In two blogs published today, we look at the EU’s draft negotiating mandate and the UK Government’s priorities for the future relationship. This first blog looks at the EU’s approach focussing on its proposals for an economic relationship. The second blog on the UK Government’s priorities for the negotiations can be found here.
The UK has now left the EU, and negotiations on the nature of the future UK-EU relationship are set to begin early next month. Michel Barnier, head of the European Commission’s Task Force for Relations with the United Kingdom made the first move on 3 February 2020 with the publication of the EU’s draft negotiating mandate.
Published alongside a recommendation that negotiations should be opened with the United Kingdom, the negotiating mandate will need to be approved by member state governments before the negotiations can begin.
The Commission’s proposal suggests using Article 217 of the Treaty on the Functioning of the European Union as a legal basis. This would indicate the Commission’s ambition, in line with what was agreed in the Political Declaration on the future relationship, is to agree an Association Agreement with the UK. This would create a framework for economic and security cooperation rather than agreeing a simple free trade agreement or a number of small sectoral agreements. An Association Agreement would be significant because it requires the unanimous agreement of all 27 member states and the consent of the European Parliament. The negotiations themselves will be conducted under the procedure laid out in Article 218 of the same Treaty.
The mandate recalls that there is a possibility to extend the transition period, by one or two years, and states both sides will do their best to achieve an agreement before the end of the transition period. It also reiterates the statement in the Political Declaration, that both sides will work to conclude and ratify a fisheries agreement by 1 July 2020.
In line with the Political Declaration, the EU has already announced that there will be a UK-EU meeting in June 2020 to take stock of progress on negotiations.
Scope of the partnership
The mandate sets out that the EU is aiming for a comprehensive new partnership which covers the following areas:
- trade and economic cooperation
- law enforcement and judicial cooperation in criminal matters
- foreign policy
- security and defence
- thematic areas of cooperation.
As with the EU’s other Association Agreements, the draft mandate proposes that the future partnership will also include governance arrangements to ensure the proper functioning of the partnership.
In broad terms, the negotiating mandate mirrors the text of the Political Declaration on the Future Relationship which was agreed alongside the Withdrawal Agreement in October 2019.
The mandate also proposes that the future relationship should provide scope for the UK to continue to participate in EU funding programmes, subject to meeting the general rules for the programmes and providing financing towards the programmes.
The economic relationship
Part II of the mandate makes proposals in relation to the economic relationship between the EU and the UK centred on the development of a free trade agreement. Speaking at the publication of the draft negotiating mandate, Michel Barnier indicated that the EU was ready to offer a trade deal which includes zero tariffs and zero quotas on all goods entering the single market along with a free trade agreement for services. He said the EU’s offer would also include intellectual property provisions and reciprocal public procurement arrangements. Michel Barnier added that
We are ready to offer all this, even though we know that there will be strong competition between the UK – our immediate neighbour – and the EU in the future.
As the UK will not be part of the Customs Union, customs checks between the UK and the EU are likely, but the mandate proposes a partnership which would seek to optimise customs procedures.
The mandate seeks to restrict technical barriers to trade including different regulatory regimes and sanitary and phytosanitary measures by proposing an approach which goes beyond standard World Trade Organisation (WTO) agreements.
For services, the mandate proposes a close partnership with market access for UK service providers in the EU and vice versa. However, access would take place under the host state’s rules and free movement and freedom of establishment for service providers will not be possible. In relation to financial services, UK financial service providers will lose the right to passporting where because of EU membership they could provide financial services in any member state. Instead, the mandate proposes cooperation regulated by the EU and UK equivalence frameworks.
Whilst the EU and the UK’s current geographical indications are protected under the Withdrawal Agreement, the draft mandate proposes the establishment of “a mechanism for the protection of future geographical indications ensuring the same level of protection as that provided for by the Withdrawal Agreement”.
For public procurement, the mandate proposes going beyond the provisions of the WTO’s Government Procurement Agreement in terms of areas of coverage and seeks to ensure EU providers are not discriminated against by proposing to ensure that they receive “treatment no less favourable than that accorded to locally-established suppliers or service providers”.
With the UK now a third country (a non-member state) from the EU’s perspective, the Commission’s proposals on trade in goods would place significant barriers to seamless trade compared to the situation the UK enjoyed as a member of the Single Market and Customs Union. This is because the trade arrangements will be between two separate regulatory markets (the EU and the UK) whereas the previous arrangements involved the UK as part of the EU’s market. As a result, Michel Barnier explained that goods entering the EU from the UK will be subject to regulatory checks.
Similarly, on mobility, the free movement of persons that UK citizens enjoyed within the EU will be replaced by a proposal for reciprocal visa free access for short term stays. The mandate also proposes that arrangements should be agreed for purposes such as research, study, training and youth exchanges.
Level playing field
Ahead of publication of the draft negotiating mandate, the EU was explicit that a key part of reaching any agreement would rest on the UK’s attitude to level playing field provisions. As a result, underpinning the future relationship, the mandate proposes principles in relation to ensuring a level playing field between the EU and the UK. Level playing field provisions are referenced in their own section in the mandate and are linked to securing “common high standards in the areas of State aid, competition, state-owned enterprises, social and employment standards, environmental standards, climate change, and relevant tax matters”.
Speaking at the launch of the draft negotiating mandate, Michel Barnier focussed on the need for level playing field provisions in the agreement suggesting that whilst economic competition between the UK and the EU is to be expected, the geographical proximity and economic interdependence of the two markets means that measures need to be in place to ensure fair competition:
We must now agree on specific and effective guarantees to ensure a level playing field over the long term.
That means mechanisms to uphold the high standards we have on social, environmental, climate, tax and state aid matters, today and in their future developments.
Michel Barnier also referenced fisheries as a key element of the future deal.
On fisheries, the mandate proposes a framework for the management of shared fish stocks, as well as the continued access to waters and resources for EU boats in UK waters and UK boats in EU waters. The mandate also proposes that the management of fish stocks should be underpinned by the long-term conservation and sustainable exploitation of marine biological resources. Crucially, bearing in mind the aim of reaching agreement on fisheries by 1 July 2020, the mandate is explicit that the outcome of the negotiations on fisheries access and quota shares will determine the wider terms of the economic partnership:
“The terms on access to waters and quota shares shall guide the conditions set out in regard of other aspects of the economic part of the envisaged partnership, in particular of access conditions under the free trade area as provided for in Point B of Section 2 of this Part.”
In relation to security, the mandate proposes a close partnership comprising law enforcement and judicial cooperation in criminal matters, foreign policy, security and defence, as well as thematic cooperation in areas of common interest.
The Commission proposal states that for judicial cooperation to take place, the UK will be required to respect fundamental rights such as data protection along with continued compliance with the European Convention on Human Rights and the domestic implementation of the ECHR (the Human Rights Act).
Whilst the UK will no longer be able to participate in the European Arrest Warrant, the mandate proposes that there should be effective cooperation between law enforcement authorities in relation to judicial cooperation in criminal matters.
As with all the EU’s Association Agreements, the mandate proposes a series of governance arrangements to manage the agreement. It also proposes a system of dispute resolution where the UK and the EU cannot agree about the operation of the Agreement. The dispute resolution proposals involve the establishment of an independent arbitration panel and where any dispute raises a question of interpretation of Union law, reference should be made to the European Court of Justice for a binding ruling. The arbitration panel should then decide the dispute in accordance with the ruling given.
The draft negotiating mandate published by the European Commission is based on the proposals set out in the Political Declaration agreed last October. What is clear from the proposals is that as a result of the UK’s decision to leave the EU, the future relationship will involve more barriers to cooperation in the areas of trade and security than existed before.
It is also clear from the draft negotiating mandate that the EU will expect the UK to follow a similar regulatory path if it wishes to secure a close trading relationship. Ahead of publication, Michel Barnier and Commission President Ursula von der Leyen had been clear that level playing field measures would be key priorities for the EU. The negotiating mandate bears this out. As a result, it appears if the UK Government is to secure a close trading relationship it will to some extent have to adopt similar level playing field measures as the EU.
Whilst the UK Government has indicated it will not adopt the EU’s level playing field measures, Michel Barnier has suggested that the closeness of the future trading relationship would depend on decisions taken by the UK Government proposing that where the EU and UK have common standards it will allow the UK better access to the EU market.
Finally, the commitment to finalising a fisheries deal by 1 July 2020 and the Commission statement that the economic negotiations will hinge on reaching agreement on fisheries could threaten to derail the negotiations at an early stage if the two sides cannot reach agreement on a fisheries deal.
Iain McIver, SPICe Research