On 2 February 2017, the government published a white paper, setting out its objectives for the upcoming Brexit negotiations with the EU. The white paper was published the day after the first House of Common vote on the proposed legislation which will grant the government the authority to trigger Article 50 of the Treaty on European Union.
The white paper restates and amplifies the content of the Prime Minister's "Brexit" speech of 17 January 2017. We reported on this in a previous briefing note which is available here.
This briefing note highlights the key aspects of the white paper that will affect business.
The white paper acknowledges the importance of certainty for businesses by placing it as its first objective ahead of the negotiations. The white paper confirms that the (so-called) Great Repeal Bill will preserve the existing body of EU law in UK domestic law as it stands on the UK's departure. It also states that the preserved law will continue to be interpreted in the same way, although the jurisdiction of the European Court of Justice ("ECJ") in relation to the UK will end. These statements imply that the government will not seek to be selective in the inclusion of specific EU legislation for preservation in domestic law and also that judgments of the ECJ which predate the Great Repeal Act will be made binding in the UK regarding relevant EU laws to be transposed into UK law by that Act. It seems likely, however, that subsequent ECJ judgments will be treated as persuasive only, with scope for gradual divergence as circumstances require.
In addition to the Great Repeal Bill, the government expects to bring forward separate bills on immigration and customs as well as a programme of secondary legislation under the Great Repeal Bill.
The white paper states that the government is committed to making the UK "the best place in the world to do business" meaning that it intends to foster a "high quality, stable and predictable regulatory environment" and to take opportunities to reduce the cost of unnecessary regulation.
Free trade with European markets
As mentioned in the Prime Minister's speech, the government does not seek membership of the single market, but aims rather to secure a new free trade agreement and a new customs agreement with the EU. The UK will not seek to adopt an existing model already enjoyed by the other countries but hopes to build on the fact that it currently has the same set of rules as a member of the EU. The white paper re-iterates that it is seeking "the freest and most frictionless trade possible in goods and services” but does not provide more detail on the specifics of a new free trade agreement.
The white paper states that both the UK and EU member states benefit from a close trading relationship, the EU being the UK's largest export market and the UK being the largest goods export market for the EU member states taken as a whole. However, the UK currently has a trade deficit with the rest of the EU (£230 billion exports of goods and services to the EU versus imports of £291 billion), although in relation to trade in services the UK has a £28 billion surplus with the rest of the EU.
By contrast, the importance of non-EU markets for UK trade has been increasing in relative terms, with the share of UK exports to the EU having declined from 54% in 2000 to 44% in 2015 and the UK's global exports increasing at a faster rate than the UK's exports to the EU. The white paper also refers to survey evidence showing that the UK is the third most attractive destination globally for inward investments.
The white paper states specifically that the UK intends to work closely with the Irish government and the Northern Ireland Executive to find a practical solution regarding the land border between Northern Ireland and Ireland, recognising its unique economic, social and political context and aiming to keep the border as seamless and frictionless as possible.
The white paper states the specific objective of ensuring the freest possible trade in financial services between the UK and EU member states, in the UK's new strategic partnership agreement. The government seeks to establish, as the UK leaves the EU, strong cooperative oversight arrangements with the EU and to "continue to support and implement international standards to continue to safely serve the UK, European and global economy".
The paper also mentions the existing energy, transport and communications networks. Specifically, the government is considering options for the UK's future relationship with the EU on energy and is particularly mindful to avoid disruption to the all-Ireland single electricity market operating across the island of Ireland. The paper observes that by invoking Art 50 TEU, the UK will leave Euratom since the Euratom treaty imports Article 50 TEU in its provisions. Whilst the new relationship between the UK and Euratom will be a matter for the negotiations, the paper insists that the UK will seek to maintain close and effective arrangements for civil nuclear co-operation, safeguards, safety and trade.
Trade with other countries
The paper refers to the establishment of a department for internal trade and confirms that the UK has started discussions on future trade ties with Australia, New Zealand and India. The new US administration has also expressed an interest in an early trade agreement with the UK. The paper states that the UK World Trade Organisation membership will form the bedrock on which it builds future trade relationships. As part of the exit arrangements, the government aims to establish the UK's own schedules under the WTO agreements, covering trade in goods and services. The white paper states that work is already under way on this and that the aim is to establish schedules in a way that replicates as far as possible the UK's current position as an EU member state.
Science and innovation
The white paper states that as the UK exits the EU, the government welcomes agreement "to continue to collaborate with our European partners on major science, research and technology initiatives". The government is engaging with sector representatives to ensure a smooth transition to future arrangements and has, for example, established a high level stakeholder working group on EU Exit, including a number of senior representatives of UK research and innovation funders, higher education institutions, national academies and business. The paper refers to an announcement by HM Treasury that researchers should continue to bid for competitive EU research funding (such as Horizon 2020) while the UK remains a member of the EU. The government states that it will work with the European Commission to ensure payment when funds are awarded and that HM Treasury will underwrite the payment of such awards, even when specific projects continue beyond the UK's departure from the EU.
The government states the objectives of ensuring continued protection of workers' rights as the body of EU law is converted into domestic law. It also reiterates its commitment to strengthening employment rights that are set out in current EU legislation. Certain UK government initiatives, for example on parental leave, are not dependent on EU membership. The white paper also refers to a current independent review of employment practices launched in October 2016, which will consider how employment rules could adapt to modern business models, such as the growth of self-employment and the shift in business practices from hiring to contracting, as well as to a green paper on corporate governance launched in November 2016.
The paper reiterates the objectives of reaching agreement on the UK's future partnership with the EU during the two years period of notice under Article 50 and of providing for a phased process of implementation of the new arrangements. Such matters will of course be a matter of negotiation.
The white paper does not contain any significant new policy developments that were not already announced in the Prime Minister's Brexit speech of 17 January. However, the paper provides additional clarification and detail in a number of areas concerning the government's objectives, reinforced by a substantial amount of trade data in graphical form which puts those objectives in context.
This article is part of our Brexit series.