State of play in the Brexit negotiations implications for the ACP: November 30th 2017

This article reviews the state of play in the 1st phase of Brexit negotiations on the eve of the deadline for the circulation of draft conclusions for the EU Council meeting scheduled for the 14/15 December 2017.  It then seeks to review the possible implications for ACP agro-food sectors of the current state of play.

  • State of Play

Following a meeting between UK Prime Minister May and European Council President Donald Tusk it was reported the UK had until the 4th December to improve its offer ‘on critical withdrawal issues’ if EU leaders were to determine ‘significant progress’ had been made and a basis now existed for  moving on to trade negotiations.

Mr Tusk maintained ‘it was “possible” sufficient progress could be made at the December summit but that it remained a “huge challenge”.’  Since some progress has been made on citizen’s rights issues and there would appear to be scope for a compromise on the important issue of the role of the ECJ in enforcing any agreement on citizens right the two main outstanding areas where ‘sufficient progress’ is still required are: the issue of avoiding the reintroduction of a ‘hard’ border within the island of Ireland; and the financial settlement.

  • The Irish Question

On the question of the Irish border the Irish Foreign Minister Simon Coveney has noted ‘it was difficult to see how border checks could be avoided if the UK quit the EU’s customs union and single market, leading to “regulatory divergence” between the North and the Republic’. It is feared the reintroduction of border checks could create a target for ‘hard-line’ nationalist and potentially undermine the Good Friday Peace Agreement

However the Taoiseach Leo Varadkar has suggested ‘a “bespoke” arrangement, similar to that operated on the Isle of Man, under which Northern Ireland, or the whole of the UK, would continue to observe the rules of the single market and customs union without necessarily remaining a member of them, would be one option to avoid a ‘hard’ border(1).

In this context the EC Brexit chief negotiator Michel Barnier has noted ‘Northern Ireland already has specific rules in many areas that are different to the rest of the UK’. He cited the case of ‘the “all-Island” electricity market, or of the specific regulations for plant health for the whole island of Ireland’ as well as common ‘rules that prevent and handle animal disease’. All in all he maintained, there are ‘over one hundred areas of cross-border cooperation on the island of Ireland’, many of which depend on ‘the application of common rules and common regulatory space’ (2).

While bilateral talks between the UK and Irish governments continue to resolve the issue of the Irish border, the UK government is reluctant to concede to any arrangement whereby Northern Ireland would continue as a member of the EU customs union while the remainder of the UK would not (1).

There are contradictory signals coming from the UK government on this option. Some Downing Street sources claim the issue is ‘a matter for negotiations’, while others maintain ‘the Government’s position is still that the whole of the UK will leave both the customs union and single market after Brexit’. The UK government is reportedly looking for an ‘innovative way forward’ with various technical solutions being advanced as to how this apparent impasse could be circumvented (1).

There is however a strong political dimension to this issue with the UK Conservative government dependent on the support of the Democratic Unionist Party (DUP) for its parliamentary majority. The DUP is firmly opposed to ‘anything that would see Belfast and London diverge’ (1). This can be seen as complicating  bilateral government to government discussions, with the DUP virtually holding a power of veto on this issue, since by withdrawing its Parliamentary support from the administration of Theresa May it could bring down the Conservative government.

It is against this background that according to the Guardian ‘the seemingly intractable question of the Irish border is now looking like the biggest single obstacle to Britain obtaining the “sufficient progress” verdict’, in time for the EU Council Summit from the 14/15 December 2017.

Resolving the Irish border issue has not been helped by remarks by the UK Trade Secretary Liam Fox to the effect that this issue ‘could be settled only as part of an agreement with the EU on future trade’.  This needs to be seen in a context where the EU insists sufficient progress must be made on the three ‘divorce’ issues before trade talks can begin (3).

  • The Financial Settlement

On the financial settlement issues, while the UK Cabinet has now agreed to increase the UK’s financial settlement offer (reportedly to €40 billion, an amount which is still far short of the EC’s estimated €60 billion). However Prime Minister May is reluctant to put forward a specific amount in the context of formal negotiations without a clear idea of the kind of trade deal which would be on offer.

Prime Minister May has however reiterated the position set out in her Florence speech  with regard to honouring in full past commitments the UK made while part of the EU and ensuring that  ‘no member state of the European Union… would receive less of have to pay more in the current budget plan’ (1).

This position could well see Prime Minister May making an improved offer on the financial settlement on the eve of the EU Council meeting.  It remains to be seen whether this will be sufficient to break the deadlock and allow the conclusion to be reached that sufficient progress has been achieved in 1st phase issues to allow the launch of negotiations on future trade arrangements, including any transitional trade arrangement which might be required.

At the level of EU member states a Dutch parliamentary European Affairs Committee report has warned the ‘EU should prepare for a chaotic and disorderly Brexit’, with this being the result of ‘Britain’s “unrealistic expectations” and “inconsistency”’ in the positions advanced (4).

Comment and Analysis

The quest for technical and administrative arrangements which would help resolve the issue of the Irish border could potentially carry valuable lessons for how to ensure the continued smooth functioning of triangular supply chains (e.g. ACP horticultural exports via the Netherlands to the UK). ACP exporters involved in triangular supply chains could usefully keep a close eye on the technical and administrative solutions being developed to try and overcome the impasse around the Irish border question.

On the financial settlement issue UK commitment continues to refer to the current budget plan, which excludes wider EU financial obligations. These range for the pension obligations to ex-EU civil servants who are UK citizens to the fulfilment of UK financial commitment to the European Development Fund, to which the UK contributes on a voluntary basis. Clearly the issue of the overall level of member states financing available under the EDF is of direct interest to the ACP, since the UK is the third largest contributor to the EDF, providing nearly € 4, 477.859 million to the financing of the 11th EDF (5).

Given current commitment and disbursement rates under the 11th EDF it is conceivable that around 90% of the 11th EDF financial commitment will still need to be disbursed after the UK has formally left the EU. Many of these EDF programmes have a focus on agriculture and rural development programmes and hence have a relevance to the development of agro-food sectors in a range of ACP countries.

Securing clarity on these broader UK financial commitments as part of the first phase of Brexit negotiations is thus of considerable importance to the ACP. There would appear to be no reason why such commitments should not be forthcoming, since DFID will already have made provision for these EDF commitments in the future budget planning process.

Should there be a ‘hard’ Brexit with no agreement in place it remains to be seen how the EC will deal with any consequent financial shortfall. This may not cause any fundamental problem, since under recent EDFs the EU has tended to carry over un-utilised funds into the successor EDF. In this context the net effect of the termination of the UK contribution may simply be a reduction of undisbursed funds at the end of the 11th EDF process.

However the withdrawal of the UK’s financial contribution could generate a less flexible approach on the part of the European Commission when problems arise with programme implementation, since the EC may start looking for “savings” equivalent to the terminated UK contribution.

On the citizen’s rights issue any failure to achieve a comprehensive agreement which provide reassurance to EU27 migrant labourers in the UK could adversely impact on labour availability in certain UK agro-food sectors. The sector potentially most severely affected is the fruit and vegetable sector. This could undermine the competitiveness of UK production, and first stage preparation and packaging activities for fresh fruit and vegetables.

This could potentially open up opportunities for some ACP exporters, notably those with good air links direct to the UK which allows ACP exporters to meet the ‘just-in-time’ delivery requirements of UK supermarkets.  The best placed ACP exporters in this regard would appear to be the EAC member countries, given a new direct scheduled freight service between Nairobi and Sheffield/Doncaster airport has recently been launched (6).

(1) Independent, ‘EU gives Theresa May 10 days to improve her offer before trade talks can begin’, 24 November 2017
(2) EC, ‘Speech by Michel Barnier at the Centre for European Reform on ‘The Future of the EU’, 20 November 2017
(3) Guardian, ‘Brexit weekly briefing: Irish border question becomes big obstacle’, 28 November 2017
(4) Guardian, ‘Brexit weekly briefing: Kicking and screaming towards the cheque book’, 21 November 2017
(5) Official Journal of the EU, ‘Internal Agreement between the Representatives of the Governments of the Member States of the European Union, meeting within the Council, on the financing of European Union aid under the multiannual financial framework for the period 2014 to 2020, in accordance with the ACP-EU Partnership Agreement, and on the allocation of financial assistance for the Overseas Countries and  Territories to which Part Four of the Treaty on the Functioning of the European Union applies’, 6 August 2013
(6) Doncaster/Sheffield Airport, ‘New cargo win for Airport’, June 21, 2017