The EU’s greatest fear with respect to Brexit is the strong possibility that the UK’s economy will prosper outside of the EU. If so, then it could well lead to the departure of more EU member states, resulting in the possible break-up of the EU at some point in the future. As mentioned in a previous BFB article, two of the most important drivers of the UK’s future economy outside of the EU will be:
- Our ability to negotiate lucrative free trade deals around the world.
- The freedom of our Government to introduce any initiative which will attract investment, stimulate our economy and make our companies more competitive abroad.
Blocking the UK’s freedom to exercise these options has been a key EU objective in the Brexit negotiations to date. Keeping the UK within the Customs Union would achieve just that. However, the EU soon realised that the UK was committed to leaving the Customs Union, so it had to come up with another strategy.
Using the Irish Border as leverage, the EU convinced Mrs May of the need for an Irish Backstop with sinister and far-reaching implications for the UK. Once activated, it would keep the UK indefinitely in a Customs Territory under Customs Union rules. Then, for permission to exit the backstop and leave the EU, the UK would likely have had to agree to remain in the Customs Territory or some other arrangement which tied us closely to Custom Union rules. Fortunately, the risk associated with the Backstop was recognised in time and Mrs May’s Withdrawal Agreement was rejected by Parliament. At that point the Brexit negotiations stalled as the EU refused to remove or modify the Backstop. This political deadlock eventually led to Boris Johnson replacing Theresa May as Prime Minister.
Under his threat of a ‘no deal’ Brexit, the EU surprisingly agreed to remove the backstop from the Withdrawal Agreement which seemed too good to be true. Had the EU really given up on their mission to control UK trade post Brexit or was there a hidden catch in this new deal? Having read the revised Political Declaration, there is most certainly a catch and it is anything but hidden. It seems that their goal remains the same. Only their strategy has changed.
The EU has reluctantly accepted that the UK must be allowed to negotiate free trade deals with countries around the world. However, their goal now is to prevent the UK benefitting from this new-found trading freedom. Their aim is to stop the UK from exercising option 2 in order to prevent our Government from introducing any economic measures which could be construed as being unfair to EU interests. In other words, to ensure that the UK does nothing which might give us a trading advantage over the EU. The EU’s intentions are clearly stated in the revised Political Declaration and the scary thing is that Boris Johnson maintains that this is a great Brexit deal for the UK. Here are some examples from the said document:
The revised Political Declaration [TF50 (2019) 65 – Commission to EU 27]
“the Parties agree to develop an ambitious, wide-ranging and balanced economic partnership.”
“It will be underpinned by provisions ensuring a level playing field for open and fair competition, as set out in Section XIV of this Part.”
“the Parties envisage comprehensive arrangements that will create a free trade area, combining deep regulatory and customs cooperation, underpinned by provision ensuring a level playing field for open and fair competition, as set out in Section XIV of this Part.”
Section X1V Para 77
“the future relationship must ensure open and fair competition, encompassing robust commitments to ensure a level playing field.”
“These commitments should prevent distortions of trade and unfair competitive advantages.”
“The Parties should in particular maintain a robust and comprehensive framework for competition and state aid control that prevents undue distortion of trade and competition; commit to the principles of good governance in the area of taxation and to the curbing of harmful tax practices;”
The big concern surrounding this text is the interpretation of vague undefined terms such as “fair”, “balanced” or “level playing field”. Who decides what is fair and what is unfair? It seems the EU has already drawn a line in the sand by stating, under Para 4, “This balance must ensure the autonomy of the Union’s decision making and be consistent with the Union’s principles” and again, under Para 77, “In so doing, they should rely on appropriate and relevant Union and international standards”
If these vague descriptive terms are left open to EU interpretation, then who knows where this will end up? The EU might even claim that, simply by negotiating a free trade deal with another country where the EU does not have a similar trade agreement, the UK has breached the EU/UK agreement on fair trade and open competition.
Inevitably this will lead to disputes which, according to the Political Declaration, will be settled by an independent arbitration panel and, if the dispute impacts on EU law, then the European Court of Justice will determine the outcome. Left unchallenged, the EU will no doubt make sure that any possible dispute is covered by EU law, which means that after Brexit, the EU will remain firmly in charge of the UK’s future trade and economy.
Surely Boris Johnson realises that if the UK economy is to prosper outside of the EU, these two trading drivers must be freely available to the UK Government. Option 1 without option 2 could seriously restrict and perhaps even eliminate many of the trading benefits associated with leaving the EU.
In Harry Western‘s recent BFB article (Don’t be fooled: a ‘bare bones’ free trade deal is exactly what the UK wants), he rightly warns against the danger of overcomplicating the upcoming EU-UK free trade talks. As such, the next UK Government must push for a quick and basic no-strings-attached free trade deal with the EU. Striving for a more complex deal will undoubtedly lead to extended negotiations requiring further concessions from the UK, and risks leaving the EU in full control of UK trade.
This latest attempt to control UK trade post Brexit must be exposed and addressed before any
Withdrawal Agreement is signed. The future prosperity of the UK depends upon it.