On 17 January 2017, the UK Prime Minister, Theresa May, gave a historic speech regarding Brexit and the UK’s negotiating position.
For the first time since the Brexit vote in June 2016, the UK Government has officially announced that the UK will not be seeking access to the Single Market or seeking to replicate any existing trade arrangement as those enjoyed by countries such as Norway, Switzerland or Turkey.
Whilst the speech will be the subject of considerable media comment, our analysis of the main points is as follows:
- UK does not want to be part of the Single Market: Whilst the UK has to date debated domestically what model of EU membership it should pursue post-Brexit, for the first time the Government has publicly stated that they do not want access to the Single Market, and will instead negotiate a new model based on a reciprocal free trade agreement. The position of the EU has been clear in that there can be no such deal, as it would fundamentally and permanently undermine the federalist bargain of the EU; the acceptance of EU sovereignty in return for access to the Single Market. The UK has essentially called the EU’s bluff and thinks it is in strong enough a negotiating position to carve out such a bargain. It wants free trade with the European bloc but wants to start the negotiations with a clean sheet of paper where free trade is not linked to unattractive obligations such as free movement of people or supremacy of European Court rulings. Only time will tell whether the UK can pull this off or whether it has overplayed its hand.
- Parliamentary Approval: The Prime Minister has stated again and publicly that the eventual terms agreed with the EU will be put to Parliament for a vote. This is not new or controversial, but Parliament at that likely late stage in the negotiation would be left with no choice but to approve it or leave the UK with no post-Brexit trade deal. This is different from granting Parliament a vote to trigger Article 50 in March this year, something the Government has tried to avoid.
- Rejection of the EU Common Customs Union: The Prime Minister emphasised that it was vital for the UK to have the autonomy to enter into beneficial trade deals with non-EU countries post-Brexit. Currently negotiating international trade deals lies within the exclusive competence of Brussels. The EU will no doubt negotiate hard on this point as again it fundamentally undermines the core benefits of EU Membership. The UK has made clear it is seeking to establish its own tariff schedules under the auspices of the World Trade Organisation.
- Existing EU law will turn into UK law: As previously stated the existing body of EU law which currently has been implemented into UK law will post-Brexit remain part of UK law. However those obligations emanating from EU Regulations and Directives will be subject to revision in the future if thought desirable. However, even this relatively benign concession is fraught with difficulties as the structure of many EU laws means they will not translate easily into UK laws.
- Rejection of the European Court of Justice: This was made a principal pillar of post-Brexit UK. The Prime Minister specifically stated that post-Brexit, the ECJ would not have jurisdiction over the British court system. Whilst simple enough, such a pledge is fraught with legal and technical difficulties as many EU laws will be retained post-Brexit. When these laws are the subject of a ruling by the ECJ, will the UK courts ignore it or adopt it? Companies trading with the European bloc will still need to conform to EU product standards and other formalities to export their goods to the EU after Brexit. So whilst a clean break sounds a good idea, it is unlikely to work in practice.
- Adoption of some common standards and frameworks: The details of this remain to be seen. Will the UK for instance adopt equivalent data protection laws to the EU?
- An end to the free movement of European nationals in the UK: This is a key aim of the UK Government, to restrict the uncapped immigration of EU citizens to the UK. The UK has now committed itself to a public position where it must be able place limitations on EU free movement. This is again a principle that the EU has said is sacrosanct in gaining tariff free access.
- EU nationals living in the UK: It was widely thought prior to this speech that the UK was refusing to guarantee the ability of EU nationals to continue to work and live in the UK and that this guarantee would only be forthcoming if reciprocal rights were granted to UK citizens in EU countries at the end of the negotiations. However it appears, at least from the text of the speech, that the UK is willing to give this assurance immediately but that several EU countries (not named) are currently refusing to make a reciprocal concession in favour of UK nationals in their countries.
- The desire for an orderly phased transition: Whilst high on the UK’s wish list, this is also the area where the UK has the least control. The remaining 27 EU Member States could choose to play “hard ball” and refuse any transitional arrangements at the end of the two year’s negotiation period after the service of an Article 50 notice, even if this in turn hurts their own economies.
- Carrot and stick: The Prime Minister made clear in this speech that the fate of negotiations and Brexit was a two way street and that the UK was equally capable of inflicting economic harm to the EU, should the EU not prove reasonable in its negotiating position. The end of the speech constituted the ‘stick’, where the UK aired perhaps Europe’s greatest worry. This was that the UK could if forced become a lower tax, more free market orientated economy, such as Hong Kong or Singapore, based just off European shores. This is a considerable worry to several major EU economies. The UK has now gone on record as adopting this officially as its fall-back position in the face of possible EU intransigence. Alongside this and other trade-war orientated threats to German cars, Spanish fishing and French agriculture, the speech more than once made reference to the UK’s central role in the European military assurance of Poland and the Baltic states against Russia. Even the UK’s nuclear deterrent was raised, reminding many in Europe that they live under the protection of the UK’s nuclear weapons capability.
- No deal rather than a bad deal: Having said the above, the Government has specified that they would be willing to accept no deal with the EU rather than a bad deal. This is likely to be nothing more then a negotiating position. A lack of deal would be disastrous to the UK and EU equally as external tariffs would apply to the UK, which the UK would no doubt reciprocate. Such a position could foreshadow severe economic damage for both parties and they will no doubt be anxious to avoid this at all costs.
- Trump: The impending inauguration of President Elect Trump on Friday 20 January was not mentioned once in the speech, but it was the elephant in the room. The incoming US President has made it clear that he wishes Brexit to be a success for the UK, embracing a hostile stance to the EU as an institution. This is already putting enormous pressure on the EU already perplexed by attacks on German Chancellor Merkel and the credibility of NATO.