Summary
The last epamonitoring.net article dealing with the process of EU/UK withdrawal negotiations covered the EU’s approval of the UK/EU Withdrawal Agreement (26th November 2018) and the subsequent deferment of the UK parliamentary vote on approving the Withdrawal Agreement. From mid-December until mid-February the UK Parliamentary process for ratifying the mutually agreed EU/UK Withdrawal Agreement has been stalled. This article provides an update of developments since the December 2018 UK governments’ decision to defer the Parliamentary vote on the Withdrawal Agreement until 2019 and the potential implications for ACP exporters serving the UK market of the ongoing uncertainty.
Parliamentary Ground-Hog Day But Prime Minister May Endures
With little expectation of UK Parliamentary approval of the Withdrawal Agreement in December the Parliamentary debate was suspended and the vote on the Withdrawal Bill deferred until mid-January 2019.
Immediately following the deferral of the parliamentary vote Prime Minister May faced a vote of no- confidence as Conservative Party leader from within the ranks of the Conservative Party. Prime Minister May survived this Conservative Party vote of ‘no-confidence’; with this meaning she will not face another Party leadership challenge for at least a year. Nevertheless some 117 Conservative MPs voted in favour of the motion declaring ‘no confidence’ in the Prime Minister’s leadership, with this being based almost exclusively on discontent with her management of the Brexit process (2).
This made the prospects of securing parliamentary approval for the Withdrawal Agreement once the debate resumed in January 2019 highly unlikely. This duly proved to be the case with on the 15th January 2019 the government losing the vote on the Withdrawal Agreement bill by 230 votes, a far larger majority against the bill than expected (3).
This immediately saw the tabling of a vote of no-confidence in the government by the opposition Labour Party. However the Conservative rebels and the DUP mobilized behind the Prime Minister and the vote of ‘no-confidence’ was duly defeated (4).
After flirting with seeking cross party support for a revised Parliamentary bill seeking approval for the Withdrawal Agreement, but declining to rule out any possibility of a ‘no-deal’ outcome (4), Prime Minister May has been focused on winning DUP and Conservative rebel support for a tweaked re-submission of the Withdrawal Agreement bill. These efforts have focused on ascertaining what deal with the EU would actually command a majority in the UK Parliament (5).
This process was articulated through a series of votes in Parliament on the 29th January 2019, with a Parliamentary majority emerging for the Withdrawal Agreement if the Irish backstop provision was replaced by an ‘alternative arrangement’. This is known as the ‘Brady Plan’ (1).
Following the vote a second alternative approach was advanced which, although being referred to as the ‘Malthouse compromise’ after the housing minister Kit Malthouse, who is leading efforts to seek a compromise, is based on initial proposals by the former Brexit minister Steve Baker. This proposal constitutes a ‘Plan B’ for a kind of managed ‘no-deal’ arrangement. It involves:
- the drafting of a different backstop which leans heavily on the use of technology to avoid a ‘hard’ border in the context of free trade area agreement, but with the backstop remaining indefinite (9);
- if efforts to renegotiate the backstop fail the establishment of a longer transition period (3 years) with the UK agreeing to honour its agreed financial contributions and its commitments on EU citizens’ rights, but with de facto no comprehensive withdrawal agreement (9).
This it is held would give both sides time to prepare for a departure on WTO terms at the end of 2021 — or to negotiate a different deal. Efforts remain ongoing to broaden support for this approach beyond Conservative Party Remainers and Brexiteers to other MPs from other political parties. To date however this approach does not enjoy official support from the UK government.
On the 7th February Prime Minister May is scheduled to meet with European Commission President Juncker to negotiate a rewording of the Irish backstop to accommodate parliamentary demands for an ‘alternative arrangement’. This appears to be an attempt to place on the EU the onus of finding a solution to what remains essentially an internal UK problem.
The UK government then hopes to return to the House of Commons for further debate on the Withdrawal Agreement in mid-February with a vote tentatively scheduled for 14th February 2019, just over 6 weeks before the UK’s scheduled departure from the EU. However this vote may prove to be yet another test of Parliamentary opinion rather than a final decision on the negotiated EU/UK agreement which is on the table.
Meanwhile the EU Watches as Various Assurances Prove Insufficient
In the run up to the January 15th Parliamentary vote the EU sought to bolster the position of Prime Minister May by providing assurances in areas of Parliamentary concern. This initiative took the form of a letter to Prime Minister May co-signed by European Commission President Juncker and Council President Tusk (6).
The letter expressed the EC’s desire to ‘create as much certainty and clarity as possible for citizens and companies’ as a result of the UK’s decision to leave the EU. The letter reiterated the EU’s its ‘firm commitment to work speedily on a subsequent agreement that establishes by 31 December 2020 alternative arrangements, so that the backstop will not need to be triggered’ (6). It noted how this commitment had been formally endorsed by the EU Council with it being highlighted how ‘European Council conclusions have a legal value in the Union commensurate to the authority of the European Council under the Treaties to define directions and priorities for the European Union’. The letter noted ‘European Council conclusions therefore constitute part of the context in which an international agreement, such as the Withdrawal Agreement, will be interpreted’ (6).
The letter further more reiterated the EC’s desire not to see the backstop enter into force and the EU’s willingness to consider ‘facilitative arrangements and technologies’ which would assist in preventing the emergence of a ‘hard border’ on the island of Ireland as well as the EU’s willingness to re-enter discussions provided the UK’s ‘redlines’ are shifted. The EU also remains open to extending the Article 50 period upon request from the UK, but only if the UK government has identified clear way forward domestically in securing ratification of the Withdrawal Agreement (6)
In regard to the future long-term trade relationship, the letter noted the EU’s commitment to launching ‘preparations for a future partnership with the United Kingdom immediately after signature of the Withdrawal Agreement’, highlighting how ‘any arrangements which supersede the Protocol are not required to replicate its provisions in any respect, provided that the underlying objectives continue to be met’ (6).
However throughout the period since the conclusion of the Withdrawal Agreement negotiations the EU has consistently ruled out any abandonment of the Irish backstop or modifying the legally binding Withdrawal Agreement.
These assurance however proved insufficient to sway the House of Commons, with UK Parliamentarians insisting Prime Minister May renew negotiations with the EU on the Irish backstop. This in part seems to be based on the believe amongst some UK government Ministers that EU leaders ‘will do whatever they can’ to avoid a ‘no-deal’ Brexit, which would seriously damage not only the UK but also a number of EU27 economies, most notably Ireland, the Netherland, Belgium, Germany and France (1).
The Current State of Play
Thus following the December 2018 deferment of the UK Parliamentary vote on the Withdrawal Agreement the situation in regard to the finalization of the Brexit process has continued to remain unclear. The two options on the table, the ‘Brady Plan and the ‘Malthouse Plan’, have been described respectively as ‘lacking in specifics’ and ‘unrealistic’ (1).
This is in large part based on established EU positions which were reiterated following the adoption of the January 29th Brady amendment. Chief Negotiator Barnier reaffirmed ‘the backstop was needed as is’, while EU Council president Tusk said the Withdrawal Agreement was ‘not open for renegotiation’ (7). Against this background senior EU officials are of the view that the risk of a ‘no-deal’ Brexit is now ‘very high’ (1). This is a view with which the UK CBI concurs, maintaining its analysis suggests the UK Parliament is so divided there is no majority for any specific course of action, with this leaving the prospect of a ‘no-deal’ exit increasingly likely (8).
It is against this background that practical preparations for a no-deal Brexit continue apace in the UK and in the worst affected EU27 countries, at both government and private sector levels. Unfortunately these preparations are paying little attention to the specific challenges a ‘no-deal’ Brexit will throw up for ACP exporter to both the UK and EU27 markets.
| Comment and Analysis
Ensuing Continued Terms and Conditions of Access to the UK Market This leaves a second alternative solution to the issue of securing ACP EPA signatories access to the UK market from 30th March 2019, namely unilateral action by the UK to extend duty free-quota free access to the UK market until at least 1st January 2021. This would be consistent with the UK’s existing commitments under Article 129 of the mutually agreed Withdrawal Agreement, an article which has never faced any Parliamentary challenge. What is more there would be a precedent for such action in the EU’s interim EPAs established in December 2007 to allow complex regional negotiations on reciprocal trade arrangements to be completed. These arrangements de facto granted IEPA signatories continued non-reciprocal duty free-quota free access to the EU market while the regional negotiation process was completed. None of the arrangements established under these IEPAs were ever challenged in the WTO. This in fact may be what the UK’s ‘Contingency Agreements’ are intended to reproduce. The key issue will be the UK’s intention in regard to the enforcement of reciprocal obligations in the tricky area of the rules of origin to be applied to UK exports once the UK is no longer part of the EU. The UK knows what it wants, but ACP governments need to be fully alert to what they can secure in exchange, in terms of improved rules of origin for their own exports, given the potential complications which could arise in their relations with third countries from the UK’s preferred approach Either way the UK government will ultimately need to address the practical shortcomings of their proposed ‘Continuity Agreements’. If these shortcomings need to be addressed before reciprocal obligations towards UK exporters enter into effect then these ‘Contingency Agreements’ may prove to be wholly consistent with calls for the UK to unilaterally extend non-reciprocal tariff preferences for a transitional period. The ‘UK’ Trade Documentation Issue Specifically the UK will need to clarify what trade documentation is to be used in trade with the UK from 29th March 2019 under a ‘no-deal’ scenario. The UK appears to assume under the UK-ESA Continuity Agreement that it will be able to continue to use EU trade documentation even when it is no longer part of the EU. While this would appear straight forward for simple trade administration documentation such as the EUR1 which certifies the origin of a product and the basis on which favourable tariff treatment is to be accorded, it could prove more complicated for EU SPS and food safety certification documentation, where the EU’s concurrence would appear essential. Under a ‘no-deal’ scenario with ‘hard’ Brexiteers pushing for a ‘managed no-deal’ the EU may not be so accommodating if the UK is no longer financing the EU institutions responsible for SPS and food safety certification and the issue of the settlement of the UK’s outstanding financial obligations remains unresolved. In this context ACP governments could usefully seek assurances from the EU that their rights to use such EU trade related documentation in trade with the UK in the immediate post-Brexit period will be recognised, regardless of the state of EU/UK relations The Future Value of Preferential Access to the UK Market However in products like bananas where, unlike the EU27, the UK has no domestic production which needs to be protected, the UK’s withdrawal from the EU customs union could see early moves towards a more liberal tariff policy. This would then increase competition for ACP suppliers on the UK market and undermine the commercial position of ACP exporters on the UK market. This banana example is illustrative of a range of products where the EU maintains high tariffs to protect domestic producers but where the UK has a different structure of production and market position (these sectors range from citrus fruit through sugar to beef). Far greater clarity on future UK tariff policy is therefore needed before the value of any ‘rolled-over ‘Continuity Agreements’ can be properly assessed. Addressing EU27 Related Post Brexit Difficulties: the Functioning of triangular Supply Chains The first of these relates to the impact of Brexit on the functioning of triangular supply chains, whereby the UK market is served through an initial port of landing in another EU member state. This is a major issue for African cut flower exporters, including exporters from least developed countries such as Ethiopia and Tanzania. The governments of these countries given their LDC status have to date remained aloof from the issue of the ‘rolling-over of’ EPA preferences into UK only preferential trade arrangements. However the future functioning of triangular supply chains is one which will directly and immediately affect both EPA based exporters and LDC based exporters. Addressing this issue requires the launching of a structured dialogue with the EU and UK authorities on how to avoid disruption of ACP supply chains built up to serve the integrated single EU market. Appropriate customs clearance arrangements to facilitate onward trade to the UK will then be needed, potentially mirroring the differential treatment accorded soft sided and had sided freight vehicles when conducting checks for illegal immigrants. Actions in this area will also need to be extended to dialogues with private sector traders in the EU27 who may well have to change their consignment loading practices for forwarding to the UK. This may require consolidating consignments on the basis of the preferential market access arrangements applied by the UK, in order to facilitate movement of cargoes across EU27/UK borders. It may even need to extend to ACP private sector exporters entering into dialogues with shipping companies to establish new direct supply routes to the UK market, side stepping the need to transit through a EU27 member state. This would require a replication of Kenyan initiatives which have seen the establishment of new direct cargo flights from Nairobi to little used UK regional airports which have been approved for SPS inspection (see companion epamonitoring.net article ‘Hard Brexit Could Create Fruit and Vegetable Shortages in the UK’ 23 November 2017) Addressing EU27 Related Post Brexit Difficulties: The Impact on the Functioning of EU27 Markets Again the banana sector is illustrative in this regard. In the banana sector if there is a ‘no-deal’ Brexit it is unlikely there will be any UK/EU agreement on the apportionment of bilaterally negotiated EU TRQ obligations. Any failure to apportion existing EU bilaterally negotiated TRQs between the UK and EU markets would result in a sudden increase in supply of $ bananas exported under these agreements on EU27 markets from the 30th March 2019. This could serve to undermine the position of ACP banana exporters not on the UK market but on EU27 markets. None of these issues will be addressed if there is no EU/UK agreement on the basis for the UK’s withdrawal from the EU, with the consequences being immediately felt by ACP producers from the 30th March 2019, a deadline which is now only a matter of weeks away. |
Sources:
(1) Economist, ‘Theresa May’s temporary triumph’, 31st January 2019
https://www.economist.com/britain/2019/01/31/theresa-mays-temporary-triumph
(2) Guardian, ‘May survives confidence vote with a majority of 83 – as it happened’, 13 December 2018
https://www.theguardian.com/politics/live/2018/dec/12/tory-mps-trigger-vote-of-no-confidence-in-may-amid-brexit-uncertainty-politics-live
(3) Guardian, ‘May suffers heaviest parliamentary defeat of a British PM in the democratic era’ 16 January 2019
https://www.theguardian.com/politics/2019/jan/15/theresa-may-loses-brexit-deal-vote-by-majority-of-230
(4) Guardian ‘Theresa May survives vote, but Britain remains in Brexit deadlock’, 17 January 2019
https://www.theguardian.com/politics/2019/jan/16/mays-government-survives-no-confidence-vote-after-brexit-defeat
(5) Guardian, ‘MPs unite for ‘alternative arrangements’, 5 Feb 2019
https://www.theguardian.com/politics/2019/feb/05/brexit-weekly-briefing-mps-unite-for-alternative-arrangements
(6) EU, EC President and EU Council President letter to Prime Minister May, 14 January 2019
https://ec.europa.eu/commission/sites/beta-political/files/letter_to_prime_minister_may.pdf
(7) Guardian, ‘MPs unite for alternative arrangements’, 5 February 5, 2019
https://www.theguardian.com/politics/2019/feb/05/brexit-weekly-briefing-mps-unite-for-alternative-arrangements
(8) Guardian, ‘Business leaders warn of ‘supertanker GB’ heading for the rocks’, 16 January 2019
https://www.theguardian.com/politics/2019/jan/16/business-leaders-warn-of-supertanker-gb-heading-for-the-rocks