White Paper

Jul 16, 2018

Last week, the UK government published its latest White Paper on the future relationship it envisions with the EU after Brexit.  In response, the EU said that they would look at the workability of the plan and Tánaiste Simon Coveney said the report was “a step in the right direction”.  We look at the main points of the plan.

Free trade area between the UK and the EU

A free trade area is proposed between the UK and the EU for the production and sale of goods which includes agricultural and fishery products.  This means that there would be no tariffs on most goods and no quotas. A common rule book will govern the trade of these goods to ensure that adequate safety standards are applied but this will only apply where it is necessary to provide frictionless trade at the border.  Therefore goods should only need to be checked once in order to ensure standards are met.  

Northern Ireland

The White paper proposes that the free trade area would allow the UK to maintain frictionless trade with the EU and thereby avoid a hard border on the island of Ireland. While there was no dedicated section in the document on Northern Ireland, avoiding a hard border is mentioned several times.  The paper states that the future trade arrangements proposed will mean that the backstop arrangement will never need to come into effect. 

Facilitated Customs Arrangement

To facilitate the import of goods from outside the EU and the UK into both jurisdictions, the UK has proposed a phased introduction of a new ‘Facilitated Customs Arrangement’. This is essentially a combined customs territory that removes the need for customs checks and controls between the UK and the EU for goods from outside the EU and the UK. It’s similar to being in a customs union with the EU except the UK is proposing that it can set its own tariffs rather than apply EU tariffs to imports.

In this scenario, the UK would apply the EU’s tariffs and trade policy for goods intended for the EU and would apply the UK’s tariffs and trade policy for goods intended for consumption in the UK. Where the destination is known and shown by a trusted trader, the trader pays the UK tariff if destined for the UK and the EU tariff if destined for EU (which the UK collects).  If no robust demonstration of destination is provided, the higher tariff is paid and if there is a difference, the UK would repay the amount.

Under this model, unlike being in a Customs Union with the EU, the UK could still negotiate and agree free trade agreements with other countries.

Financial Services

The UK would like to develop its own service regime but is seeking reciprocal access to European markets. The UK can no longer operate under the EU’s “passporting” regime, as it will no longer be a member of the Single Market.  The alternative is the EU’s third country equivalence regimes but it only provides limited access to some areas of EU financial services markets.  The UK wants more than this and hopes to expand the breadth of third country equivalence and to encompass a broader range of cross border activities.

There are other proposals involving energy markets, professional qualifications (the UK would like mutual recognition to continue), the role of the European Court of Justice, security and data protection.

How is the paper likely to be received?

The EU has said that they will consider the workability of the proposals and has constantly warned that the UK cannot cherry pick from aspects of the Single Market; the UK is either in or fully out.  The UK looks to have conceded that they cannot have access to the single market for financial services and have put forward proposals on how trade in goods would work.  The free trade area relies on the workability of a common rule book to ensure conformity with EU standards and this would need to be implemented rigorously in order to have the confidence of all EU 27 member states.

The white paper in its current form does represent a step forward from the UK and with just over 250 days to go until Brexit day, we await a response from Brussels.  It is still unclear however the extent to which the white paper has the endorsement of the UK political system as a basis for future negotiations with Brussels.  That may well make any response to it from Brussels redundant.