-appointment hearing with the Treasury Select Committee and the Government has accepted that if it disagrees with a negative report from the Committee, it will table a motion disagreeing with the Committee in Government time. We call on the Government to publish the details of arrangements for appointing the Chair of the Independent Authority as soon as possible, including which Committee it would envisage as having a statutory veto or the right to an appointment hearing. (Paragraph 40)

8.We note that the draft legal agreement does not reflect all the options in the December Joint Report. We support the Government’s rejection of the Commission’s interpretation of what constitutes the previously agreed fall-back position of full alignment in the draft Withdrawal Agreement in the context of the Joint Report’s commitment to uphold the Good Friday Agreement. This is because the UK Government’s commitment was to the United Kingdom—not just Northern Ireland—maintaining “full alignment” with those rules of the internal market and the customs union which support north-south co-operation, the all-island economy and the protection of the 1998 agreement. Whatever solution is reached to resolve issues around the Border must involve the whole of the UK. While we recognise it is the least favoured option for both the Government and the European Union, it has, potentially, far reaching consequences for Northern Ireland, the United Kingdom and Ireland. The Irish Government has said that it sees the Joint Report as an unambiguous commitment to there being no divergence that could lead to a hard border, including any physical infrastructure or related checks and controls. We note that Michel Barnier has already stated that innovative and imaginative solutions must be sought to deal with this issue and believed that given political willingness there are solutions that are worthy of consideration. Because the UK Government has not explained what full alignment means, it should now provide answers to the following questions:

Paragraph 47 of the Phase 1 Agreement said, “The two parties have carried out a mapping exercise, which shows that north south co-operation relies to a significant extent on a common European Union legal and policy framework”. We believe the Government should publish the results of this mapping exercise in order to provide clarity about what is covered by north south co-operation. (Paragraph 50)

9.If the Government is unhappy with sections of the draft withdrawal agreement then it should produce its own suggested legal text. (Paragraph 51)

10.The Joint Report and the draft Withdrawal Agreement commits to there being no “physical infrastructure” or “customs checks” on the Northern Ireland/Republic of Ireland border. We know of no international border, other than the internal borders of the EU, that operates in the frictionless manner of the border that is between Northern Ireland/Republic of Ireland. When the UK leaves the European Union, it will become a third country. Even the border between Norway (an EEA member state) and Sweden (an EU member state) requires some checks and physical infrastructure. (Paragraph 61)

11.We agree with both sides that maintaining a frictionless border through the Future Partnership and Specific Solutions is the best option. We look forward to scrutinising the Government’s proposals, when they are presented. In their absence, however, we remain of the view that we cannot see how it will be possible to maintain an open border with no checks and no infrastructure if the UK leaves the Customs Union and the Single Market. (Paragraph 62)

12.10 April 2018 will be the twentieth anniversary of the signing of the Good Friday Agreement. We welcome the commitment from the Government, as co-guarantor to the Agreement, and from the EU to protect the Agreement “in all its parts”. We also welcomethe Government’s commitment to support fully “Northern Ireland’s position as an integral part of the United Kingdom.” There must be no hard border North-South or East-West. (Paragraph 64)

13.We welcome the agreement of the Financial Settlement in the Joint Report which enabled the EU27 to agree that sufficient progress had been made and that negotiations could move to Phase 2. The Government has outlined its view that the payment of the Financial Settlement is contingent on the agreement of the Future Partnership. However, the treaty establishing the Future Trade Agreement part of the Future partnership will probably not be ratified until after the UK has already made a substantial portion of these payments. (Paragraph 74)

Transition/implementation period

14.The Government believes it can agree the “substance” of its Future Partnership with the EU before October 2018. In the short time that remains, it is difficult to see how it will be possible to negotiate a full, bespoke trade and market access agreement, along with a range of other agreements, including on foreign affairs and defence cooperation. The UK Parliament will need absolute clarity on the Future EU-UK Partnership, including the arrangements for the Northern Ireland/Republic of Ireland border. We look forward to monitoring progress over the coming months. (Paragraph 84)

15.The Secretary of State has said that the “substance” of an EU-UK trade agreement will have been agreed before UK withdrawal in March 2019. The Prime Minister has said that key aspects of our Future Partnership in foreign affairs and defence will be effective by the same date. Yet, the Government has also given October 2018 as the date by which it expects to have agreed the “substance” of its Future Partnership with the EU. The Government should give regular updates to Parliament on progress. (Paragraph 85)

16.If substantial aspects of the Future Partnership remain to be agreed in October, the Government should seek a limited extension to the Article 50 time to ensure that a Political Declaration on the Future Partnership that is sufficiently detailed and comprehensive can be concluded. It would meet the Government’s objective that negotiations on substantive aspects of the Future Partnership should not take place in the transition/implementation period. That time should be used to finalise details and implement administrative measures and infrastructure that is necessary for the Future Partnership. (Paragraph 86)

17.If a 21-month transition/implementation period is insufficient time to conclude and ratify the treaties/agreements that will establish the Future Partnership or to implement the necessary technical and administrative measures along with any necessary infrastructure at the UK border, the only prudent action would be for the Government to seek a limited prolongation to avoid unnecessary disruption. It would, for example, be unacceptable for business to have to adapt their import and export processes twice. We therefore recommend that the Withdrawal Agreement include a provision to allow for the extension of the transition/implementation period, if necessary, and with the approval of Parliament. However, we note that there is a risk that a transition/implementation period that lasts much more than two years might exceed the vires of Article 50 and be subject to a legal challenge in the CJEU. (Paragraph 87)

18.During a prolonged transition/implementation period, the UK would be bound by the full acquis, with no say in the Union’s decision-making bodies. It would also be bound by the CJEU without a UK Judge on the Court. Furthermore, it would have to make financial contributions to the EU’s new seven-year budget, with no say on how it is to be spent. The UK would also be subject to new EU laws over which it had not had voting rights. (Paragraph 88)

19.We note the Government’s view that the Specified Date for the citizens’ rights chapter of the Withdrawal Agreement should be the 29 March 2019 but that it has also made a unilateral offer to provide EU citizens arriving during the transition/implementation period with the opportunity to apply for indefinite leave to remain in the UK. However, under this proposal EU citizens that arrive in the UK will have different rights to those that are living in the UK before the transition/implementation period. We believe that this is not consistent with full acceptance of the acquis which is fundamental to the transition/implementation period. (Paragraph 92)

20.The UK will be a ‘rule-taker’ with few formal rights to consultation under the current proposals for the transition/implementation period. We agree that the Withdrawal Agreement should establish a mechanism under which the UK can have a say on new EU laws that will apply to the UK during the period but which are devised after it has left the European Union’s institutions and call on the Government to come forward with proposals for such a mechanism as soon as possible. (Paragraph 99)

21.The EU has a number of bilateral international agreements with non-EU third countries to which the UK wishes to remain party during the transition/implementation period. The UK has asked the EU to seek agreement with those third countries to continue with these agreements during that time. These third countries and the UK may have a mutual interest in continuing these agreements on current terms. However, the Government’s approach to reaching agreement on the continuation of these agreements after the transition period is over is not clear and the progress that the Government have made to date is unknown. (Paragraph 105)

22.Failure to reach a timely deal on continuing these agreements during the transition/implementation phase could lead to UK exporters no longer being able to take advantage of the EU’s existing free trade agreements, while exporters located in countries with EU FTAs would continue to benefit from preferential access to the UK market on the same terms as now. This would be unacceptable. (Paragraph 106)

23.In our last report, we recommended that the Government publish a detailed White Paper on the transitional/implementation period setting out the Government’s objectives in detail. This would provide much needed clarity for citizens, business, institutions and our partners in the EU27, as well as providing Parliament with an opportunity to scrutinise and potentially improve the Government’s plans. However, just days before the transition/implementation deal is expected to be agreed, the Government has still not published a substantial policy paper that sets out what it wants in precise terms. This is regrettable. By contrast, the EU has set out its objectives for the transition/implementation period in clear terms. (Paragraph 114)

Future Partnership

24.The Government’s EU Exit Analysis modelled the economic impact of three scenarios for the UK’s Future Partnership with the European Union—an “average” Free Trade Agreement with the EU, membership of the European Economic Area and World Trade Organization Most Favoured Nation rules (a ‘no deal’ scenario). The Government is only now starting to measure the economic consequences of different EU-UK trade models. It is therefore concerning that the Government drew red lines on the Future EU-UK trade relationship without having conducted any assessment of the possible impact of these red lines on the UK economy. Moreover, there is no evidence that the Government has modelled the impact of its preferred end state relationship with the European Union. (Paragraph 122)

25.We welcome the Prime Minister’s recent speech on the Future EU-UK Partnership because it provided more details on the Government’s approach and acknowledged the inevitable trade-offs that will result from the UK leaving the Single Market and Customs Union. Furthermore, it acknowledged that the EU’s standards, regulations and enforcement structures would continue to have a significant effect on the UK. However, the speech failed to outline which EU standards and rules the Government expects the UK to continue to abide by and which it wants to diverge from or the economic case for either approach. (Paragraph 131)

26.We welcome the Prime Minister’s statement that the UK will wish to remain associated with certain EU agencies after exit. However, some EU agencies do not currently permit third country participation and the UK’s contribution to decision-making would not be guaranteed. It is acknowledged that the UK has great expertise to contribute in a number of fields that is valued within a number of EU agencies. However, the UK needs to make specific proposals for how it envisages continuing to make an important contribution after exit. Clarity must also be provided on what the UK’s role will be in EU agencies during the transition period. (Paragraph 132)

27.The Commission has suggested that the negotiations on the treaties/agreements will be divided into four pillars to be negotiated in parallel and agreed separately. This structure seems sensible, as it will avoid the rigid, obstructive phasing that has characterised the Article 50 negotiations. However, the Government has not yet set out to Parliament its own view on how this process should be organised or acknowledged that the negotiations on a new partnership will in practice occupy a significant part of the transition/implementation period. It should now outline exactly how the process should be structured and then seek agreement with the European Union. This must be done well in advance of October. (Paragraph 133)

28.We are currently examining different types of trade and partnership agreements into which the EU has entered with third countries. These include CETA, the EFTA and the EEA agreements, the Ukraine Association Agreement, the EU-Turkey Customs Union and TTIP, which was a proposed trade agreement between the United States and the EU which was halted after the 2016 US presidential election. We will present our findings in our next report together with our views on the structure of the future negotiations. (Paragraph 134)



Published: 18 March 2018