The UK Government’s Brexit White Paper – a focus on trade

Posted in UK and EU legal framework WTO and international trade

The UK Government has published its Brexit White Paper, setting out its proposal for the future EU-UK relationship.

According to the Government, the new relationship should be broader in scope than any that currently exist between the EU and a third country, reflecting the EU and UK’s close ties and unique starting point.  The Government’s vision is for the new relationship to be structured around an economic partnership and a security partnership: the two principal areas of focus of the White Paper.

As set out in our previous post, the key element of the Government’s proposal regarding future economic arrangements is the establishment of a free trade area in respect of goods (services would not be included and the Government’s proposals regarding services will be addressed in a separate blog post).

Specifically, the UK and the EU would maintain a common rulebook for all goods, including agricultural products.  In order to achieve this, the UK has offered to commit by treaty to "continued harmonisation" with EU rules on goods to the extent necessary to provide for frictionless trade at the border.  The plan would aim to protect integrated supply chains and ‘just-in-time’ processes that have developed across the UK and the EU. 

In order to achieve this, the Government proposes that the UK will participate in those EU agencies that provide authorisations for goods in highly regulated sectors – namely the European Chemicals Agency, the European Aviation Safety Agency, and the European Medicines Agency – accepting the rules of these agencies and contributing to their costs, under new arrangements that recognise the UK will not be a Member State.

As part of this plan, the UK proposes a new Facilitated Customs Arrangement, which would aim to achieve “most frictionless trade possible in goods”. Under this plan, the UK seeks to reconcile being outside of the Customs Union with the aim of avoiding a hard border with Ireland or having different customs arrangements for Northern Ireland and the rest of the UK.

Under this proposal, the UK would apply its own tariffs for goods intended for the UK, and the EU’s tariffs for goods intended for the EU.  The system would need to ensure that businesses paid the right or no tariff upfront in the vast majority of cases, and otherwise through a repayment mechanism, for example, the destination cannot be robustly demonstrated at the point of import. In the Government’s view, it is estimated up to 96% of UK goods trade would be most likely to pay the correct or no tariff upfront, with the remainder most likely to use the repayment mechanism.  The White Paper does, however, recognise that there would need to be a phased implementation of this model, which will presumably necessitate ensuring that the implementation dovetails with the proposed transition arrangements to avoid any gaps in coverage. 

The Government maintains that the plan would enable the UK to control its own tariffs for trade with the rest of the world and would remove the need for customs checks and controls between the UK and the EU “as if they were a combined customs territory”.  Further, the Government contends that the plan would not prevent the UK pursuing its own independent trade policy. Indeed, the White Paper states that the UK will potentially seek accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership on terms consistent with the UK’s future relationship with the EU.

Further, the paper proposes binding commitments to open and fair competition, something fundamental of trading relationships. According to the White Paper, the UK will commit to apply a common rulebook on state aid and establish cooperative arrangements between regulators on competition, including. Further, it is proposed that standards would not fall below existing levels in relation to the environment, climate change, social, and employment and consumer protection.

While the White Paper reiterates the Government’s red line that free movement of people will end post-Brexit, there is arguably some softening, or at least elaboration, of the UK’s preferred approach.  For example, the paper provides the new economic partnership should provide reciprocal arrangements that “support businesses to provide services and to move their talented people”.  Such arrangements should also “allow citizens to travel freely, without a visa, for tourism and temporary business activity” and facilitate mobility for students and young people.

The Government intends that the White Paper will provide the framework for the future relationship between the UK and the EU, particularly in relation to future trade.  With negotiations on it and the Withdrawal Agreement will recommence during the week beginning 16 July 2018, businesses will hope that the publication will result in significant progress in the parties reaching an agreement.  Of particular note, the Executive Summary to the White Paper concludes by citing the principle that nothing is agreed until everything is agreed and asserts that ‘the Withdrawal Agreement and the framework for the future relationship are inextricably linked – and so must be concluded together’.

We will be providing analysis of other aspects of the White Paper in separate blog posts in the coming days.

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