Brexit Delayed but No Deal Brexit Still on the Table

Summary
While the UK has sought an extension of the Article 50 process, the EU Council has limited the duration of the extension granted, with this being conditional on approval of the Withdrawal Agreement. Failure of the UK Parliament to approve the Withdrawal Agreement would require an alternative way forward to be identified if the UK was not to leave under a ‘no-deal’ scenario on 12^th April. While the UK’s unilateral EBA style trade regime for LDCs and the signing of a ‘Continuity Agreement’ will ensure continuity in tariff treatment for access to the UK market, these agreements will not on their own ensure continuity in trade flows nor continuity of the value of current ACP DFQF access beyond June 2020. For this to be achieved both additional special arrangements will need to be set in place immediately upon the UK’s withdrawal and a multiplicity of supplementary commitments will be required from the UK government if the current value of ACP trade arrangements with the UK is to be preserved and enhanced.

With the clock to the scheduled withdrawal of the UK from the EU on 29^th March it has been a busy and chaotic month in the Brexit process.

On 12th March in the first of a series of three votes the House of Common again rejected the Withdrawal Agreement jointly agreed by the EU and UK government. This time the majority against the agreement was down from the record 230 in January to 149 (1).

On 13th March a second vote took place, this time on whether MPs wished to leave the EU without a deal. This proposition was rejected by a majority of 43 (2).

On 14th March a vote was taken mandating the UK government to request an extension of the Article 50 process, which was approved by 413 to 202 votes, a majority of 211 (2).

A planned 3^rd House of Commons vote on the Withdrawal Agreement schedule for 19^th March was deferred, when the Speaker of the House of Commons John Bercow, ruled that under established Parliamentary procedures the government could only return for a 3^rd vote on the EU/UK Withdrawal Agreement if the proposition tabled was ‘neither the same nor substantially the same’ as the proposition previously rejected by the House of Commons (3).

On March 20^th Prime Minister May wrote to the EU Council requesting a short extension to the Article 50 process until the 30^th June 2019 and for the European Council to ‘approve the supplementary documents’ agreed with EC President Juncker at an earlier meeting with Prime Minister May in Strasbourg (4).

In response to this letter at its meeting on 21^st March the EU Council agreed an extension of the article 50 process ‘until 22 May 2019, provided the Withdrawal Agreement is approved by the House of Commons next week’. However it stated ‘if the Withdrawal Agreement is not approved by the House of Commons next week, the European Council agrees to an extension until 12 April 2019 and expects the United Kingdom to indicate a way forward before this date for consideration by the European Council’ (5).

According to EU Council President Tusk ‘the 12th of April is a key date in terms of the UK deciding whether to hold European Parliament elections. If it has not decided to do so by then, the option of a long extension will automatically become impossible’ (6).

In addition the EU Council statement reiterated the EU position that ‘there can be no opening of the Withdrawal Agreement that was agreed between the Union and the United Kingdom in November 2018. Any unilateral commitment, statement or other act should be compatible with the letter and the spirit of the Withdrawal Agreement’ (5).

This creates a situation where any attempt to return to the UK Parliament for a 3^rd vote on the Withdrawal Agreement could fall foul of Speaker Bercow’s requirements for a 3^rd vote to be allowed to take place.

As Prime Minister May pointed out to a letter to MPs dated 22^nd March 2019, for the government to return to the House of Commons for a 3^rd vote the agreement on which the proposition was tabled ‘would have to be “fundamentally different – not different in terms of wording, but different in terms of substance“’, with this requiring further changes in the Withdrawal Agreement (7). Prime Minister May implied she believed the ‘legally-binding assurances relating to the backstop and alternative arrangements that I agreed with President Juncker in Strasbourg’ (7) should be sufficient to meet the Speaker’s criteria.

This creates a situation where if the House of Commons does not approve the Withdrawal Agreement before the 12^th April the UK could be faced with a choice of either leaving with no deal or needing to ‘indicate a way forward before this date for consideration by the European Council’ (7)

However if this way forward involved a further extension of the Article 50 process this would require the UK to fully participate in the European Parliamentary elections. In her letter to MPs Prime Minister May expressed her strong believe that ‘it would be wrong to ask people in the UK to participate in these elections three years after voting to leave the EU’.

Prime Minister May also indicated in her letter how for the Article 50 extension to take effect the UK government will need to adopt ‘domestic legislation by Statutory Instrument’ setting out ‘the new date of our departure’ (7). According to Prime Minister May the choices before the House of Commons were now clear:

‘revoke Article 50’, but this Prime Minister May held ‘would be to betray the result of the referendum’ (7).
‘leave with no deal on 12 April’, but Prime Minister May pointed out ‘the House has previously said this is not something it will support’ (7).
if there is not sufficient support for the Withdrawal Agreement to warrant a 3^rd vote in the House of Commons or the Withdrawal Agreement is once again rejected asking for ‘another extension before 12 April – but that will involve holding European Parliament elections’ (7).
‘If it appears that there is sufficient support and the Speaker permits it, we can bring the deal back next week and if it is approved we can leave on 22 May’ (7).

Comment and Analysis
As can be seen from the above developments, the extension of the Article 50 process agreed by the EU Council is not as long as that sought by the UK. This arises from the complications the ongoing Brexit process poses for the internal EU system of governance. The European Parliament cannot be legally constituted unless all EU member states are represented. This is significant since not only does the European Parliament play a vital role in the routine legislative process in the EU but its endorsement is necessary for the new European Commission to take up office on 1^st October 2019. If the business of the European Union is not to grind to a halt the UK’s position in the EU will need to be resolved or a way found to circumvent the problem of legally constituting the European Parliament following the May 2019 European Parliament elections.This constrains how much time can now be allowed to resolve the Brexit impasse and ensure the Withdrawal Agreement agreed is in place, thereby averting a ‘no-deal’ departure of the UK from the EU.

From an ACP perspective it should be borne in mind the December 2018 Withdrawal Agreement (through Article 129) provided ACP exporters with a 21 month breathing space during which all aspects of current trade arrangements governing trade with the UK could remain in place.

However in the absence of a ‘Withdrawal Agreement’ not only will all negotiated EU trade agreements no longer apply to the territory of the UK, but also for ACP exporters under a range of circumstances the basis for routine trade administration arrangements will fall away. What is more the UK will no longer have access to trade facilitation systems over which the EU has proprietary rights (e.g. the REX system). This will be the case unless special alternative arrangements have been set in place.

Thus we find while UK officials maintain unofficially that access to the REX system will be retained for a year after the UK’s departure, this is not reflected in the EC’s 11^th March 2019 guidance note (‘Withdrawal of the United Kingdom and Customs Related Matters in Case of No Deal’), which sets out just what basic trade administration changes will be required to accommodate the UK’s departure from the EU without the ‘Withdrawal Agreement’ being in place.

Against this background the rolling over of the EU’s GSP scheme, including the special provisions for least developed countries (the EBA scheme), into a UK only unilateral trade arrangements and the conclusion of UK-only ‘Continuity Agreements’ (now signed on to by four of the ESA EP Group, Fiji, Papua New Guinea and CARIFORUM), will only partially address the challenges arising for ACP exporters as a result of the UK’s departure from the EU without a Withdrawal Agreement being in place.

The signing of ‘Continuity Agreements’ and the rolling over of the EBA will ensure continuity of current duty free-quota free (DFQF) access to the UK market, but will by no means ensure continuity in trade flows nor continuity of the value of current ACP DFQF access beyond June 2020.

For continuity in trade flows to be ensured additional special arrangements will need to be set in place immediately upon the UK’s withdrawal from the EU without an agreement. Meanwhile if continuity of the value of current ACP DFQF access is to be ensured beyond June 2020 a multiplicity of supplementary commitments will be required from the UK government, this is particularly the case if the current value of ACP trade arrangements with the UK is to be enhanced.

Unfortunately why such additional supplementary commitments and measures are required is not yet fully understood within the UK Department for International Trade, the Department for International Development and the Foreign Office. This being stated there have been some informal indications of interest by UK government officials in the concept of an ‘Annex of Concerns’, which could provide a framework for addressing issues of concern to African, Caribbean and Pacific countries in their future trade relationships with the UK, which are not yet covered by existing Continuity Agreements.

In this context, if the UK Parliament does not approve the Withdrawal Agreement before the 29^th March those ACP countries which have in place economic partnership agreements with the EU should seek to conclude Continuity Agreements with the UK by the 11^th April, with this including an “Annex of Concerns” setting out the key issues in future trade relations with the UK which need to be addressed before reciprocal tariff preferences for UK exporters can legally take effect.

If the Withdrawal Agreement is approved by the UK Parliament and the UK leaves the EU on 22^nd May with a transitional period until 1^st January 2021 in place, then under Article 129 of the Withdrawal Agreement existing trade arrangements governing ACP exports to the UK market will remain fully in place until 1^st January 2021.

This reduces the pressure to sign the inadequate ‘Continuity Agreements’ which the UK has tabled to date and provides more time for elaborating the proposed “Annex of Concerns” approach designed to ensure future trade arrangements with the UK not only roll over existing tariff preferences enjoyed by ACP exporters, but also enhance opportunities for exports from ACP countries which sign on to such agreements.

In the coming weeks the epamonitoring.net website will post a series of country and region specific briefings on the issues which need to be addressed if continuity in ACP exports to the UK and continuity in the value of current ACP DFQF access beyond June 2020 is to be ensured for all current ACP beneficiaries of such EU agreed arrangements.