BREXIT and its Implications Gerhard Erasmus tralac Annual - - PowerPoint PPT Presentation

BREXIT and its Implications

Gerhard Erasmus tralac Annual Conference Cape Town 6 April 2017

What is the Brexit Process about?

• So

Somethin ing never done before.

• UK

K to lea leave th the EU after referendum of 23.06.2016.

• In

In term rms of f Art.

• rt. 50 Lis

Lisbon Treaty – which ich is is untested.

• Art

rt 50 = Exit xit clau lause for r members with ithdrawin ing fr from EU.

• Div

ivorce proceedin ings trig triggered on 29 Mar arch 2017.

• Th

The process ah ahead: : i) ) Co Comply lyin ing with ith appli licable le la law, ii ii) ) forgin ing new rela latio ionship ips, ii iii) i) Many polit litic ical decis isio ions iv) iv) Decid idin ing exit xit & future trade with ith EU & the world rld.

• Ramif

ific icatio ions wide ider th than EU-UK rela latio ionship ip

What does Art. 50 say?

• Wit

ithdrawal per national constitutional requirements.

• Notify

fy th the EU Council. In In th the lig light of f th the guidelines provided by th the Council, th the Union shall negotiate & conclude an agreement wit ith th that State, setting out th the arrangements for its its wit ithdrawal, taking acc ccount of f th the fr framework for its its fu future rela lationship wit ith th the Unio ion.

• That agreement shall be negotiated in

in acc ccordance wit ith Article 218(3) of f th the EU Treaty. (Commission submit recommendations to Council…to adopt a decision authorising negotiations & nominate Union’s negotiator.) .)

• It

It shall be concluded on behalf of f th the Union by th the Council, act cting by a qualified majority, aft fter obtaining th the consent of f th the European Parliament. (Mixed Agreement im implications.) .)

What does Art. 50 say?...cont’d

• Th

The EU Treatie ies sh shall ll cease to apply ly to th this is St State fr from th the date of f entr try in into force of f th the with ithdrawal l agreement or, , failin iling th that, , tw two years aft fter th the notif tific icatio ion, unle less th the European Co Council il, in in agreement with ith th the Member St State concerned, unanim imously ly decid ides to ext xtend th this is perio riod.

• Th

The with ithdrawin ing Member St State sh shall ll not t partic icip ipate in in th the disc iscussio ions of f th the EU Co Council il or r in in decisi isions concern rnin ing it. it.

• A quali

lifi fied majo jorit ity sh shall ll be defin fined in in accordance with ith Art rtic icle le 238(3)( )(b) ) of f th the Treaty on th the Functio ionin ing of f th the European Unio ion.

• Re

Re-jo join inin ing is is su subje ject to th the procedure in in Art rt. . 49.

What has happened thus far?

• Referendum of

f 23.0 .06.2 .2016 & its its uniq ique poli litics.

• PM’s 12 Point Plan of 17 Jan 2017 (Hard Brexit
• it. No acc

ccess s to th the Sin ingle Market t --

• - gains

s fu full ll contr trol over im immig igrati tion. . Tax haven?)

• PM’s 6 pages notification letter of 29.03.2017 (“deep and

sp special partn tnership” with ith a lin link to se secu curity ty.) )

• EU's

's draft ft gu guid idelines for negotiations 31.0 .03.2 .2017. . (Str triv ive for ce certainty ty, 2 stages, se secu curity a dif ifferent t iss issue, 3m EU cit citizens.)

• UK to settle divorce bill of €60 bn.(U

(UK budget contrib ibutions, cost

• f
• f div

ivorce, pension lia liabili ilitie ies, movin ing EU ag agencies base ased in in UK, , rese search fu fundin ing, re ob

• blig

igations ac accepted by y EU re 3rd

rd states.)

• EU Council meets

ts 29 April il to approve gu guid idelines & mandate

• Ele

lecti tions in in France and Germany.

• UK’s Great Repeal Bill. (Scotland, Northern Ireland, Wallis )
• In

In mean tim time EU acq cquis continues to apply to UK

What happens over next 2 Years and how? EU view

• Preserv

rve in integrity of f th the Sin ingle Market

• Aim

im for UK as a cl close Partner, but prepare for fail ilure too.

• No sect

ctor-by sector approach

• Nothing is

is agreed until everything is is agreed

• A phased approach & EU acts

cts as one

• For an orderly wit

ithdrawal

• Opti

timal ce certainty – no le legal vacuum

• Reci

ciprocal guarantees for cit citizens/their rig ights a priority

• Wit

ithdrawal agreement to in include dis ispute settlement re application and in interpretation of f wit ithdrawal agreement.

• Ir

Ireland, Cyprus and Gibraltar got t special mention.

• It all ends on 29 March 2019, after 43 years, unless….

What happens over next 2 Years and how? EU view….cont’d

• Fir

First phas ase: Di Disentangle le UK fr from EU

• Clar

larit ity for busi sinesses an and citi citizens

• Re requirement “take ac

account of

• f the

the fr framework for r fut future re rela relationship ip”: : An “overall understanding” during 2nd

nd Pha

hase.

• Prelimin

inary ry dis iscussions to

• th

this is end as as so soon as as su sufficient progress has as been mad ade in in th the fir first phas ase towards an an or

• rderly with

ithdrawal. l.

• Fu

Future rela lationship needs a a se second phas ase.

• Will be concluded once the UK has become a “th

third rd cou

• untry

ry”.

• Will “seek” transitional arrangements (for EPAS too?)
• Three se

sets ts of

• f negotia

iations now: i) ) with ithdrawal, ii) ii) prelimin inary dis iscussions on

• n fr

framework re fu future rela lationship ip, iii iii) ) tr transitional arr arrangements.

• Then comes 2n

2nd Phas ase: fu future tr trade rela lationship (Ar (Arts. 20 207 7 & 21 218)

What happens over next 2 Years and how? UK view

• Restore national self-determination & re-invent UK

trade governance.

• Leaving EU but not leaving Europe.
• Convert EU acquis into UK law. Ensure continuity.
• Deep & special partnership: economic & security
• No membership of the Single Market.
• Fair settlement of rights & obligations.
• Avoid harm to Ireland & peace process. No hard border.
• Agree terms of future partnership alongside

withdrawal.

• Bold and ambitious FTA between UK-EU.
• More ambitious than anything before – include crucial

sectors such as financial services & network industries.

What happens over next 2 Years and how? UK view….cont’d

• If no agreement –trade on WTO terms. (All EU and
• ther trade then on MFN basis = cost increases.)
• Security/terrorism cooperation then weakened.
• Agree soon on a high level approach.
• Manage evolution of regulatory frameworks

(NTBs!)

• Dispute settlement part of future relationship.
• Businesses in UK, EU, and in third countries

should be able to plan. Avoid cliff-edge.

• Implementation periods necessary to adjust to new

arrangements.

What happens over next 2 Years and how? Negotiating Process

• This a ‘mix

ixed agreement’: Unanimity among 27 members, conse sent of f European Parlia rliament, and agreement of f 38 national and regional parliaments, including Wallonia….

• Art

rt 50 concerns th the div ivorce & th the div ivorce alo lone --

• - can be

conclu luded by quali lifie ied majo jorit ity in in Co Council il.

• Th

The more rela laxed procedure of f Art rt 50 cannot be use sed to cir ircumvent Art rt 207 & 218 TF TFEU r re fu futu ture rela latio ionship ip.

• UK’s negotiating strategy: (i)

) What concessio ions? (ii) (ii) What is is default lt posit sitio ion? (iii) (iii) Ba Bargain in fr from a posit sitio ion of f power? r? (iv) (iv) Negotia iatin ing capacit ity.

What happens over next 2 Years and how? Negotiating Process…cont’d

• Negotiations may take years and shape UK’s economic

fu futu ture: i)T )Terms-of

• f-trade effects

ts (w (weak pound) ) ii ii) ) productio ion-lo locatio ion & in investment decisi isions ii iii) i) tr trade poli licy can be use sed to raise ise profit fits of f domestic ic firm firms

• Post-Brexit EU still world’s largest market & UK’s biggest

tr tradin ing partner

• UK

K needs a deal l more th than EU does.

• Default

lt= WTO. . More restric ictiv ive th than EU in in se servi vices - reduced access to EU mark rkets for r UK K se servi vice producers. ➢ Free lab labour mobilit ility betw tween UK K and EU would ld cease. ➢ No passport rtin ing rig rights for r UK-based firm firms.

What happens over next 2 Years and how? Negotiating Process…cont’d

• As 2-year limit approaches, UK needs an agreement…..
• EU has an in

incentive to slo low down negotiations, as tim time passes its its bargaining power in increases.

• UK to seek tr

transitional arrangement for as lo long as nece cessary.

• Art 50 tr

trigger cannot be reversed. . One of f 3 outcomes: (i) a div ivorce agreement, perhaps acc ccompanied by tr transitional arrangements; or (ii (ii) an agreement to ext xtend th the negotiating period; or (ii (iii) no agreement. EU Treaties sim imply ce cease to apply at t end of 2 years (a (a dis isorderly Brexit).

• UK has not negotiated own tr

trade deals for 43 years.

• Trade policy now back as part of

f UK domestic politics.

• Effects of

f tr trade policy do not stop at t national borders.

Assume there is a UK-EU FTA: What rules govern UK’s other Int. Trade?

• Trade under WTO ru

rule

• les. What does th

this is mean?

• Bu

But t sin since 1973 UK K an EU member– In Int.

• t. tr

trade in in goods regula lated by EU CE CET, , t tarif iff f quotas e etc. .

• UK

K is is a WTO member but sa sans new Tarif iff f & GATS S Sc Schedule

• les. Old

ld sc schedule les predate WTO

• How wil

ill l EU tarif iff f rate quotas be decid ided?

• New negotia

iatio ions with ith WTO alo longsid ide Art rt. . 50?

• In

Interim im arr rrangement and a WTO waiv iver? Detail ils la later?

• And if

if there is is no deal l with ith the EU?

• Are WTO talk

lks ju just as s urgent now?

Implications for SACU & Africa?

• Re EU:

: EU of f 27 wil ill l conti tinue to have th the rig rights and

• bli

ligatio ions as before re its its in internatio ional l agreements. [SADC EPA]

• Th

The UK K wil ill l no lo longer be covered by agreements conclu luded by th the EU. . (WTO sc schedule les etc)

• EU exp

xpects UK K wil ill l honour its its in internatio ional l commit itments accepted while ile an EU member.

• Which

ich are th these agreements? (E (EPAs, FTAs, cli limate?)

• Constructiv

ive dia ialo logue & common approach re 3rd country ry partners & in int.

• t. Organiz

izatio ions as s p part of f negotia iatio ions?

Implications for SACU & Africa?....cont’d.

• UK a major in

investor, , source of f remittances, development aid donor, , and tr trade partner.

• RSA,

A, Nig igeria and Kenya most affected. . RSA banks & Funds.

• How to fit

fit SADC-EPA/Africa in into Art t 50 lo logic and when?

• What does promise to avoid cli

liff edge really mean?

• Promises do not count in

in In Int.

• t. tr

trade.

• UK’s own FTAs with Africa? About what?
• How generous will

ill UK be? Services, fin finances, in investment im important for London.

• UK’s own GSP as restored WTO member?
• A special rela

lationship wit ith Afr frica? What and how?

• What could Commonwealth do?

What should African Policy Makers plan for now?

• Clarify many aspects… what do we trade with UK & EU

at t what rates? Im Impact on curr rrencie ies.

• Who does what when? What is

is th the pla lan?

• Sh

Should ld EPAs be inc inclu luded under A Art rt. . 50 talk lks re tr transit itio ional l arrangements?

• When to start

rt negotia iatin ing FTAs with ith Lo London?

• About what? Days of

f so soft ft lan landin ings mig ight be over.

• What is

is th the commercia ial l reali lity – where do SACU CU grapes and SA wine ine lan land? How th then to Tesco sh shelv lves?

• Does it

it matter for r us s how EU wil ill l tr trade with ith EU? YES!