Battle for Brexit Britain: How Are the Negotiations Going?
Slowly but surely, day by day, Britain’s future relationship with the EU is coming into focus. How? The Government recently published a series of position papers, spelling out what it wants from the ongoing Article 50 negotiations. These are wide-ranging, covering everything from nuclear materials to Northern Ireland, but what interests us in the retail and eCommerce space is what they say on trade and data protection. We’ll give a broad overview of the negotiations’ current state, then delve into developments that directly concern us and our industry.
At the time of writing, early September 2017, negotiations have entered their third round with outstanding topics being the size of Britain’s financial settlement – the so-called ‘Brexit Bill’ – to the EU, EU citizens’ rights in Britain and Britons’ rights in the EU, and the Irish border. The talks cannot progress to Britain’s future trading relationship with EU until ‘sufficient progress’ has been made on all three. Britain wanted otherwise, with talks running in parallel, but the EU’s approach has been agreed by all 27 remaining member states, meaning its negotiating team cannot budge.
Brexit is an ongoing story and this is just another chapter. We’ve written plenty else on it. Catch up with earlier blogs at the bottom.
Want the skinny but haven’t got the time to read the whole article? We’ve added a per section summary for anyone who’s time-poor.
Irish border, Citizens’ rights
Contrary to pervasive gloom in the media, fair progress has been made on the question of the Irish border and citizens’ rights.
On the border, neither side wants a return to the checkpoints and observation towers that characterised the Troubles, sacrificing the deep and lucrative trading relationship established between Northern Ireland and the Irish Republic since peace. Fears that the Republic could become a back door for EU migrants into Britain, and Britain a way for non-EU goods to enter the EU tariff-free, could be allayed with simple information-sharing. That way, both countries would know who and what was flowing across their territories, and apply checks, tariffs and sanctions as needed. These needn’t happen at the border itself. And, excitingly, Blockchains – whose potential we covered recently – could help.
Citizens’ rights have proved harder to resolve, but typical of any negotiation, both sides are steadily hammering out a compromise somewhere between their opening stances. The EU, for instance, wanted their citizens’ rights guaranteed post-Brexit by the European Court of Justice (CJEU), a position unpalatable to the British who want to escape its jurisdiction altogether. How to break the deadlock? A new, independent arbitrator standing over both parties. We shouldn’t expect, like some quarters of the media, each parties’ initial stances to be final. It’s a well-known tactic to enter negotiations asking for the unrealistic, then make concessions to achieve the realistic.
Summary: Good progress is being made. Scare stories concerning a hard border with Ireland and deportation of EU or British citizens are just that.
That brings us to the Brexit Bill. Why should Britain pay? Because many commitments were made on the assumption that Britain would remain an EU member indefinitely, such as contributing to the EU’s budget until 2020, funding EU employees’ pensions and guaranteeing loans advanced under the European Development Fund. If Britain didn’t settle its accounts, its reputation for keeping its word would be severely degraded, making it harder to enter future agreements since parties would fear Britain going back on them. The British Government agrees with this, so there isn’t a question that Britain will pay. Rather, the question is how much it will pay.
The EU has calculated a bill of roughly €75-€100 billion. But that’s heavily contested by Britain whose negotiating team picked it apart in a three-hour long presentation. Some, they believe, are without legal foundation. They haven’t presented an alternate figure, but pressure seems to be downwards.
Summary: This is proving a sticking point. Britain will pay a divorce settlement, but a good deal less than what the EU is currently asking.
The dispute threatens postponing discussions on Britain’s future trading relationship – as mentioned, the EU’s chief negotiator, Michel Barnier, had expected to report back that sufficient progress had been made to allow moving on to trade in October. But this may be deliberate on the EU’s part – allowing talks to overrun to create a sense of crisis that makes the other side back down – and may backfire. The British Government has agreed there should be a transitionary period, lasting over 2019-22, which would preserve the status quo. Why transition? Because it would give extra time, beyond the two-year Article 50 process, for business to adjust and outstanding points of disagreement to be ironed out.
Barnier often repeats the “clock is ticking”, but the British know they’ve added years to the original March 2019 deadline.
So, that future trade relationship – what will it look like? There are numerous grounds for optimism – that a free trade agreement (FTA) with the EU will be comprehensive and settled quickly.
First, there’s the scope and nature of Britain’s trade with the EU. On its nature, Britain runs a deficit in goods, meaning it buys more than it sells. And on its scope, that deficit is large – some £60 billion annually. In total, EU goods exported to Britain amounted to £277 billion in 2016 – more than that sold to Brazil, Russia, India and China combined. These mean Britain will be negotiating from a position of strength – rationally, the EU won’t want trade barriers limiting access to Britain as an export destination.
Second, there’s the unique starting point from which Britain and the EU embark. Other FTAs frequently stall over the question of parties’ different rules and regulations yielding unfair advantages and disadvantages. A case in point is US-produced chlorinated chicken. Currently banned in the UK, a post-Brexit US-UK trade deal could allow it to be sold on British shelves, an eventuality at which many UK consumers would be aghast – that standards were lowered for the benefit of US farmers.
But Britain’s been an EU member for 44 years, continuously adding European regulations to its lawbooks. That means, because there’s now very little difference between them, Britain and the EU set out from the same position. A lot of the messiness that usually accompanies trade deals, of coming to an accommodation over different standards, will be spared.
Added to speed and scope, the Government’s position paper also emphasises the need for minimal disruption. Those goods placed on the Single Market just prior to Brexit should be able to circulate freely, without undergoing further inspections, nor should businesses that have already ensured their goods’ compliance with EU regulations before Brexit be required to repeat the process after. Oversight, states the paper, should be maintained on both sides to reduce delays.
If agreed, a comprehensive UK-EU FTA, signed in a few years, will be unambiguously good news for the eCommerce world. Goods will continue to flow into the UK from the EU, and from the UK into the EU, with minimum fuss. No tariffs or unnecessary customs delays. Supply chains, with goods crossing to and from the UK and EU multiple times, preserved. And because we won’t be in the EU’s customs union – so won’t have to apply duties on goods from those countries outside it – imports beyond the EU should become considerably cheaper.
No deal is less desirable, but need only mean the EU setting low tariffs on exports. Britain doesn’t have to retaliate, and could still benefit from cheap imports coming from the EU and the rest of the world.
And what of the Government’s other paper on data protection?
Summary: Because Britain will experience a transitionary period that maintains the status quo after it leaves the EU in 2019, but before a trade deal is concluded, expect no immediate change. Ultimately, there are many reasons a good deal will be agreed.
We’ve written extensively on the EU’s General Data Protection Regulation (GDPR), touching on Brexit making no difference to its rollout, and indeed that’s what the paper echoes. What’s new, however, is its vision for the post-Brexit approach to data protection – that there’ll be no loosening of standards to allow continued, close cooperation with the EU and preserved data flows. This matters as 43% of large digital companies in the EU call Britain home, with over 75% of their data transferred between EU countries.
And it highlights that Brexit is about choices. It doesn’t follow that, post-Brexit, Britain will suddenly deregulate vast swathes of the economy. British politicians can choose, as the Government has, to impose roughly the same or even more regulation as the EU. Which means we’ll be as busy as ever covering regulatory changes affecting eCommerce.
Summary: Data protection standards will remain high even after Britain leaves the EU.
We’ve covered a lot of ground in this blog, from the negotiations’ progress to what the British Government is hoping to achieve and likely impacts on eCommerce. How do we think everything will work out? There are two schools of thought – that the EU will strike a bad deal that’ll make an example of Britain (discouraging other countries from leaving), or that rational heads will prevail and a good deal will be struck for business’ benefit. For the moment, we side with the latter camp. The sheer complexity of leaving, which looks like it’ll be a six-year process, is likely enough to dissuade others from going down the same route, especially if they’re Eurozone members which adds another layer of complication. And the budgetary impact of Brexit on the EU, missing Britain’s contributions, will likely be severe enough that it will resort to keeping trade flowing as the key to prosperity, rather than payment of a hefty divorce bill.
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Catch Up: The Khaos Control Brexit Blog Series ????
- Brexit Means Brexit Actually Means Transition?, December 2016
- Brexit Baton Passes to the Lords, February 2017
- Article 50 Triggered: What Next?, April 2017
- Not Another One! General Election 2017, April 2017
- The Good, the Bad and the Ugly: Manifestos Reviewed, June 2017
- 2017 General Election Aftermath: What Next for Business?, June 2017