On some details of the British White Paper on the future relations with the European Union

On some details of the British White Paper on the future relations with the European Union

Preliminary remarks

The United Kingdom wants to stay in all agencies useful for Britain. This is using a cherry-tree as a Christmas Tree. All the agencies were formed in a process called forming  „the ever closer union“ between the member states – so despised by Brexiteers. In some of the agencies there may be possibilities for a kind of observer status. Some are part of the membership benefits not open for third parties. But in all cases Britain can only be a rule taker and not a rule maker, because the agencies are bound to the EU institutions and rules are made inside that framework.

The UK proposes new arrangements on services and digital, providing regulatory freedom for Britain, while recognising that the UK and the EU will not have current levels of access to each other’s markets, …and new economic and regulatory arrangements for financial services, preserving the mutual benefits of integrated markets and protecting financial stability while respecting the right of the UK and the EU to control access to their own markets – noting that these arrangements will not replicate the EU’s passporting

To have all this the best would be to stay a member of the EU. It was the British decision to leave, so only second best solutions are possible. The EU wants the best for the remaining EU member states. They have an interest that services including banking services are coming home to the continent from Britain and no services are offered from offshore companies in London, where EU institutions including the European Court of Justice and the European Central Bank have no supervision. I am sure London will survive as a mayor place for global banking, but the EU will enhance competition against all third countries including the UK and ask those enterprises which need close supervision to be established on its territory.

It is well known that the services for the manufacturing industry are not easily separated from the goods produced. However, establishing a working single market for services must be the priority for the EU, before any agreements can be concluded that allow access to third countries.

The City of London will not be amused about the very laconic approach to the interests of the Square Mile in the White Paper, but it is a realist position. There is not only no way to give passporting rights for the EU to third countries, but there is also the new fact that whenever London is using the right to have different rules that may undercut EU-competitiveness, the EU will react with all the regulation that is needed to re-establish a level-playing field.

The protection of personal data is something where inside the EU we are only beginning to grasp what it means to challenge the big data firms and rogue data fishing by states. Britain has been quite good in circumventing data protection when collaborationg with the US in the PRISM system disclosed by Edward Snowden. A very important factor in all data protection arrangements is that is has to be controlled by EU laws guaranteed by the jurisdiction of the ECJ, something Britain rejects. Therefore the free flow of personal data may have to be restricted when there is no more EU supervision in place.

The new fishing arrangements mean that British fleets also loose their right to fish in any other EU waters without an explicit agreement. If Britain prefers to fish in their own seas and eat all the fish themselves there should be no problem. If the UK wants to export fish competing with other fishery nations inside the EU, market access may be bound to fishing rights for EU fishermen as well as to compliance with EU measures against overfishing.

Applying the principle that ‘nothing is agreed until everything is agreed’, the UK Government believes that the Withdrawal Agreement and the framework for the future relationship are inextricably linked – and so must be concluded together.

This is a misinterpretation of article 50. The withdrawal agreement must take into account what kind of relationship is wanted in the future – that means it has to do everything not to close options for such a relationship. But it is a separate agreement that has to be signed first. The principle that nothing is agreed before all is agreed is a non-binding committment, which is useful, but also used as a tactical move. Legally this is not necessary and even not logical. The practical problem is that the agreements suggested in the White Paper are so numerous and so complicated that they are very unlikely to be ready until the transition period of less than two years is over. However, the trasition period cannot even start without the withdrawal agreement concluded.

Obervations on the text of the White Paper

(Original text from the White Paper is marked in italic letters)

Part 1 – Economic Partnership

„… These close arrangements on goods would sit alongside new arrangements for services and digital, recognising that the UK and the EU will not have current levels of access to each other’s markets in the future. This would provide regulatory flexibility that is important for the UK’s services-based economy.“

This means the UK wants a preferred access to the markets for goods, but regulatory flexibility for their main industry that is services – this is not what a level playing field means. Why should the EU concede a model most beneficial for the UK while giving Britain the advantage to be free to compete EU countries out of the market in services by undercutting their rules?

“ Every trading relationship has varying levels of market access, depending on the respective interests of the countries involved. The EU has adopted different agreements with countries beyond its borders and outside the Single Market, which are tailored to the depth and nature of its relationships with the countries concerned. It is right for the UK and the EU to take a similarly tailored approach.“

If the UK wants a normal free-trade agreement this is the right approach. A more tailored relationship can certainly be negotiated. Experience shows that this will possibly need ten years of tough negotiations. Each topic will be discussed in details and the overall balance of interests has to be observed.

„At the same time, the UK recognises that the Single Market is built on a balance of rights and obligations, and that the UK cannot have all the benefits of membership of the Single Market without its obligations.“

Not only can Britain not have all the benefits of the Single Market, it can also not have some of them in form of cherry-picking without accepting the four freedoms. There is no cherry-tree of obligations that can be chosen to get some proportionate benefits. Out-of-the-Single-Market means Out-of-the-Single-Market.

“ In 2017 the value of imports and exports between the UK and the EU stood at over £423 billion, with the UK reporting an overall trade deficit in goods with the EU of £95 billion. In the same year, the EU accounted for 70 per cent of UK agricultural imports.“

It is good that some striking numbers are published in the White Paper. Those numbers are the result of EU membership and may change quickly and drastically when Britain has left the EU. They shall show the huge interest of the EU in keeping Britain a partner, but they mainly show the huge interest Britain should have to stay a member of the EU.

„… The UK’s proposal for a free trade area includes:
a. the phased introduction of a new Facilitated Customs Arrangement that would remove the need for customs checks and controls between the UK and the EU as if in a combined customs territory, while enabling the UK to control tariffs for its own trade with the rest of the world and ensure businesses pay the right tariff;“

The combined customs territory is an innovative idea not contained in the WTO rulebook. I have no objections to fantasy, but either it is a facesaving name for a Customs Union or it is an awkward arrangement that needs thorough scrutiny. I believe it does not work.

„b. the elimination of tariffs, quotas and routine requirements for rules of origin for goods traded between the UK and the EU;“

Even inside the EEA, rules of origin have not only to be observed but their fulfilment also has to be declared and controlled. If all tariffs and quota and non-tarriff barriers are removed why should the EU give this to the UK while conceding that the UK can agree its own duties with third parties?

„c. a common rulebook for manufactured goods, alongside UK participation in EU agencies that facilitate goods being placed on the EU market;“

Make UK goods exports easy is fine – but what is on offer for the EU side ? The British market is much smaller than the EU market. It would be rather unequal treatment if access to the much smaller British market is reciprocated with access to the much bigger Single Market. The EU will have to look on the overall balance of trade in goods and services and balance the opportunities with the disadvantages of Britain keeping a free hand where it wants to undercut the EU competitors.

„d. a common rulebook for agriculture, food and fisheries products,
encompassing rules that must be checked at the border, alongside equivalence for certain other rules, such as wider food policy; and“

An agreed rulebook typical for a free trade agreement may be possible – a common rulebook can only be one where Britain is the ruletaker, not the EU. Equivalence agreements may only serve in cases where harmonization is impossible – but not if it is only an excuse to deviate from hitherto common rules.

„e. robust domestic market surveillance and cooperation between the UK and the EU to ensure the rules are upheld in both markets.“

The EU does not trust anybody but itself to control its own rules, and the controller has to be under the jurisdiction of the ECJ. So that control must be done by EU controllers (like they do for example in Argentinian slaughterhouses to guarantee EU conformity of the meat exported).

The White Paper then explains the Facilitated Customs Agreement (FCA):

„… the UK would apply the EU’s tariffs and trade policy for goods intended for the EU. The UK would also apply its own tariffs and trade policy for goods intended for consumption in the UK. …Mirroring the EU’s customs approach at its external border would ensure that goods entering the EU via the UK have complied with EU customs processes and the correct EU duties have been paid. This would remove the need for customs processes between the UK and the EU, including customs declarations, routine requirements for rules of origin, and entry and exit summary declarations. „

I have my doubts if this could really work. The technical facilities are certainly not yet even tested. This would also imply the acceptation of EU officials controlling the British border or at least to have the right to unscheduled controls of any British border station. Otherwise the door for fraud is wide open.

„… where a good reaches the UK border, and the destination can be robustly
demonstrated by a trusted trader, it will pay the UK tariff if it is destined for the UK and the EU tariff if it is destined for the EU. This is most likely to be relevant to finished goods; and… where a good reaches the UK border and the destination cannot be robustly demonstrated at the point of import, it will pay the higher of the UK or EU tariff…. This is most likely to be relevant to intermediate goods.“

By the way why should the EU allow Britain to continue serving as a doorway for third party exporters to the EU. This was a typical benefit of membership, that Britain does not want any more. The interest of the EU is now, that those exports go through EU ports, directly controlled by EU customs, doing manufacturing with productions chains preferably inside the EU to benefit EU workplaces for EU citizens. It is a huge benefit of the EU that it allows production chains to be very efficient – this advantage should be an incentive for manufacturers to invest inside the EU – especially in areas like the Mediterranean countries where there is still not enough work available.

„…The UK recognises that this approach would need to be consistent with the integrity of the EU’s Customs Union and that the EU would need to be confident that goods cannot enter its customs territory without the correct tariff and trade policy being applied. „

It is not only about the integrity of the EU Customs Union, it is also about the commercial and industrial interest of the EU as a whole. When Britain is a third country the EU is a competitor. Confidence has already been deeply shaken by rogue politicians like Boris Johnson as Secretary of State of the FCO and extremist Tory politicians fighting for Leave with lies and demagogy.

„… The UK and the EU should agree a new trusted trader scheme …“

The trusted trader principle seems to be too vulnerable to massive fraud to be workable. Even if it would work a direct oversight by EU officials in situ is necessary.

“ The UK would maintain a common rulebook with the EU, including the Union Customs Code and rules related to safety and security, and would apply and interpret those rules consistently with the EU. The UK already applies the Union Customs Code, and the new Customs Declarations Service (CDS), due for implementation by 2019, is fully compatible with it.“

The devil is in the details for any change. A common rulebook is not the same as accepting the EU rulebook – as EEA countries do. A common rulebook would bind both sides while the EU rulebook binds all member states collectively while third countries just have to observe it if they want to trade with the EU. Having only part of the EU legislation in the rulebook invites to cherry-picking and may be destructive for the coherence and integrity of the EU. The UK must be legally bound to legislate every change the EU decides on – the Norwegian Parliament does just that. Otherwise it would have the effect of a postponed cliff edge jump out of the customs area.

„e. There will need to be appropriate mechanisms for the UK to implement new rules related to customs with the EU, to provide for the proper functioning of the arrangement. There will need to be mechanisms to ensure that rules are applied appropriately, interpreted and enforced consistently, and that disputes between the UK and the EU related to those rules are resolved effectively.“

The sentence correctly describes four problems with the system: the rules must function, they must be interpreted appropriately, they must be enforced, and a dispute resolution mechnism must be in place. I believe that all four problems are not addressed properly by the British proposals.

„…To ensure that new declarations and border checks between the UK and the EU do not need to be introduced for VAT and Excise purposes, the UK proposes the application of common cross-border processes and procedures for VAT and Excise,“

That sounds so simple but means another new bureaucratic procedure only to keep the problem away from the border. It means that the processes and procedures have to be put in place elsewhere. It would be much easier just to keep VAT and Excise in line with the EU.

“ a. zero tariffs across goods (including manufactured goods, agricultural, food and fisheries products), with no quotas;
b. no routine requirements for rules of origin between the UK and EU; and
c. arrangements that facilitate cumulation with current and future Free Trade
Agreement (FTA) partners with a view to preserving existing global supply chains. This would allow EU content to count as local content in UK exports to its FTA partners for rules of origin purposes, and UK content to count as local content in EU exports to its FTA partners. Diagonal cumulation would allow UK, EU and FTA partner content to be considered interchangeable in trilateral trade the UK is seeking participation in these EU agencies, as an
active participant, albeit without voting rights, which would involve making an
appropriate financial contribution. „

After Brexit the UK is a third country – why should there be zero tariffs on all goods from Britain coming into a market of 450 Million, while the EU reciprocately gets acces to a market of just 60 Million – who deliberately want to have a more global outlook loosening the links to the EU. However, if there is a preferential or zero tariff in place the rules of origin have to be strictly enforced because otherwise this would be the main entrance for organized fraud. The so called cumulation with future Free Trade Partners only indicates a problem for business: they will no longer have to deal with one set of rules valid for all EU member states but with a huge number of different rulebooks possibly not from the outset compatible with each other. It will either be a bureaucratic mess to cumulate all these rules with the alignment with EU rules, or negotiations with third countries should from the start be negotiated along EU guidelines.

Agriculture

„70 per cent of UK agri-food imports came from the EU in 2017. Food and drink manufacturing is the UK’s largest manufacturing sector, contributing £27.8 billion in Gross Value Added (GVA) in 2017.“

These numbers show that Brexit will be disruptive for the British food industry. The UK wants to leave the CAP, it will no longer paying anything for the solidarity with the struggling agricultural sector in many EU countries. Yes, the CAP is protectionist, because farmers all over the world are protected and need protection. There is no reason why the EU should except agri-food from Britain from the considerable level of tariff protection of the EU CAP.

“ existing precedents of equivalence agreements covering testing and approval procedures. The UK wants equivalence arrangements on wider food policy rules.“

Any equivalence agreement would need a clear committment not to change the rules on any capricious parliamentary initiative or because of lack of judicial restraint.

Services and Investment

“ In 2017, services made up 79 per cent of total UK GVA worth
£1.46 trillion.10 In 2017, 21 per cent of EU27 services imports came from the UK, and 20 per cent of EU27 services exports went to the UK.11 Globally services trade is growing rapidly; UK services trade with non-EU countries grew by 73 per cent between 2007 and 2017.“

This is one of the most important sectors of the British economy. If Britain wants to be free to regulate this sector on its own – mainly to be more competitive than continental competitors, this is absolutely legitimate. But is is clear that the EU will possibly reassess its level of necessary protection against unfair undercutting by light regulation before any new arrangement can come into force.

“ b. a system for the mutual recognition of professional qualifications, enabling professionals to provide services across the UK and EU;

This is a very sensible issue, because some of the qualifications are not yet harmonized on EU level. in such a case Britain must try to agree on that with each national or regional government involved.

“ The WTO’s General Agreement on Trade in Services (GATS) provides a framework for global services trade and defines four modes of services supply:“

The GATS is part of the WTO framewirk where all partners are members. This will be the basis for the relationship beyond any special agreements.

“ Since 1997 the UK has recognised over 142,000 EU qualifications, including for lawyers, social workers and engineers.13 Over 27,000 decisions to recognise UK qualifications have been undertaken in the EU.“

To continue those recognitions is important for the EU citizens who have the right to stay and work indefinitely in the UK, so this must be done in a way that keeps the existing level of recognitions. On the other hand if Britain or the EU change any of the conditions for professional qualifications in the future this must be reflected in adaptations of the recognition rules – a complicated issue.

„This includes legal services, where the UK is the destination for 14.5 per
cent of total EU legal services exports.15 It also includes accounting and audit
services. In 2016, UK firms provided over 14 per cent of EU27 audit and accountancy imports.16 , permitting joint practice between UK and EU lawyers, and continued joint UK-EU ownership of accounting firms. The supplementary provisions would not replicate Single Market membership, and professional and business service providers would have rights in the UK and the EU which differ from current arrangements.“

Legal services and accounting firms need a close supervision. The knowledge of EU law is crucial for any person working inside the EU, while the British case law will no longer play an important role in the EU. There may be an issue of ECJ competence and oversight here. These services are normally rather protected. The EU must be careful not to be forced to open up for global law firms from any third country by the WTO-rule of the most-favoured nation treatment. The solution may not be a bespoke agreement on such services but the need for such firms to have separate economic entities with their economic seat and paying taxes on the continent which may then co-operate with their UK counterparts.

„UK-located banks underwrite around half of the debt and equity issued by EU businesses;17 UK-located banks are counterparty to over half of the over-the-counter interest rate derivatives traded by EU companies and banks;18 around £1.4 trillion of assets are managed in the UK on behalf of European clients;19 the world-leading London Market for insurance hosts all of the world’s twenty largest international (re)insurance companies; and more international banking activity is booked in the UK than in any other country. … 

Since services are generally not liberalized on a global level, the EU has to decide how far the banking sector with its special risks can operate from an offshore London into the continent. This will be a piecemeal approach because some operations are global or international and may not be affected, others need supervision by the ECB and EU institutions, others are protecting companies which work and pay taxes in the EU.

The UK can no longer operate under the EU’s “passporting” regime, as this is intrinsic to the Single Market of which it will no longer be a member.… In addition, given the importance of financial services to financial stability, both the UK and the EU will wish to maintain autonomy of decision-making and the ability to legislate for their own interests.“

Britain always insists that it wants to have an even stricter control of the financial sector to avoid another meltdown like the one in 2008. However, there is much suspicion that there will be an irresistable temptation to be competitive by undercutting stricter rules by light regulation. The EU states may not tolerate that because it is damaging their stability. Therefore banks and financial firms may need to move into the EU to stay in business. There were operations tolerated by the EU like a flourishing Euro-market. The EU may take back control over that.

„The EU has third country equivalence regimes. In this context, the UK proposes a new economic and regulatory arrangement with the EU in financial services. Structured withdrawal process: if circumstances arise that cause either party to wish to withdraw equivalence, there should be an initial period of consultation on possible solutions to maintain equivalence. „

Equivalence regimes have to be very specific on what is recognized as equivalent and what not. The EU will study this taking into account their own necessities.

MOBILITY

„EU citizens are integral to communities across the UK, with 3.5 million EU citizens living in the UK.22 Approximately 800,000 UK nationals play an equally important role in communities across the EU.23 The UK and the EU have already reached an agreement on citizens’ rights which provides EU citizens living in the UK and UK nationals living in the EU before the end of the implementation period with certainty about their rights going forward. Individuals will continue to be able to move, live and work on the same basis as now up until the end of December 2020.“

The agreement on citizens’ rights is very much criticized in the European Parliament and may need to be amended. There are still some questions open. Many have not realized that European citizens are just deprived of rights they thought to be safe.

“ …attract the brightest and best, from the EU and elsewhere. „

This is certainly in the British interest – most of the immigrants came from no-EU-countries. Without a privileged access the relation between EU and non-EU immigration to Britain may shift strongly into the non-EU direction. However, there should be more sensibility to the issue of brain-drain damaging the countries of origin.

„… seek reciprocal mobility arrangements with the EU, building on
current WTO GATS commitments
a. support businesses to provide services and to move their talented people;
b. allow citizens to travel freely, without a visa, for tourism and temporary business activity;
c. facilitate mobility for students and young people, enabling them to continue to benefit from world leading universities and the cultural experiences the UK and the EU have to offer;
d. are as streamlined as possible to ensure smooth passage for legitimate travel while strengthening the security of the UK’s borders; and
e. provide for other defined mobility provisions, including arrangements to ensure that UK citizens living in the EU, in future, continue to benefit from their pension entitlements and associated healthcare.“

Here the technicalities of a border regime are blurred with the aspiration to keep the rights and entitlements of British citizens to participate in EU funded programs. This does not belong to the same chapter of the negotiation. Smooth travel may not happen if British border procedures are too tedious and humiliating – the EU may reciprocate on that.

„The UK would seek reciprocal arrangements that would allow UK nationals to visit the EU without a visa for short-term business reasons and equivalent arrangements for EU citizens coming to the UK. This would permit only paid work in limited and clearly defined circumstances, in line with the current business visa policy.“

This clearly states that for a more than short term visit visa will be necessary. This may be inevitable under the circumstances but shows that Brexit throws Britain back into the 1950ies.

„In the year ending September 2017, UK residents made approximately 50 million non-business related visits to the EU spending £24 billion,24 and EU residents made over 20 million non-business related visits to the UK spending £7.8 billion.25 83. The UK therefore proposes reciprocal visa-free travel arrangements to enable UK and EU citizens to continue to travel freely for tourism in the future, maintaining the close links between the people of the UK and the EU.“

Tourism in both directions may suffer depending on how smooth border procedures and treatment really are. Countries that want tourists often even unilaterally renounce on strict procedures.

“ The UK already has existing arrangements with low-risk, non-EU countries that enable smooth access at the border, such as the Registered Traveller Scheme in place with a number of countries like the US and Japan. The UK wants to agree reciprocal arrangements with the EU that ensure smooth passage for UK nationals when they travel to the EU, for example on business or on holiday. The UK will strengthen the security of its borders, which should include exploring whether to apply the electronic travel authorities proposed for third country nationals to each other’s nationals, and ensuring travel documents meet minimum security standards. But at the border, as now, tourists and business visitors should not routinely have to face questions about the purpose of their visit. „

Much will depend on the practice at the border. The unfriendly environment which is in place in the US may be a blueprint for the future UK border regime. If that is the case tourism may suffer severely. Business travel may then be limited to the absolute necessary as many companies do with the US now.

“ Streamlined arrangements are particularly important at the Gibraltar-Spain border, which is crossed every day by thousands of people from other Member States.“

Spain has the right to veto any agreement if its interests are not sufficiently taken into account. The EU with Spain as a member state and Britain as a non-member state has to support Spain. The drying up of Gibraltar as a tax and regulation haven is in the EU interest.

„The UK will seek reciprocal arrangements on the future rules around some defined elements of social security coordination. This will be important for UK nationals who want to live, work or retire in the EU in the future, „

This is important but also very complicated. Social security agreements between countries with different social security systems tend to take a long time. There have to be put in place complex refunding systems. The EU has no overall competence on social security, so additional agreements may be necessary with many EU member states.

“ The UK will also seek to secure onward movement opportunities for UK nationals in the EU who are covered by the citizens’ rights agreement“

This privilege will depend on how EU citizens are treated in the UK. There is nothing said about what the UK will offer for that concession. The minimum would be that EU citizens who were allowed to live in the UK can also move inside the EU without loosing the right to come back to live in the UK.

“ The UK therefore proposes a digital relationship that covers:
a. digital trade and e-commerce;
b. telecommunications and digital infrastructure;
c. digital technology; and
d. broadcasting.“

“ The global digital economy is built on the ability to collect, share and process data. This underpins not just digital trade but all trade flows. Any disruption in cross-border data flows would therefore be economically costly while unnecessary barriers, such as the unjustified localisation of data, could also have a serious impact on future prosperity.
96. The UK’s proposals would include:
a. ensuring cross-border data flows, providing for the removal and prevention of barriers to the flow of data across borders;
b. protecting the free, open and secure internet, working with EU partners to lead the global effort to ensure that the internet is safe and open; and
c. recognising equivalent forms of electronic ID and authentication, ensuring that these are secure, trustworthy and easy to use across borders.“

The UK data protection is not seen as the most trustworthy in the EU. Without the oversight of the European Court of Justice any agreements become very sensitive. Data flows are at the same time important for business. Here the EU may look for strict level playing fields including the tratment of global data collecting companies. It must not be allowed that big data companies subvert EU data protection operating from Britain.

“ … In the UK, telecoms contributed £30 billion of GVA in 2016, with exports of services to the EU in the sector worth £2.7 billion in 2015 and imports worth £3.4 billion.“

The Telecom sector is part of the services sector and may be excluded from preferential treatment in the EU. The EU without the UK may have a less liberalizing position on natural monopolies like rail, water, and also the telecom sector.

„The UK has been a leading advocate of the development of the EU state aid and competition regime, and has much to gain from maintaining disciplines on subsidies and anti-competitive practices.“

The Labour Party under Jeremy Corbyn has quite a different view on state aid. The EU may observe very closely what is done and will react in case EU competitiveness is undercut.

“ The UK’s proposals include:
a. committing to a common rulebook on state aid, to be enforced and supervised in the UK by the Competition and Markets Authority (CMA);
b. maintaining current antitrust prohibitions and the merger control system with rigorous UK enforcement of competition law alongside strong cooperation with EU authorities;
c. committing to high regulatory environmental standards through a non-regression requirement;
d. maintaining high standards on climate change, noting the UK’s world leading ambitions;
e. committing to high levels of social and employment protections through a
non-regression requirement for domestic labour standards; and
f. committing to high levels of consumer protection.“

If the rules are overseen by the CMA this is fine for Britain, but the EU enforces its rules globally through its own rulebook – there is no need for a special common rulebook with Britain. If the UK is committed to high standards on all these topics this is very valuable – but if there is no enforcement by EU rules and procedures this may not be enough.

“ . In 2016 the UK gave 0.3 per cent of GDP as state aid, half the EU average of 0.7 per cent.30 . This is without prejudice to the UK’s intention to develop new tailored arrangements in relation to payments to farmers and other land managers for environmental benefits, and the UK’s future public procurement policy.“

For a third country the EU will have to take a sectoral approach and see if any state aid is damaging EU interests.

„… The UK’s proposal for its future economic partnership with the EU would not fetter its sovereign discretion on tax, including to set direct or indirect tax rates, and to set its own minimum tax rates.“

As long as a country does not use the tax system to get an advantage in competition with the EU this is OK. If it does the EU may react.

„Independent Trade Policy
On goods, the proposals set out in section 1.2 of this chapter, including the Facilitated Customs Arrangement (FCA), would enable the UK to set its own tariffs and vary them as it chooses, independently of the tariffs the EU applies. „

The whole FCA system seems to me rather dysfunctional – and why should the EU open its market for Britain if at the same time the UK is allowed to conclude free trade agreements varying from EU agreements with third countries. Variations will certainly and legitimately have the purpose to give the UK an advantage over the EU – so why should the EU help to do that?

“ The frictionless access to the EU market provided by the FCA and common rulebook would also support the UK’s ongoing attractiveness as a destination for Foreign Direct Investment for overseas firms seeking to service both UK and EU markets. This is likely to be particularly relevant to manufacturing sectors with integrated supply chains.“

To leave the EU and at the same time ask the EU to keep the UK an attractive destination for FDI to serve the EU market is rather astonishing. The EU interest is now to direct the FDI flow into EU countries in need for investment, not into a third country.

Security Partnership

“ The UK therefore proposes a coherent and legally binding agreement on internal security
a. provide a legal basis for future cooperation on the basis of existing EU law
enforcement and criminal justice tools;
b. clearly define the scope of cooperation;
c. contain provisions that allow for new areas of cooperation to be added…
d. set out appropriate horizontal provisions on agreed safeguards…“

“ UK participation in these EU data exchange tools is the only effective way to protect specific cross-border capabilities for UK and EU operational agencies.“

It is in the mutual interest of both the UK and the EU to co-operate on internal security. That was one of the striking reasons why the EEC has further developed in the process of an ever-closer-union and included the home and justice affairs into the EU Treaties. Now the UK needs a specific agreement for that. Whenever rights of citizens are involved the European Charter of Basic Rights and the jurisdiction of the ECJ come into the game. Since Britain excludes the jurisdiction of the ECJ, many of the procedures are no longer viable. New procedures may be much weaker. Data access is very sensitive without ECJ control – so the best way to combat crime and terrorism would be to stay in the EU. If not restrictions to data flows seem inevitable.

“ The UK therefore proposes an agreement that helps disrupt criminal activity and facilitate law enforcement activity through the swift exchange of sensitive information and data, including but not limited to:
a. information about airline passengers;
b. alerts to police and border forces, with access to systems that allow for efficient responses;
c. efficient, accurate and reliable exchanges of criminal record information; and
d. DNA, fingerprint and vehicle registration.“

“ Between 2014 and 2016, the UK was in the top three most active Member States on ECRIS. In 2016, the UK notified Member States of more than 35,000 convictions handed down to their nationals in the UK, and responded to almost 13,500 requests for information from the EU relating to UK nationals offending in the EU.…The UK proposes continued participation in ECRIS „

„The UK recognises that being a third country creates some challenges for the full operation of the EAW as it stands, particularly in terms of the constitutional barriers in some Member States to the extradition of their own nationals.“

These are all examples where the UK seeks to be half-in the EU again. Leave means also leaving all these mechanisms. The EU should offer the best possible co-operation for third countries but cannot continue as if the UK is still under ECJ control. To speak of some challenges in terms of constitutional barriers is underestimating the huge problem, that extradition could become be nearly impossible in case of EU citizens.

Foreign Policy, Defence, Development

“ Future UK-EU foreign policy, defence and development cooperation is likely to require a combination of formal agreements enabling coordination on a case-by-case basis. Given the particular intergovernmental nature of foreign and defence policy, it is especially important that the partnership must respect the sovereignty of the UK and the autonomy of the EU and its Member States.“

The UK is an excellent partner if we want to share intelligence on a give-and-take basis. But the UK even when a member state has never given EU partners privileges it gave to the five eyes countries even as a member state. Confidential data of the EU which may be interesting for UK trade interests will in the future be protected from Britain as from any other third country.

“ The UK and the EU should continue to cooperate closely on relevant space technologies, through continued UK participation in EU space programmes, including Galileo, the EU Global Navigation Satellite System (GNSS)…The UK wants Galileo to be a core component of the future security partnership….However, at present there is a fundamental difference of views between the UK and the EU about the conditions under which the UK could participate in Galileo….The EU has put forward proposals which have the effect of ending UK participation. This would be to the detriment of Europe’s security and prosperity. „

Galileo was devised to make the EU independent from third countries on some very sensitive issues of global communication and security. Britain will be a third country in the future – and even one co-operating closely with the main competitors of the EU in that field. This excludes full participation in Galileo.

Institutional Arrangements, Dispute Settling

“ While the legal base that would need to be cited under the EU Treaties would be for the EU to determine, and would depend on the content of the institutional framework, precedent suggests that the UK’s proposal would take the form of an Association Agreement between the UK and the EU…. The future relationship is likely to consist of a number of separate agreements, each covering different elements of economic, security and cross-cutting cooperation. The details of each individual agreement will be subject to negotiation with the EU, but some should be legally binding, for instance, components of the economic partnership such as a core Free Trade Agreement (FTA) and of the security partnership such as internal security, while others should be based on political commitments, for instance, components of external security cooperation. „

Once again an example how complex Brexit is and how far the UK government underestimates the time-consuming negotiations necessary on many different issues. It is as if instead of a booking package tour with your travel agency you negotiate with the agent on each meal and each excursion and other activities separately day by day – reserving the right to do the same with another travel agent putting up co-ordination mechanisms with several agents to deal with your special dietary prescriptions.

“ the Governing Body should meet biannually at leader level (at leader and ministerial level), including at least once between the UK Prime Minister and the heads of state and governments of the Member States of the EU as well as the presidents of the EU institutions, with additional ad hoc formal and informal ministerial dialogue as necessary“

Consultation mechanisms will indeed be necessary, although EU leaders and ministers already have a full calendar of meetings. They may be tired to have more of that kind. These meeting will get a far lower priority than EU meetings have.

„To ensure that relevant parts of the future relationship function effectively, officials from the UK and the EU should meet for detailed discussions through a Joint Committee, and sub-committees where appropriate….Through regular and structured dialogue, the Joint Committee would be designed to prevent disputes from arising, whether related to implementation, enforcement or compliance. „

This is a parallel bueraucracy put in place for just one country while the Commission does that for all member states at once with a relatively small bureaucracy – smaller than that of a big citiy.

“ Finally, if an agreement had been updated to reflect a rule change, this would become a binding obligation on both parties in international law. The agreed rule changes would also need to be given effect in UK law through domestic legislation.“

The EU is permanetly developing its rulebook. Rule changes will be a daily bread and butter issue. This can only be taken over by the UK on a take or leave-it basis, not by replicating the complicated processes which take place inside the EU before a rule becomes law. The Norway model is on the shelve. The UK proposal is far too complicated.

“ Where the UK had agreed to retain a common rulebook with the EU, the UK would commit by treaty that its courts would pay due regard to CJEU case law, insofar as this was relevant to the matter before them. UK courts would not, however, be able to make preliminary references to the CJEU. Once the UK has left the EU, such references would no longer be appropriate or necessary. „

What does paying due regard mean? It does not give any legal security for the EU. The UK proposals would effectively make the UK a sideshow member of the EU where a separate process of negotiating rules takes places after the internal EU process is over. This is unworkable.

 

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