The Prime Minister's Mansion House Brexit speech

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On 2 March 2018, Prime Minister Theresa May outlined her vision for the UK's future economic partnership with the EU in her Brexit speech at Mansion House. We look at what she said and what this means.

 

Area

What the Prime Minister said

What this means

Level playing field

“...our agreement will need reciprocal binding commitments to ensure fair and open competition.”

“...the level of integration between the UK and EU markets and our geographical proximity mean these reciprocal commitments will be particularly important in ensuring that UK business can compete fairly in EU markets and vice versa.”

These sorts of ‘level playing field’ provisions – covering the likes of state aid and competition law – are areas where the UK-EU will include more tightly binding rules than elsewhere in the deal.

The EU has recently expressed concerns that they are even more necessary given the UK-EU circumstances. This part of the speech directly recognises that.

Arbitration

"...we will need an arbitration mechanism that is completely independent”

“This will ensure that any disagreements about the purpose or scope of the agreement can be resolved fairly and promptly.”

“the ultimate arbiter of disputes about our future partnership cannot be the court of either party”

Arbitration – enforcement and dispute settlement – will be a key part of the future deal.

The Prime Minister did not put forward any new UK position. Instead she reiterated the messages put forward in the UK’s future partnership paper on the topic in August.

But this makes clear that any suggestion the European Court of Justice (ECJ) is the sole arbiter is still ruled out.

Data

“the free flow of data is also critical for both sides in any modern trading relationship”

“That is why we will be seeking more than just an adequacy arrangement and want to see an appropriate ongoing role for the UK’s Information Commissioner’s Office”

Through the Prime Minister’s Munich speech and the data future partnership paper, the UK has stressed the importance of a good deal on data.

This means going beyond the typical ‘adequacy’ decision offered by the EU to third countries, as adequacy is a unilateral decision by the European Commission that can be revoked and allowing the Information Commissioner to attend the regulator’s forum.

Migration

“as we leave the EU, free movement of people will come to an end and we will control the number of people who come to live in our country.”

“But UK citizens will still want to work and study in EU countries … businesses across the EU and the UK must be able to attract and employ the people they need. And we are open to discussing how to facilitate these valuable links”

This is the first time the UK has said that migration could be a substantive topic for negotiation.

The UK will want to negotiate some elements of movement in terms of services (discussed below), but this suggested an openness to go beyond that.

Goods

“the UK-EU border should be as frictionless as possible”

 

“we must ensure that, as now, products only need to undergo one series of approvals, in one country, to show that they meet the required regulatory standards”

“To achieve this we will need a comprehensive system of mutual recognition”

“UK and EU regulatory standards will remain substantially similar in the future”

“Our default is that UK law may not necessarily be identical to EU law, but it should achieve the same outcomes.”

“there will need to be an independent mechanism to oversee these arrangements”

The UK will want to align its regulations in some areas, but in others it wants the freedom to meet the same standards but by different means. The UK also wants the right to diverge in the future, even if that brings market access consequences.

It wants to agree a comprehensive system of mutual recognition to ensure any divergence does not result in friction at the border. But the EU has suggested it is unlikely to accept this. The only other example, outside of the EU, of the kind of deal the UK is seeking is the Trans-Tasman Mutual Recognition Agreement. But that does not include the highly regulated areas that are important to the UK.

The big challenge will be spelling out how this could work in practice and then negotiating it with the EU.

The UK position is still consistent with Theresa May's Florence speech and David Davis's speech in Vienna. But the Prime Minister did say there would need to be an independent mechanism to oversee arrangements and that standards would stay “substantially similar”. Detailing exactly what this means will be critical for entering negotiations.

Agencies

“We will also want to explore with the EU, the terms on which the UK could remain part of EU agencies such as those that are critical for the chemicals, medicines and aerospace industries: the European Medicines Agency, the European Chemicals Agency, and the European Aviation Safety Agency”

“We would, of course, accept that this would mean abiding by the rules of those agencies and making an appropriate financial contribution”

This is one of the most important new in this speech. It develops on the points made by the Prime Minister in her Munich speech, but extending the principle beyond security and into the single market.

This signals an intention to seek a ‘high alignment’ relationship with the EU in the areas mentioned by the Prime Minister. It is not clear whether this would allow any divergence and means the Prime Minister has crossed her red line on ECJ jurisdiction.

Customs

“We have thought seriously about how our commitment to a frictionless border can best be delivered. And last year, we set out two potential options for our customs arrangement.”

“Option one is a customs partnership between the UK and the EU”

“Option two would be a highly streamlined customs arrangement, where we would jointly agree to implement a range of measures to minimise frictions to trade, together with specific provisions for Northern Ireland.”

There was nothing new from the Prime Minister on customs. She repeated the positions the Government put out last summer.

Option one is untried and untested, with the UK admitting it would take at least five years to implement.

Option two would result in friction, so the Prime Minister spoke of the specific additions aimed at mitigating the need for customs checks.

Agriculture

“We are leaving the Common Agricultural Policy and will want to take the opportunity that brings to reform our agriculture...”

The UK would like to diverge on the way it’s farms are subsidised, as the Secretary of State for Environment, Food and Rural Affairs, Michael Gove, set out in his consultation document. But we learned little new.

Environmental and food safety standards are less clear, however. The Prime Minister asked for “flexibility” while also promising to maintain at least as high standards. It is not clear whether this rules out doing trade deals with the US, for example.

Fish “The UK will regain control over our domestic fisheries management rules and access to our waters.” The UK wants to take back control of its waters by leaving the Common Fisheries Policy. But the Prime Minister’s reference to the EU’s demands on fisheries suggests she may consider access to UK waters as a key bit of leverage in the deal.  
Services

“...we should only allow new barriers to be introduced where absolutely necessary.”

The UK accepts that access in services cannot continue as now. But the Prime Minister also wants to go beyond the precedents that have been agreed, setting out some forms of liberalisation that could be agreed.
  “agree an appropriate labour mobility framework that enables UK businesses and self-employed professionals to travel to the EU to provide services to clients in person” Known as mode 4 in trade terms, the ability for people to travel to provide cross-border services to clients would be one of the basic asks and can be found in the Comprehensive Economic and Trade Agreement (CETA) with Canada.
  “it would make sense to continue to recognise each other’s qualifications in the future”

The UK wants mutual recognition of qualifications, ensuring that those working as architects or accountants can continue to do so across the EU with their current qualification. The UK tried to raise this in phase one but the EU batted this into phase 2 of the negotiations.

  “There are two areas which have never been covered in a Free Trade Agreement in any meaningful way before – broadcasting and, despite the EU’s own best efforts in the Transatlantic Trade and Investment Partnership, financial services.” The UK has suggested it wants an unprecedent relationship on broadcasting and financial services. The only detail given is the suggestion of mutual recognition with not much more on how that works in practice. For financial services May cites the precedent of TTIP but does not go into more detail, leaving that for a later speech by the Chancellor.
Energy “On energy, we will want to secure broad energy co-operation with the EU. This includes protecting the single electricity market across Ireland and Northern Ireland – and exploring options for the UK’s continued participation in the EU’s internal energy market." It’s unclear whether “exploring options” for remaining in the EU’s internal energy market means the UK is prepared to countenance signing up to EU rules. But this signals that this is one of the areas where maintaining participation is key. Preserving the single energy market in Northern Ireland and Ireland is a key issue for both sides.
  “We also believe it is of benefit to both sides for the UK to have a close association with Euratom.” The Prime Minister mentions being part of the nuclear agency, possibly through observer status. This would allow the UK to influence the rules but without a vote.
Transport “On transport, we will want to ensure the continuity of air, maritime and rail services; and we will want to protect the rights of road hauliers to access the EU market and vice versa.” A statement of intent that does not provide much of the detail in terms of how to achieve this as the UK’s status would change post-Brexit.
Digital

“On digital, the UK will not be part of the EU’s Digital Single Market, which will continue to develop after our withdrawal from the EU... it will be particularly important to have domestic flexibility”

The Prime Minister highlights digital services as one of the areas the UK will diverge. It will not be part of the future EU rules on this, so the UK would diverge automatically if it did not match the rules. The UK sees this as an opportunity to lead the way.

Civil judicial “We will want our agreement to cover civil judicial co-operation, where the EU has already shown that it can reach agreement with non-member states, such as through the Lugano Convention, although we would want a broader agreement that reflects our unique starting point.” The UK wants to expand on the convention which allows the judgements of the signatories’ courts in civil and commercial matter to be recognised and enforced in different jurisdictions.
Science and research, and education and culture

“The UK is also committed to establishing a far-reaching science and innovation pact with the EU, facilitating the exchange of ideas and researchers. This would enable the UK to participate in key programmes alongside our EU partners.”

“...we want to take a similar approach to educational and cultural programmes, to promote our shared values and enhance our intellectual strength in the world - again making an ongoing contribution to cover our fair share of the costs involved.”

The Prime Minister suggested that she wants to remain part of future science and innovation framework programmes. The UK has already put out a future partnership paper on this.

Likewise for education and culture the Prime Minister suggests the UK may want to stay part of the Erasmus programme, and would be willing to pay for it.

 

Update date: 
Friday, March 2, 2018 - 17:45