In his introduction to the government’s controversial Brexit white paper; the country’s first attempt to try to explain on paper how leaving the EU by March 29th, 2019 might work; new Brexit secretary Dominic Raab talks about how “technological revolutions and scientific transformations are driving major changes in the global economy.”
Raab remarks that “this Government is determined to make sure the UK is ready to lead the industries of the future and seize the opportunities of global trade”, and discusses Brexit in terms of making the right deals with the EU to ensure that Britain can aggressively pursue these global opportunities, whilst upholding its duties and obligations to the 27 remaining members of the European Union.
It is a positive take on a scenario that many feel is a domesday one; unwanted, unnecessary, and the result of a referendum campaign that misled voters and has since been almost entirely discredited, with most of its architects and campaigners no longer in front line politics.
Be that as it may, the White Paper does discuss, in general, if not excessively precise terms, exactly how Britain will approach both existing and emerging industries in a post Brexit environment. In our final post of this three part deep dive into the government’s paper; The Future Relationship Between The United Kingdom & The European Union; we will take a brief look at the industries in question and how the UK is proposing to tackle each after what is, in theory at least, a rapidly approaching Brexit deadline.
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It has already been well documented (and covered in our previous posts) that the UK is keen to promote a free trade agreement with the EU, whilst being free to negotiate independent trade deals with the rest of the world. It’s also well known that it is likely in both the UK and the EU’s interests to maintain close ties where financial services are concerned and to minimise red tape, at least in the short term, because of the size and importance of the UK financial services industry.
Digital Is The Future?
The UK states that it is keen to put new arrangements on digital trade and ecommerce into place. The White Paper points out that both the UK and EU will want to be able “respond nimbly to the new opportunities and challenges presented by emerging technologies”, but also acknowledges that “the UK and the EU will not have current levels of access to each other’s markets”.
This seems to suggest that the UK is targeting digital and online trade as part of its global industrial strategy. Britain is a global leader in terms of how much its population uses online services, more so than the EU, and the UK economy is dominated by the service industry, as the paper points out: “the UK is world leading in many services sectors, including legal, business and financial services. In 2017, services made up 79 per cent of total UK GVA worth £1.46 trillion.”
It makes sense, therefore, that Britain is prepared to go it alone, making its own deals and no doubt looking to attract business and partnerships from tech giants in Silicon Valley, China and the subcontinent. The sale of ARM technologies to Softbank, the Japanese tech multinational that has a tech fund worth hundreds of billions to invest globally, is a good example of the digital strategy the UK may wish to pursue. One of the conditions of that deal (demanded by Theresa May) was that Softbank maintained ARM Technologies HQ in the UK, and guaranteed a certain level of employment.
The paper also discusses the importance of manufactured goods, both to the UK and EU, and proposes that a “common rulebook” be drawn up, to cover industries such as automotives, aerospace, chemicals, electronics, machinery and pharmaceuticals.
Essentially, the UK wants to make sure that its products will be subject to the same rules and regulations as those manufactured in the EU, and that it can distribute them across the EU without them being subject to extra checks. For example, the paper suggests the “British Standards Institution (BSI) would retain its ability to apply the “single standard model”, and is in step with the European Standards Organisations (ESO) as much as possible.”
Furthermore, the UK wants to ensure that there is one set of rules and regulations responsible for governing more complex industries such as The European Medicines Agency (EMA), the European Chemicals Agency (ECHA) and the European Aviation Safety Agency (EASA) . It would certainly present the UK with a tricky situation if its manufactured products fell out of step with EU regulations, potentially damaging its ability to trade not only with the EU, but globally.
In this sense, the UK is walking a tightrope. One the one hand, it wants to have the right to independently arrange its own trade deals and terms, on the other, it risks being alienated by not conforming to EU wide regulations which guarantee trust in the products being traded. Will Britain be able to sell its manufactured goods in Europe, or even in the rest of the world, in a worst case scenario when they are not receiving the same quality stamps as their European competitors?
The Agriculture, Food & Fisheries Question
Another potential bone of contention discussed in detail in the paper is agriculture, food and fisheries products. The UK relies on the EU for some 70% of its agri-food imports, whilst the paper also mentions “food and drink manufacturing is the UK’s largest manufacturing sector, contributing £27.8 billion in Gross Value Added (GVA) in 2017.
This industry relies on “complex international supply chains”, and once again, the UK will have some wheeler-dealing to do to ensure that it stays compliant and carries out the right checks at the border, and in terms of quality control when importing and exporting goods.
The paper also discusses a concept known as Geographical Indicators, which “recognise the heritage and provenance of products which have a strong traditional or cultural connection to a particular place”, for example, Welsh Lamb, Scottish Whisky, or Scottish farmed salmon. The UK says that it “will be establishing its own GI scheme after exit, consistent with the WTO Agreement on Trade-Related Aspects of Intellectual Property”.
Overall, the paper seem to suggest that the UK wants to adopt a “go-it-alone” policy, exiting key EU-wide agreements and negotiating its own subsidies, tariffs and trade arrangements. Many “Leavers” have criticised the White Paper for betraying British industries whilst seeking to pander to the EU, but a close reading of the proposed agricultural policy may suggest otherwise.
And the rest?
Besides digital, which is subject to the most discussion of any industry in the paper, industries under discussion include Tourism, Aviation, Maritime, Road and Rail Transport, Electricity and Gas, and Civil Nuclear. There is not space to go into all of these in this article, so, to give you a flavour, we will look at proposals relating to just two.
Tourism: “UK residents made approximately 50 million non-business related visits to the EU spending £24 billion,24 and EU residents made over 20 million non-business related visits to the UK spending £7.8 billion.”
Proposal: “The UK therefore proposes reciprocal visa-free travel arrangements to enable UK and EU citizens to continue to travel freely for tourism in the future, maintaining the close links between the people of the UK and the EU.”
Aviation: “The UK has the largest aviation industry in Europe,38 and the UK’s geographical position in the network is key, with around 80 per cent of all North Atlantic traffic passing through UK or Irish controlled airspace”
Proposal: The UK will explore options for maintaining reciprocal liberalised access through an Air Transport Agreement. This would permit UK and EU carriers to operate air services to, from and within the territory of both the UK and the EU on an equal basis.
The Money Cloud View
Overall, it seems fair to say that the White Paper represents more than a political punching bag. The paper goes into considerable detail, makes numerous industry specific proposals, discusses the major implications of the border question, free trade, equivalence, immigration, and explores many plausible scenarios.
On the flip side, what is very clear is that this long-overdue; from the perspective of the EU; report is only the beginning of a long and protracted process. It is unlikely to receive an “A” grade from the EU’s negotiating team, and it makes very many assumptions about what might happen, that few people are likely to agree with.
But, considering the gargantuan task that a divorce form the EU presents, a start needed to be made, and the least you can say is that a start has now been made. It might feel more like the first ball in a 5-day test match, however, than the kind of set piece goal that England got used to scoring in Russia in June.
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