By Svea Miesch, Research and Policy Manager
Next week, the Brexit negotiations will open formally when the European Council, the body comprising all EU heads of state (EU27), will appoint the EU Commission as their negotiator and finalise the detailed negotiation mandate. The talks will probably focus on procedural issues first before actual political negotiations will start after the General Election on 8th of June.
In preparation of this, the fourth ScotlandIS Brexit Briefing updates you on the key points of relevance to Scotland’s digital technologies sector in the UK’s and EU’s negotiation principles. I have also outlined the likely timeline for the negotiations and decision-making process to inform your own forward planning.
Key points from the Prime Minister’s letter triggering Article 50
People
In her letter triggering Article 50, the Prime Minister stressed that the UK Government wants to give “citizens and businesses in the United Kingdom and the European Union … as much certainty as possible, as early as possible.” The Government therefore aims to agree early in the negotiations on the rights and future status of EU citizens living in the UK, and UK citizens living in other EU countries.
EU negotiators have indicated that they will not accept EU nationals being treated any differently from UK nationals prior to Brexit taking effect, as this would be a violation of their guaranteed rights as EU citizens. This means that all EU nationals who move to the UK before March 2019 must be treated in the same way as those who settled here before the June 2016 referendum.
Trade negotiations
The Prime Minister renewed her call for parallel negotiations during the next two years covering both the terms of the UK’s exit from the EU, and a free trade agreement between the UK and the EU. Such an agreement should include “sectors crucial to our linked economies such as financial services and network industries.” Depending on the definition used, “network industries” include parts of the digital technologies industry.
She confirmed that if no such agreement could be reached, future trade between the UK and the EU would default to World Trade Organisation (WTO) terms. She believes that the UK and the EU “would of course cope with the change, but it is not the outcome that either side should seek.” This seems a more conciliatory approach the “No deal is better than a bad deal” comment in her Brexit speech in January .
Position of the European Council
The European Council responded to the Prime Minister’s letter with a set of negotiation guidelines. The Council stressed that negotiation of the conditions surrounding the UK’s exit will be their priority, and that talks can only move on to the future UK-EU relationship “when sufficient progress has been achieved”. Such ‘’progress” is to be judged by the European Council. This is clearly a point of disagreement, as the Prime Minister’s letter called for negotiation of a trade agreement to begin as soon as possible.
The European Council has stated that any free trade agreement “must ensure a level playing field, notably in terms of competition and state aid, and in this regard must encompass safeguards against unfair competitive advantages through, inter alia, tax, social and environmental regulatory measures and practices.”
This indicates that public procurement rules, social, environmental and other regulations will need to remain aligned after Brexit if a trade agreement is to be reached. It is likely to limit the UK Government’s ability to change regulations post Brexit.
Another key point in the European Council’s guidelines is the reminder that trade agreements can only be finalised after the UK has actually left the EU. The EU cannot in effect sign a trade agreement with the UK until after the 29th March 2019 when the UK becomes a third country as in the meantime the UK is part of the EU and not a third country. This will impact the UK’s ability to develop trade agreements with other countries in the interim.
Next Steps
It is likely that a transition period will be necessary to avoid a vacuum between the end of the UK’s EU membership and the date the new trade agreement with the rest of the EU comes into force. The European Council states that “transitional arrangements” could be negotiated, which seems to align with the Prime Minister’s position as she mentions “implementation periods” in her letter. This would probably require the UK to pay into the EU budget, and accept freedom of movement and other obligations related to EU membership for longer. However, the strength of opposition from hard Brexit supporters regarding such arrangements remains to be seen.
Once the detailed EU negotiation mandate will be adopted on the 22nd of May, the negotiations can formally be opened. Actual political talks between the European Commission’s Chief Negotiator Michel Barnier and David Davis, Secretary of State for Exiting the European Union, will most likely start after the 8th of June, the day of the UK General Election. Article 50 allows two years for the exit negotiations but Barnier has already suggested that he will aim to conclude the negotiations within 19 months from the triggering of Article 50. The remaining time will be needed for the exit treaty to be ratified by the European Parliament and the EU member states (including the UK).
Based on this timetable, we would know what “the deal” looks like by Autumn 2018. The ratification process needs to be completed by 29th of March 2019, after which the UK will no longer be a member of the European Union.
ScotlandIS will keep you updated on any future developments that could affect our industry. We will continue to lobby the Scottish and UK Governments to make sure that decision makers are aware of the needs of Scotland’s digital technologies sector and the impact the UK’s exit from Europe is likely to have on our industry and the wider economy.
If you have any comments or questions about this Brexit briefing or suggestions for other topics, please get in touch with me at svea.miesch@dektinary.com.