UK-EU relations after Brexit Contents

Chapter 2: The scope of the future UK-EU relationship

Compare and contrast

10.Both sides have acknowledged the desirability of establishing a strong UK-EU relationship. The Prime Minister has stated her desire for a “positive and constructive”, or “deep and special” partnership with the EU.4 The European Council has stated its determination “to have as close as possible a partnership with the UK in future”, while warning that the UK’s “repeatedly stated positions” may “limit the depth of such a future partnership”.5

11.The two sides have also identified benefits that they would like to achieve by means of this future partnership—though without so far agreeing to any great extent on the mechanisms for delivering these benefits. Table 1 compares the benefits that the UK Government (in particular as set out in the Prime Minister’s speech at the Munich security conference on 17 February 2018 and in her Mansion House speech on the future economic partnership with the EU of 2 March 2018), the European Council (in its guidelines adopted on 23 March 2018) and the European Parliament (in its resolution of 14 March 2018)6 have identified. We will seek to produce updated versions of this table as more detail on the positions of the UK Government and the EU institutions emerges, notably once the Government’s White Paper on future UK-EU relations is published. Benefits are colour-coded as follows:

Table 1: Comparison of the UK Government, European Council and European Parliament’s positions on future UK-EU relations (5 June 2018)

Issue

UK Government position

European Council position

European Parliament position

Cross-cutting issues

Dispute resolution/ enforcement

The jurisdiction of the CJEU in the UK must end: instead an independent arbitration mechanism, resolving disagreements fairly and promptly. ‘Respect the remit’ of the CJEU in some, limited, spheres.

Governance to address management and supervision, dispute settlement and enforcement, including sanctions. Must respect the autonomy of the EU legal order, including the role of the CJEU.

A robust dispute settlement mechanism and governance structures. Must fully preserve the autonomy of the EU’s decision-making and legal order, including the role of the CJEU.

Regulatory cooperation

Cooperation between regulators.

A framework for voluntary regulatory cooperation.

Regulatory cooperation should have a specific focus on SMEs, and be voluntary.

Data protection

Data protection arrangement with more depth than an adequacy arrangement, and with an appropriate ongoing role for UK Information Commissioner’s Office.

Data protection should be governed by EU rules on adequacy, ensuring a level of protection equivalent to that of EU.

An adequacy decision is the preferred and most secure option. The UK must provide a level of data protection that is as robust as Union data protection rules.

Free movement

End to free movement, but maintenance of opportunities for UK and EU citizens to work and study in each other’s territories.

Movement of natural persons, based on full reciprocity and non-discrimination.

Specific provisions on the movement of persons.

Social and employment rights

The UK will not engage in a race to the bottom in workers’ rights; employment rights will keep pace with the changing labour market.

A level playing field in the provision of social protection.

A level playing field in provision of social and workers’ rights.

EU agencies

UK to remain part of some EU agencies (including Medicines, Chemicals and Aviation Safety) through associate membership, abiding by their rules, respecting the remit of the CJEU where relevant, and making an appropriate financial contribution.

Autonomy of EU decision-making excludes participation of the UK in the decision-making of EU bodies, offices and agencies.

As a general rule the UK cannot as a third country participate in or have access to EU agencies, though this does not exclude cooperation in specific cases.

Economic relations

Future economic relationship

Economic partnership, covering more sectors and co-operating more fully than any FTA.

A balanced, ambitious and wide-ranging FTA. This cannot offer the same benefits as EU Membership.

UK membership of the internal market and the customs union is the best option, but current UK position is only compatible with a trade agreement.

Trade in goods

Trade in goods

Zero tariffs or quotas, and one set of regulatory approvals (through associate membership of some regulatory agencies).

FTA should cover all sectors and seek to maintain zero tariffs and no quotas, with appropriate rules of origin.

UK position is only compatible with a trade agreement.

Product standards

Reciprocal binding commitments (including to keep standards as high as EU) to ensure fair and open competition. Equivalence of regulatory outcomes, overseen by an independent mechanism. Comprehensive system of mutual recognition.

A combination of rules and mechanisms to ensure effective implementation domestically, enforcement and dispute settlement mechanisms, to preserve ‘level playing field’.

A level playing field in relation to international standards and EU policies, together with a clear enforcement mechanism and governance structure, access to justice and a proper complaints mechanism for citizens and NGOs.

Customs

Customs agreement through either a UK-EU customs partnership, or a highly streamlined customs arrangement.

Appropriate customs cooperation, preserving the regulatory and jurisdictional autonomy of the parties and integrity of the EU customs union.

The UK’s position will lead to customs checks and verification, even if tariff barriers can be avoided.

Agriculture

The UK will leave the CAP, but environmental standards will remain at least as high as the EU’s. Maintenance of open markets for each other’s produce.

Disciplines on sanitary and phytosanitary measures.

Access to the EU market in food and agricultural products is conditional on strict compliance with all EU law and standards.

Environment/ climate change

Environmental standards will remain at least as high as the EU’s.

The future partnership should address climate change and sustainable development, as well as cross-border pollution.

The UK should remain fully aligned with current and future EU legislation; if not, there should be safeguards and mechanisms to ensure close cooperation and high standards.

Fisheries

The UK will leave the CFP, but will work with the EU to manage shared stocks and to agree reciprocal access, while ensuring a fairer allocation of fish to the UK fishing industry. Maintenance of open markets for each other’s produce.

Existing reciprocal access to fishing waters and resources should be maintained.

A ‘novel bilateral partnership’ covering access to waters and resources and sustainable management of shared stocks. Access to the EU domestic market must be conditional on access for EU vessels to UK fishing grounds, and cooperation in management of shared stocks.

Trade in services

Trade in services

New barriers should only be introduced where absolutely necessary.

FTA to cover trade in services, to the extent consistent with the UK becoming a third country.

Under a FTA market access for services is limited and subject to exclusions, reservations and exceptions.

Cross-border service provision

Enable UK firms to set up in the EU and vice versa, and agree an appropriate labour mobility framework.

Allow market access to provide services under host state rules, consistent with the UK becoming a third country.

Reciprocal market access in full compliance with WTO rules and with EU rules on equal treatment.

Qualifications

Mutual recognition of qualifications.

Mutual recognition of qualifications.

No specific reference.

Financial services

Include financial services in a FTA, based on maintenance of the same regulatory outcomes over time, alongside an enforcement mechanism.

Safeguard financial stability in the EU and respect its regulatory and supervisory regime and standards.

UK will lose passporting rights for financial services. Prudential carve-out and limitations in the cross-border provisions of financial services are normal in FTAs.

Corporate taxation

No specific reference.

No specific reference.

The UK (and its dependent territories) should adhere to EU laws on taxation and anti-money laundering.

Energy

Protect the single electricity market in Ireland/Northern Ireland; explore UK participation in EU internal energy market (IEM); close association with Euratom.

No specific reference.

Possible third-country arrangement, respecting the integrity of the IEM and contributing to energy security. UK to comply with nuclear safety standards.

Transport

Continuity of maritime and rail services, and mutual access for road hauliers.

Agreements on transport, ensuring a level playing field.

Market access conditional on regulatory convergence and alignment. Possible cooperation on transport projects.

Aviation

Continuity of air services. Membership of the European Aviation Safety Agency.

Air transport agreement, with aviation safety and security arrangements.

Agreements on air transport and aviation safety.

Digital

The UK will not be part of the Digital Single Market but will seek domestic flexibility to respond to new developments.

No specific reference.

No specific reference.

Civil justice cooperation

A broader agreement going beyond the Lugano Convention, covering company law and intellectual property.

Options for judicial cooperation in matrimonial, parental responsibility and other related matters, and protection of intellectual property rights, including geographical indications

No specific reference.

Competition/ State aid

UK may remain in step with EU regulations on State aid and competition.

A level playing field, including in competition and State aid.

A level playing field, including in competition and State aid.

Public procurement

No discrimination between UK and EU service providers.

FTA to address access to public procurement markets.

Reciprocal market access based on full compliance with WTO rules on public procurement.

Science and innovation

UK to participate in EU programmes and make an ongoing financial contribution.

Participation of the UK in programmes subject to third country rules.

UK participation as a third country; no net transfers from the EU budget to the UK; no decision-making role for the UK.

Education and culture

UK to participate in EU programmes and make an ongoing financial contribution.

Participation of the UK in programmes, subject to third country rules.

Cooperation, including through programmes such as Erasmus or Creative Europe.

Security

Internal security

A new security treaty that preserves operational capabilities, respects the sovereignty of the UK and EU legal orders, includes a dispute resolution mechanism and data protection arrangements. It should retain the benefits of the European Arrest Warrant, Europol, the Schengen Information System II and the processing of passenger data.

Law enforcement and judicial cooperation in criminal matters, taking into account that the UK will be a non-Schengen third country, covering information exchange, operational cooperation between law enforcement authorities, and judicial cooperation in criminal matters. Safeguards to protect fundamental rights and enforcement and dispute settlement mechanisms.

Continued security cooperation, avoiding disruption of information flows. Third-country arrangements on judicial cooperation on criminal matters, extradition and mutual legal assistance. Non-Schengen third-country arrangements on exchange of security-relevant data and operational cooperation with EU bodies and mechanisms such as Europol and Eurojust. Safeguards for fundamental rights, data protection standards, and effective enforcement and dispute settlement.

External security

Foreign and defence policy cooperation, including consultation and coordination, in particular on sanctions; continued coordination and operational delivery on the ground; possibility of UK contributions (including financially) to EU development programmes and instruments. In return, the UK to play an appropriate role in shaping collective actions.

Cooperation in foreign, security and defence policy, respecting the autonomy of the EU’s decision-making, and that the UK will be a third country. Should include appropriate dialogue, consultation, coordination, exchange of information, and cooperation mechanisms. Security of Information Agreement to allow for the exchange of information.

As a third country UK will not be able to participate in the EU’s decision-making. Consultation mechanisms to allow the UK to align with EU actions and positions. Support for sanctions coordination. UK could participate in EU missions etc (but with no lead role), the sharing of intelligence, training and exchange of military personnel, and collaboration on armaments policy. Security of Information Agreement to allow for the exchange of information.

Defence

A future relationship with the European Defence Fund and European Defence Agency.

No specific reference.

UK third country participation in defence and external security programmes, including the European Defence Fund.

Cybersecurity

UK to participate in European capability development in cyber.

No specific reference.

Third-country arrangements in electronic communications, cybersecurity and ICT.

Space

UK to participate in European capability development in space. Continued collaboration, including in the development of the Galileo programme.

No specific reference by the European Council, but Commission has said that third countries “cannot participate” in security-sensitive matters.

Third country participation in the EU space programmes, including Galileo, without any net transfers from the EU budget to the UK, or any decision-making role for the UK.

Development and aid

No specific reference.

No specific reference.

Cooperation in development and aid would be mutually beneficial.

Key: Green=broad agreement both on the desired outcome and the means of achieving it; Yellow=agreement on the outcome but disagreement on the means; Red=clear disagreements have emerged, either on outcomes or means; White=insufficient evidence to assess the prospects for agreement

Source: Rt Hon Theresa May MP, speech on ‘The Government’s negotiating objectives for exiting the EU,’ 17 January 2017: https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech [accessed 24 May 2018]; Rt Hon Theresa May MP, speech on ‘new era of cooperation and partnership between the UK and EU’, 22 September 2017: https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-and-partnership-between-the-uk-and-the-eu [accessed 24 May 2018]; European Council, ‘European Council (Art. 50) guidelines on the framework for the future EU-UK relationship, 23 March 2018: http://www.consilium.europa.eu/en/press/press-releases/2018/03/23/european-council-art-50-guidelines-on-the-framework-for-the-future-eu-uk-relationship-23-march-2018/ [accessed 24 May 2018] and European Parliament, ‘Guidelines on the framework of future EU-UK relations’, 14 March 2018: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+P8-TA-2018-0069+0+DOC+PDF+V0//EN

12.The amount of yellow shading in Table 1 illustrates both the common ground between the UK and the EU, and the distance. The two sides agree in desiring continued cooperation in trade, security and culture, but there is minimal agreement on how to deliver these cardinal outcomes. In a number of areas, moreover, clear disagreements have emerged, showing that even specific issues, such as UK participation in the Galileo space programme, may have the potential to derail more cross-cutting agreements. There is also a risk that key concepts may be interpreted differently by the two sides.

The obstacles to agreement

13.The UK Government’s ‘red lines’ were articulated first in the Prime Minister’s speech to the Conservative Party conference in October 2016, just over three months after the referendum, and have been developed in subsequent speeches, notably her Lancaster House speech in January 2017. They derived from her fundamental premise, that the result of the referendum meant that the UK should become a “fully-independent, sovereign country”.7 In summary, the Government’s ‘red lines’ were:

14.In response to the UK’s ‘red lines’, the EU soon issued its own ‘red lines’, or ‘core principles’. As described in the European Council (Art. 50) guidelines of April 2017, these are:

15.In the European Council’s March 2018 guidelines, these ‘red lines’ were re-stated, but qualified by a statement that they reflect “the positions stated by the UK. If these positions were to evolve, the Union will be prepared to reconsider its offer.” But as no such change has occurred, the two sides’ current ‘red lines’ severely limit the options for establishing a deep and long-lasting partnership. For instance, the UK’s wish to end the direct jurisdiction of the CJEU, combined with the EU’s determination to protect its autonomous decision-making and the role of the CJEU as the sole arbiter of EU law, puts continuing UK engagement in many areas of shared interest—including police and security cooperation—at risk.

16.The logic of mutually exclusive ‘red lines’ is illustrated by the ‘Stairway to Brexit’—the slide presented by the EU’s chief negotiator, Michel Barnier, to the European Council in December 2017. The slide is reproduced as Figure 1.

Figure 1: The ‘Stairway to Brexit’

Slide showing a graphical representation of the possible future relationship post-Brexit

Source: European Commission, ‘Slide presented by Michel Barnier, European Commission Chief Negotiator, to the Heads of State and Government at the European Council (Article 50) on 15 December 2017’: https://ec.europa.eu/commission/publications/slide-presented-michel-barnier-european-commission-chief-negotiator-heads-state-and-government-european-council-article-50-15-december-2017_en [accessed 5 June 2018]

17.The Commission’s slide is compelling and misleading in almost equal measure. It fails to acknowledge the existence of the EU’s ‘red lines’, which mirror the UK’s—for instance, it is only the EU’s insistence on the indivisibility of the four freedoms13 which, when juxtaposed with the UK’s desire to end free movement of persons, precludes fuller participation in the Single Market. This failure is compounded by the Commission’s insistence that the options for future relations be represented solely by means of pre-existing models, such as the ‘Norway model’, or the ‘Turkey model’. In this way, the uniqueness of the UK-EU relationship (given that no other Member State has ever left the EU) is obscured.

18.Thus both sides began by adopting defensive postures, ruling options out rather than in. In the words of Jude Kirton-Darling MEP: “The two negotiating teams are in their trenches, with the UK side saying, ‘We have these red lines in relation to the single market and the customs union’, and the EU side saying, ‘That discounts you from anything other than a Canada deal’.”14 Frances O’Grady, General Secretary of the Trades Union Congress, agreed: “It is fine having red lines, but you do not publish them. You give yourself some room for manoeuvre.”15 The Government, in her view, needed to “extend an olive branch”, to “unlock” the negotiations.

19.In reality, however, the Government’s red lines were from the outset less clear than they appeared. As early as January 2017, the Prime Minister qualified her insistence that “vast contributions” to the EU budget should end by conceding that the UK might want to participate in some “specific European programmes”, and that it would be willing in return to make “an appropriate contribution”. That process of qualification has continued, leading to what Dr Sylvia de Mars, of Newcastle University, called “blurring of the red lines”.16 Joe Owen, of the Institute for Government, agreed that the Government’s red lines had become “less stark”,17 while Jude Kirton-Darling believed that the Government’s red line on CJEU jurisdiction had been “completely blown out of the water”.18 Carolyn Fairbairn, Director General of the Confederation of British Industry (CBI), was more positive, describing the Prime Minister’s Mansion House speech in particular as a “real step forward”:

“The challenge we had up to that point was the sense that you could have everything. The core central question, which is the trade-off between access and control, was somehow not there. Having your cake and eating it was the phrase of the moment.”19

20.In her Mansion House speech, the Prime Minister described what she called “some hard facts”:

“We are leaving the Single Market. Life is going to be different. In certain ways, our access to each other’s markets will be less than it is now … The second hard fact is that even after we have left the jurisdiction of the ECJ, EU law and decisions of the ECJ will continue to affect us … The next hard fact is this. If we want good access to each other’s markets, it has to be on fair terms. As with any trade agreement, we must accept the need for binding commitments—for example, we may choose to commit some areas of our regulations like State aid and competition to remaining in step with the EU’s … Finally, we need to resolve the tensions between some of our key objectives. We want the freedom to negotiate trade agreements with other countries around the world. We want to take back control of our laws. We also want as frictionless a border as possible between us and the EU—so that we don’t damage the integrated supply chains our industries depend on and don’t have a hard border between Northern Ireland and Ireland.”20

21.The Prime Minister also challenged the EU to face up to “hard facts” about tensions in its own position. For instance, while the EU aspired to a balanced, ambitious, and wide-ranging deal, with common rules to ensure fair and open competition, she argued that this would not be delivered by a ‘Canada-style’ deal. She also criticised the EU’s insistence on ‘no cherry-picking’: “Every free Trade Agreement has varying market access depending on the respective interests of the countries involved. If this is cherry-picking, then every trade agreement is cherry-picking.”

Conclusions

22.The most constructive way to approach negotiations on the future UK-EU relationship would be for both sides to focus on their desired outcomes. Instead, both sides appear to have approached the negotiations by focusing on ‘red lines’, closing off rather than opening up the options for establishing a fruitful and lasting relationship.

23.The Prime Minister set the tone in her speech to the Conservative Party conference in October 2016, and the Commission’s ‘Brexit stairway’, published in December 2017, was negative and prescriptive in its representation of the options for future relations. Even the European Council’s March 2018 guidelines, while paying lip service to the EU’s desire for a close partnership with the UK, do not set out a compelling vision for that partnership, but are predicated on reacting to the UK’s ‘red lines’.

24.We welcome the Government’s increasing realism, which suggests that it is beginning to understand the costs and compromises that will be needed to achieve a successful outcome. Both sides now need to change their mindset if a genuinely close and mutually beneficial partnership is to be achieved.


4 Rt Hon Theresa May MP, speech on ‘The Government’s negotiating objectives for exiting the EU,’ 17 January 2017: https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech [accessed 24 May 2018]; Rt Hon Theresa May MP, speech on ‘new era of cooperation and partnership between the UK and EU’, 22 September 2017:https://www.gov.uk/government/speeches/pms-florence-speech-a-new-era-of-cooperation-and-partnership-between-the-uk-and-the-eu [accessed 24 May 2018]

5 European Council, ‘European Council (Art. 50) guidelines on the framework for the future EU-UK relationship’, 23 March 2018: http://www.consilium.europa.eu/en/press/press-releases/2018/03/23/european-council-art-50-guidelines-on-the-framework-for-the-future-eu-uk-relationship-23-march-2018/ [accessed 24 May 2018]

6 European Parliament, ‘Guidelines on the framework of future EU-UK relations’, 14 March 2018: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+P8-TA-2018–0069+0+DOC+PDF+V0//EN [accessed 6 June 2018]

7 Rt Hon Theresa May MP, speech on ‘Britain after Brexit: A vision of a Global Britain,’ 2 October 2016: http://press.conservatives.com/post/151239411635/prime-minister-britain-after-brexit-a-vision-of [accessed 24 May 2018]

8 Rt Hon Theresa May MP, speech on ‘The Government’s negotiating objectives for exiting the EU,’ 17 January 2017: https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech [accessed 24 May 2018]

9 Rt Hon Theresa May MP, speech on ‘Britain after Brexit: A vision of a Global Britain,’ 2 October 2016: http://press.conservatives.com/post/151239411635/prime-minister-britain-after-brexit-a-vision-of [accessed 24 May 2018]

10 Rt Hon Theresa May MP, speech on ‘The Government’s negotiating objectives for exiting the EU,’ 17 January 2017: https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech [accessed 24 May 2018]

11 Rt Hon Theresa May MP, speech on ‘The Government’s negotiating objectives for exiting the EU,’ 17 January 2017: https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech [accessed 24 May 2018]

12 European Council, ‘European Council (Art. 50) guidelines following the United Kingdom’s notification under Article 50’, 29 April 2017: http://www.consilium.europa.eu/en/press/press-releases/2017/04/29/euco-brexit-guidelines/ [accessed 24 May 2018]

13 Some commentators have challenged the EU’s insistence that the four freedoms are indivisible. See for instance Wilhelm Kohler and Gernot Müller, ‘Brexit, the four freedoms and the indivisibility dogma’, 27 November 2017: http://blogs.lse.ac.uk/brexit/2017/11/27/brexit-the-four-freedoms-and-the-indivisibility-dogma/ [accessed 4 June 2018]. The Committee has not taken evidence on this issue.

20 Rt Hon Theresa May MP, speech on ‘our future economic partnership with the European Union,’ 2 March 2018: https://www.gov.uk/government/speeches/pm-speech-on-our-future-economic-partnership-with-the-european-union [accessed 24 May 2018]




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