Implications of the Withdrawal Agreement for Business Across the Globe
On 14 November the UK and European Commission jointly published an updated version of the draft Withdrawal Agreement (WA) and outline Political Declaration (PD). The Withdrawal Agreement canvasses the concrete legislative dimensions of the divorce arrangements of the EU, while the Political Declaration addresses the future relationship. The parliamentary debate on these motions began on Monday, December 3 and will conclude with the ‘meaningful vote’ on Tuesday, 11 December. It is highly unlikely that this vote will be won by the Prime Minister and her Conservative backers, despite a coordinated PR campaign by these actors. In the event of approval, the EU has committed to working with the UK to ensure that all existing third country trade agreements apply throughout the transition period. This period currently runs until December 2020, and may be extended by 1-2 years. If, following this period, the UK enters a ‘backstop’ customs arrangement with the EU to avoid the creation of a hard border with Northern Ireland, the status of preferential trade agreements with third countries is unclear. Therefore, although the current deal would provide some degree of short-term certainty, businesses would continue to face a lack of clarity in relation to the medium- to long-term trade arrangement. If the WA does not withstand the meaningful vote, the Prime Minister has 21 days to return to Parliament to outline next steps. Potential alternatives include a reversion to WTO rules under a ‘no-deal’ scenario, the extension of Article 50 to allow the continuation of negotiations, and a second referendum. None of these currently command a parliamentary majority, and each contains a range of risks.
In the PD, the UK states its commitment to maintaining ‘level playing field’ provisions with the EU. This is portrayed by its proponents as a means of retaining market access to the EU single market, and by its detractors as inhibiting the UK’s ability to enter into meaningful trade arrangements with third countries. The BCC continues to convey its belief that the practical trade implications for UK businesses are not being sufficiently considered by government, and we are working hard to ensure that there is no disruption to existing trade relationships. This includes expressing the concerns of those in the international network that prolonged uncertainty surrounding these trade relationships may grant a competitive advantage to non-UK companies in third countries.
Colleagues enquired as to the contrast between the focus on trade in goods, and the comparative lack of attention to services. This may be attributable to the relative vulnerability of the UK across certain goods sectors, as well as the concerted lobbying efforts by those with complex, integrated supply chains such as the automotive industry. The current arrangement allows for the mobility of professional services providers, and grants them rights to establishment, which has allayed much of their concern. However, there remains much to be determined regarding the contours of the future arrangement. This hinges primarily upon a data adequacy decision on whether data channels between the EU and UK can remain open, and equivalence decisions in particular sectors such as the financial services sector.
The BCC is consistently updating its Business Brexit Checklist to reflect ongoing developments, and you can access this here.