PROJECT PRACTICALITY: THE WTO DEAL
As we draw closer to EU Exit Day on 29
March 2019, with no viable “deal” on the table, we are still deafened
daily by the strident voices of those seeking to stop Brexit screeching
that leaving without an agreement – as we will do by law – is akin to
jumping over a cliff-edge, tumbling into an abyss, waking up on 30 March
to chaos, confusion and disaster. Such wild and emotive assertions lend
little credit to the arguments of these arch-Remainers, who would
prefer permanent subjection to EU laws over which we will have no say to
the many opportunities for growth and prosperity offered by
self-government and independent trade, foreign, defence, social,
environmental, energy and research and development policies. After all,
55% of our trade is already with non-EU countries, and our non-EU trade
runs a surplus – unlike our trade with the EU, with which we run a
whopping £95 billion annual trade deficit.
The desperate claims of Remainer MPs are
even more risible than those of media pundits, since they cast serious
doubt on their ability to read or even take note of the masses of
no-deal Brexit legislation that has already been passed by Parliament to
ensure there is no “cliff-edge” on 29 March 2019. Parliament, after
all, has already legislated for a “no-deal” Brexit, principally through
the European Union (Withdrawal Act) 2018 and the Taxation (Cross-border
Trade) Act 2018, both of which seek to make the transition to an
independent future as smooth as possible by domesticating EU systems
businesses are used to precisely to avert the “chaos and confusion” so
gleefully predicted by Remainer MPs.
The EU, too, has not been idle. It
published a whole raft of no-deal preparedness notices on 19 December
2018, after the first vote on the Withdrawal Agreement was pulled, and
announced further measures in January and February. Since then EU27
member states have published more bilateral arrangements to enable life
to continue as normal after 29 March – bar a few formalities which are
nothing to anyone used to travelling or trading further than the
Continent.
Far from “No-Deal” (or as it should more
correctly be termed, a return to full sovereignty trading under WTO
rules) being a disaster or a “cliff-edge” scenario, it is looking more
and more like the best deal on offer. It provides complete certainty
under international law and conventions to which the UK has long
subscribed. It prevents endless prevarication and delay while years are
wasted trying to hammer out terms with an intransigent EU. And it
delivers Brexit in full – no multi-billion pound divorce settlement, an
immediate release from the jurisdiction of the ECJ, no requirement to
follow EU rules over which we have no say, no border in the Irish Sea,
no customs union, no EU control over our economy, agriculture,
fisheries, no risk of new EU taxes being imposed on a UK that will have
no ability to vote them down.
Below, we pull together some of the many
announcements on trade, citizens and other areas that give a clear
outline of what this WTO Deal looks like. Altogether, it presents a very
attractive package of measures based on practical common-sense and
mutual self-interest, just as a good business deal should.
Trade
The government has yet to publish the UK’s
no-deal tariff, due to political arguments, but recent reports suggest
that a low tariff model is now the preferred option. Cutting tariffs is
at zero cost to the Exchequer, since all customs duties currently raised
are collected on behalf of the EU, with only 20% retained to cover
administrative costs.
DIT has, however, already published a list of EU trade remedies it will
delete (66) as well as 43 it will retain to protect British businesses
and consumers after Brexit. These figures alone show that having to
implement the EU’s trade policy in full, as the Withdrawal Agreement and
Political Declaration oblige us to do, could be very detrimental to our
own commercial interests.
Despite not being able to commence any
trade deals until after a complete Brexit (which means no backstop and
no customs union as envisaged by the Political Declaration), the UK has
rolled over some important trade and mutual recognition agreements to
enable trade flows to continue unhindered in a no-deal Brexit – with the
USA, Australia, New Zealand, Switzerland, Israel and South Africa among
others.
Talks are continuing with a host of other partners, including Japan,
with agreements expected to be in place by 29 March. It is obvious that
third countries with EU agreements are waiting to see what status the UK
will have in relation to the EU before they sign transitioning
agreements, which makes uncertainty about the Withdrawal Agreement
something of a blocker.
The government has joined the WTO
Government Procurement Agreement, an annual market of public sector
contracts worth £1.3 trillion, which British businesses will be able to
bid for.
Several mitigation measures have now been
made to prevent a legal black hole for cross-border financial services,
which could have severe repercussions on the already fragile Eurozone
banking sector. On 19 December 2018, the EU published a range of
contingency measures for a no-deal Brexit, including equivalence
guarantees to enable the continuation of derivatives contracts in the
City. Regulations and decisions followed to give these measures legal
effect. The Bank of England and UK Debt Office were given mutual
recognition statusfor all key market areas on 30 January. In February
2019, ESMA (the European Securities & Markets Authority) recognised
UK clearing houses (LCH Limited, ICE Clear Europe Limited and LME Clear
Limited) as able “to provide their services in the EU in the event of a
no-deal Brexit… in order to limit the risk of disruption in central
clearing and to avoid any negative impact on the financial stability of
the EU”.
A memorandum of understanding between the
UK’s Financial Conduct Authority and ESMA allows asset management firms
to continue trading as normal after a no-deal Brexit
Insurance firms are covered by a separate MoU between the UK’s
Prudential Regulatory Authority and the EU’s equivalent regulators,
although less than 0.5% of existing insurance business is not covered by
no-deal preparations.
Elsewhere, the UK has signed a deal with
the USA to enable mutual recognition, regulatory cooperation and the
continuance of the £45 trillion worth of derivatives traded each year
between the two countries (about a third of the £230tn of derivatives
contracts traded in the City every year come from US companies, more
than from any other jurisdiction).
Newspaper reports and surveys confirm that the post-Brexit landscape for
financial institutions is now very clear, with contingency plans
already triggered. The City of London is expected to retain its position
as a global financial centre.
Transport
On 7 March, the British government provided
a guarantee that flights to and from the EU would continue unchanged
after Brexit: “Measures put forward by the UK and the EU will ensure
that flights can continue in any scenario; deal or no deal. This is good
news, not only for the industry but most importantly it reaffirms the
fact that passengers can book flights with confidence, as normal.”
Here, the UK government sets out in detail its reciprocal arrangements
to the EU’s no-deal offer on aviation, in many cases going beyond the
EU’s offer to maximise competition and offer better choice to consumers.
The UK has already signed open skies aviation agreements with the USA
and Canada, and as all other third country flights will operate under
international law and the 1944 Chicago Convention, leaving the EU will
make no difference to non-EU aviation.
Eurotunnel has made it quite clear that its services and business model remain unaffected by Brexit:
“Yes – the Channel Tunnel will definitely
be open after Brexit, and Eurotunnel will be operating as normal
whatever form Brexit takes,” it has announced.
The Channel Tunnel is operated under the
Anglo-French bilateral Treaty of Canterbury, and not under EU law, with
both countries committed to facilitating “as frictionless trade as
possible”. Eurotunnel goes on to explain:
There has been a recent story in the press
about The European Commission providing authorisation for the Tunnel to
continue to operate as it does now for 90 days after Brexit in the case
of a “no deal”. This is just because agreed safety and operating
licences can’t be signed between the UK and the EU unless the UK
actually is a “third party” at the moment of signing. The 90 days means
that these agreements will be physically signed after the 29th of March,
without the service being affected in any way. We are Brexit-ready and
pleased to let customers know they can book with confidence.”
Train scanners funded entirely by
Eurotunnel at their hub at Calais-Fréthun can scan freight wagons for
customs as they cross into France without trains needing to stop, thus
opening up the possibility of rail freight from the UK all the way to
China.
In addition to guarantees from Eurotunnel,
French authorities have given repeated assurances that there will be no
long queues due to new controls at Calais in the event of a no-deal
Brexit. The French government has now gone one step further, launching
its smart customs border at Calais for 29 March 2019 to enable people
and goods to keep flowing. The main incentive, as the promotional video
says, is to maintain France’s dominant position in cross-Channel trade.
The “smart border” will operate for both
ferry traffic and shuttle trains through the Channel Tunnel, enabling
business to automate goods crossings by HGV through electronic
pre-declaration of goods, a barcode linking the declaration to the goods
and the registration plate of the vehicle, and dedicated lanes as
drivers reach the port – green for “no checks” and orange if the vehicle
needs to be checked.. This simply takes existing trusted trader schemes
and electronic declarations and customs pre-clearance to its logical
conclusion.
The idea of a 50-mile lorry queue in Kent
often portrayed by Project Fear is, of course, dependent on hold-ups at
Calais for ferries leaving the UK – and the French are not anticipating
any problems. Nor is the port of Dover anticipating any more checks than
it currently operates for lorries entering the UK. DFDS seaways has
been focusing its resources on helping businesses deal with electronic
customs, and this is, of course, the key to a frictionless border.
Certain legislative measures have already
been made to ease traffic at RoRo ports, and the UK’s accession to the
Common Transit Convention as an independent state greatly reduces
customs formalities, allowing goods to move across multiple customs
borders on a single transit declaration. CTC membership also moves
certain customs formalities away from ports, thereby easing the pressure
on these potential pinch points.
HMRC has offered guidance and even £8
milllion for training and IT grants to help traders to familiarise their
staff and upgrade their systems for customs processes. Businesses used
to importing from the rest of the world will already be familiar with
the system, since the UK’s standalone customs regime is designed to keep
rules essentially the same in order to minimise confusion and
disruption. However, the government has just made legislation that will
reduce the checks and formalities required at RoRo ports for a period of
up to twelve months (Customs Managed Transition Procedure). Coupled
with the simplified electronic processes already announced, the aim is
“to keep trade flowing” by making customs compliance as easy as
possible. Further easements for excise duty movements and VAT have also
just been published. This handy tracker keeps up to date with the latest
no-deal statutory instruments.
People – citizens’ rights
Gallons of ink and much vitriol has been
expended on citizens’ rights, yet it’s one of the few areas in the
Brexit debate on which all parties have largely agreed. No one thinks
it’s fair for people who have based their life choices on an existing
system to be disadvantaged because that system has changed.
- EU citizens already in the UK
The UK has unilaterally committed to
protect the rights of EU citizens in the UK and has offered generous
terms to enable them to complete the necessary formalities in order to
obtain settled status. Applications must be made by 30 June 2021 and
there is no fee. The process is simple, and applicants can receive
confirmation of their rights by email after scanning documents through a
Home Office app.
Rules for EU visitors to the UK will not
change either in a no-deal Brexit, with visa-free entry for visits of up
to 90 days guaranteed. The EU has offered to reciprocate for UK
visitors to the EU.
Rules for EU immigrants in a no-deal Brexit
give them the same opportunity to live, study and work in the UK as
now, up until 2021, provided they apply for a European Temporary Leave
to Remain. If they wish to remain after 2021, they will still be
eligible to apply for settled status.
In effect, this means that free movement of
EU/EEA citizens for work and study continues until 2021 under a WTO
Brexit. There is therefore no “cliff-edge” when it comes to recruiting
and retaining staff from the EU.
- UK citizens living in the EU27 countries
It’s unfortunate that the EU, which has
made such a fuss about citizens’ rights, has not been able to
reciprocate the UK’s generous offer. Whilst it had the authority to
negotiate under the Article 50 talks, it doesn’t have a mandate to make
bilateral arrangements, although it has encouraged all EU27 member
states to guarantee the rights of UK citizens living in their countries.
Many countries have now published their
guarantees to protect the rights of British expats in the event of a
no-deal Brexit, including: France, Germany, Italy, Spain, Portugal,
Belgium, the Netherlands, Sweden, Denmark, Finland, Austria, Ireland
(which is of course covered by a separate bilateral treaty). However,
some of these offers are not quite clear, since they are based on
reciprocity for those countries’ nationals living in the UK – rights
which the UK has more generously protected as outlined above.
The UK has already signed an agreement with
the EEA countries (including Norway, which has 30,000 British
residents) to enable current residence rights to continue, and
the citizens’ rights agreement with Switzerland could perhaps serve as
the template for bilateral treaties with the EU27.
The EU runs a very profitable tourist trade
on visitors from the UK, and one of the first no-deal offers from
Brussels was a 90-day visa waiver for short stay visitors from the UK
provided there was reciprocity – which there has been. Portugal is so
keen to ensure British holidaymakers still choose to visit that it has
proposed fast-track UK-only passport lanes at its airports. It is an
idea that is likely to catch on in hotspots popular with British
tourists as destinations compete for business.
People – study & research
Both the UK and the EU have proposed the
continuation of current Erasmus programmes for the 14,000 EU students
and researchers currently in the UK and the 7,000 UK students in the EU.
The EU has published a regulation to come into force on Exit Day, while
the UK government has guaranteed funding for all current programmes and
students for the current cycle that ends in 2020, even for projects
that continue beyond that date. The government intends to seek a
continuation of Erasmus participation in the event of a no-deal Brexit,
and as this is set out as an objective in the Political Declaration, it
is likely to meet with a receptive hearing.
- Researchers – Horizon 2020 and beyond
The government has also guaranteed
to underwrite Horizon 2020 projects entered into before 29 March 2019
for the lifetime of the projects entered into by Exit Day. The
government has also committed to develop a new UK research strategy
providing a fund for research and development fund of 2.7% of GDP by
2027. In essence, research funds currently sent to Brussels and dished
out through a complicated process between several countries will be able
to be focused on projects run entirely from the UK (with or without
overseas partners).
New Horizons…. In June 2018, the EU set out proposals for its next
Horizon Programme, 2020-2027, in which non-EU countries will be able to
participate for a fee. This concession is clearly aimed at keeping the
UK within the Horizon programme.
Conclusions
It can be seen from all of the above that –
to quote a hackneyed phrase – as the clock ticks down to 29 March,
there is nothing whatsoever to fear from leaving the EU without an
agreement and reverting to WTO rules. These rules have been
long-established, are universally accepted, and present no change at all
for the majority of our exporters. Only then will the UK gain the
leverage it needs to propose the kind of free trade deal with the EU
that would maximise the benefits of Brexit – when control of our
borders, law and money has been repatriated to these shores.
