21 Apr

Message from the CEO - Brexit Update

  • Key Issues in Brexit
  • The Future Australia UK and Australia EU relationships
  • The impact of the general election

During March, debates were held in both the House of Commons and the House of Lords which passed the bill to enable the Prime Minister to trigger Article 50 of the Lisbon Treaty, which she duly did through a 6-page letter on the 29th of March 2017. This gives the UK and EU a two-year timeline for negotiating the departure of the UK from the EU including the single market.

Since then, the Prime Minister has sought and had approval from the government to hold an early general election on 8th June 2017. The next election was not due to take place until May 2020. By calling the election, the Prime Minister is seeking a greater majority for the Conservative party in Parliament, therefore allowing her a stronger mandate in Brexit talks. According to current polls, the Conservatives will secure a sweeping victory in the election.

Key Issues in Brexit

Separation framework:-
The letter triggering Article 50 laid out the Prime Minister’s view that the UK should be able to negotiate both the exit and the future arrangements at the same time.
The response from the EU however, both through President of the EU Council, Donald Tusk’s formal 9-page response, and through the comments of a number of leaders since 29th March, is that the “divorce” must be finalised before the new future arrangements can be considered.

Four Freedoms:-
Access to the EU single market allows the four freedoms - free movement of people, capital, goods and services. Both sides have made it clear that the free movement of people, both the departure of EU citizens from the UK and UK citizens from the EU, must be an early issue to be resolved in negotiations.
Both sides have also agreed that the UK cannot “cherry pick” from the four freedoms. Should the UK restrict immigration, they will not be able to expect the other three freedoms to continue in the same form.

Reparations for Exit:-
There is significant interest in the implications of the UK’s withdrawal on the EU budget. The UK is committed to the current EU budget cycle which concludes in 2020. Under the current timing, the UK is due to depart at the end of March 2019. Any amendment to the UK’s financial commitment can only proceed with the agreement of the remaining EU27 Member States. This is seen as an unlikely outcome.
The figure currently being put forward for an early exit from the 2020 Budget is about GBP50bn. The UK is countering this figure, pointing to the assets that the UK has contributed to, not just the current fiscal contributions.

Other items:-
The EU has interestingly stipulated that the relationship between the EU and Gibraltar must have the agreement of the Kingdom of Spain, a move sure to open an old sore.

The Future Australia UK and Australia EU relationships

Currently the EU and Australia are in the final phase of a scoping study on a potential Free Trade Agreement (FTA). This will not be the first time that Australia has undertaken this process with the EU.

Australia’s Minister for Trade, Tourism and Investment, Hon Steven Ciobo MP has suggested that negotiations for the agreement could commence as early as September 2017. This is a priority for Australia as it will allow Australians better access to the EU for goods and services. The EU as a whole is the second largest trading partner with over $89bn in trade with Australia, accounting for 13% of Australia’s trade overall (DFAT). This will continue to be a priority regardless of the UK’s plans to exit the EU. It should be noted that the UK is a significant part of the numbers quoted above with over $20bn in trade.

The UK and Australia will not be able to negotiate an FTA until after the UK has formally completed the Article 50 process. This means that currently negotiations cannot be initiated until April 2019. Despite this, both Australia and the UK have expressed a strong commitment to completing an FTA as soon as practicable after that. To this end, Minister Ciobo met with Secretary of State for International Trade, Rt Hon Liam Fox MP, in September last year and agreed to establishing a Trade Working Group which will look at both the current trading situation and areas that could be improved through a future FTA. It is in the interests of both countries to ensure that the relationship between each party and the EU is maintained during this period to enable the most efficient and timely completion of the opportunities for both countries.

The impact of the general election

It is unlikely that the election will result in the triggering of Article 50 to be revoked. The leading parties, the Conservatives and Labour, have both committed to continuing with Brexit. Only the Liberal Democrats and Green Party, minority parties, oppose Brexit.

Posted in General by hmaclean@britishchamber.com
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