The EU is quietly but surely progressing with its Brexit preparations. Whilst the Westminster bubble and UK media continues to theorise the relative advantages/disadvantages of variants around a customs union (maximum facilitation or “max fac” vs. a new customs partnership), The European Commission continues its favoured approach: publishing simple slides. The two most recent ones, customs controls and possible future framework merit a closer look.
First the customs union slide. Whilst at first glance the structure and detail look comprehensive, the most important point is subtle yet simple: only the two red bullet points (from a total of approximately 30 issues raised) are formally solved by the UK remaining in the customs union. What the Commission are inferring is that customs co-operation with a third country is far more complex than simply adhering to the customs union. In short, in order to ensure all the other customs elements are not negatively affected by Brexit, there needs to be new, comprehensive solutions proposed. One solution, of course, would be remaining in the single market as well as the customs union though this remains, at this stage, a red line for the UK.
Next the future relationship slide. Again this visual depiction outlines the various elements which the EU sees as forming part of the future relationship. Two elements are worth highlighting: firstly, the regulatory co-operation framework box, which the EU sees in the context of “level playing field”. In essence how close or loose that co-operation will be will dictate the extent to which the UK aligns with EU regulations and standards or deviates by developing its own regime. The closer the alignment, the better the access to EU markets – ensuring a level playing field. The looser, the less likelihood the UK will be able to access EU customers. Secondly, financial services and data protection are seen by the Commission as outside the governance framework under the heading “EU autonomous measures”. The clear signal to London and the City is that these issues are for the EU to decide and not for part of the core market access/free trade agreement section. The UK, of course, would like to see these issues included as part of the broader economic partnership.
For its part the UK has published their own slide deck recently on the economic partnership which are being presented and discussed with EU negotiators in Brussels. Whilst the slides will be welcomed for providing more flesh on the bones compared to the previous, high level speeches from the PM and ministers, it is clear from these slides that the UK’s starting point for a future relationship remains a very different one when compared to the EU’s slide.
In conclusion there remains a stand-off in terms of how to frame the future relationship. And even before negotiations can really develop on the future framework, EU leaders will have to, once again, assess progress at their upcoming summit at the end of June. It seems unlikely the emphasis on customs can square the circle with regards to Ireland/Northern Ireland. From the EU’s perspective, there can be no frictionless trade and no border unless the UK agrees to remain in the customs union and the single market. Whilst few expect the UK to accept that position in June, the big test is whether EU leaders are willing to continue to fudge things in the hope that ultimately, the UK might accept the logical consequence of the EU’s customs slide.