April 10, 2017

The Committee concludes in its report that the Government’s assertion that “no deal is better than a bad deal” is unsubstantiated without an economic assessment of “no deal” having been done and without evidence that steps are being taken to mitigate what would be the damaging effect of such an outcome.

The cross-party Committee concludes that the Government should set out what contingency planning is taking place for the risk that there is “no deal” at the end of the Article 50 negotiating period and undertake an economic and legal assessment of such an outcome, in which the UK would fall back on trading under World Trade Organisation (WTO) rules.

Key findings of the report include:

• Timescale for reaching agreement: Michel Barnier, the European Commission’s Chief Negotiator for Brexit, has said that negotiations must finish within 18 months in order to allow time for EU institutions, governments and parliaments to ratify the agreement. It is not yet evident, the report warns however, that the timetable for achieving this is realistic;
• Gibraltar: the Committee urges the UK Government to maintain a high level of dialogue and engagement with Gibraltar throughout the negotiations;
• Potential exit payment: it will be essential to ensure that discussions around the UK’s outstanding and future financial liabilities to the EU do not get in the way of simultaneous negotiations over the UK’s future relationship with the EU27;
• Securing an UK–EU Free Trade Agreement (FTA): the Government should seek a UK–EU FTA that covers both goods and services and retains the mutual recognition of professional qualifications and product standards. The Government will need to provide clarity on how it will address divergence in rules and standards, and resolve trade disputes, outside of the jurisdiction of the Court of Justice of the EU (CJEU). The digital industry is an increasingly important sector of the UK economy and relies on the stability of data flows across UK and EU borders. The Government must seek to maintain uninterrupted UK–EU data flows by securing a data adequacy agreement with the EU before the end of the Article 50 negotiations;
• The Customs Union: the Government must provide more clarity on this and how its preferred option will differ from the current customs union, bearing in mind a risk that the EU27 will decline to allow the UK to both leave the CCP and the CET and yet retain existing tariff- and barrier-free trade;
• FTAs with non-EU countries: the UK is party to over 50 Free Trade Agreements through the EU. Seeking clarity on whether the UK can continue to trade through those agreements, known as “grandfathering”, should be a priority. The UK urgently needs to develop resources and expertise for the trade negotiations to come;
• Cooperating in the fight against crime and terrorism: the UK has been a leading force in Europol’s development. The value of maintaining participation in the European Arrest Warrant, or at least securing an analogous agreement, has been commended to the Committee. There is also a strong operational argument, in the interest of both UK and EU27 law enforcement, for the UK to continue to participate in programmes for data sharing in the fight against terrorism and international crime. The technical obstacles that will need to be overcome for continuing cooperation in these areas will be significant, but not insuperable. However, it is unlikely that the UK will be able to retain the leading role that it currently enjoys;
• Immigration: the UK’s own new arrangements for migration from the EU will need to be flexible enough to meet the needs of the economy across the UK. The Government should also consider whether immigration could be managed on a geographic basis;
• Consultation with devolved administrations: the Government must establish a more effective process for engaging the devolved administrations in developing the UK’s negotiating position through the Joint Ministerial Committee for EU Negotiations (JMC (EN)). The Committee recommends that the UK Government respond formally to the Welsh, Scottish and Northern Ireland legislatures regarding each of their options papers as a matter of urgency;
• Northern Ireland and the Republic of Ireland: the border between Northern Ireland and the Republic will become one of the EU’s external borders when the UK leaves the EU. It is important to ensure that in implementing Brexit everything is done to maintain and build upon the considerable progress made as a result of the peace process and the Good Friday Agreement; and
• Minimising disruption to business when we leave the EU: where changes in trading arrangements or market access are substantial, the Government should seek to establish frameworks for implementation phases as early as possible in the negotiation process. It should communicate the terms of those agreements promptly and clearly to businesses and the public, in order to ensure adequate time for planning. To read the Committee’s news release in full and for a link to the full report, click here.