Vicky Ford is Conservative MEP for the East of England and Chairs the European Parliament Committee for the Internal Market and Consumer Protection.
This autumn, as politicians across Europe return from their summer breaks they will start to refine their own positions and priorities for negotiations with the UK. If we are to avoid the economic fallout of an acrimonious divorce then it is important to look at what is on the minds of those in other EU countries. In the words of Robbie Burns: “O wad some Pow’r the giftie gie us To see oursels as others see us!”
After triggering Article 50, the agreement on the terms of our exit from the EU will require only a majority from the other EU countries. However a new trade deal between the UK and the EU needs the unanimous consent of all 27 EU countries. Any one country could veto it. We cannot assume that just because a deal has the support of, say, Germany, France and Poland that it will be acceptable to all. Many countries have their own historic alliances, and the suggestion that we might try to pick off countries one by one and offer a series of bilateral agreements went down very badly. Our own negotiating strategy needs to be detailed and very well prepared.
My MEP colleagues often remind me that the top priorities of their own national leaders are not the negotiations with the UK. Security and counter-terrorism have become the leading issues for some. For others it is the ongoing situation with migrants arriving from outside the EU. Many EU leaders have their own domestic economic problems and political concerns, including upcoming elections, which will colour their attitude to negotiations with the UK.
Security and Defence
Theresa May’s immediate message to European leaders that she wishes the UK to continue to playing a leading role on security, defence and counter-terrorism set a constructive tone. Negotiations in this area are fiercely complex, as I discovered when working on new cross-border processes to counter cybercrime. The mutual benefits of co-operating and sharing information between security services must not compromise national sovereignty over decisions regarding our own national security. In her time as Home Secretary the Prime Minister built great respect with counterparts across the continent. They respect our differences on issues such as Schengen and asylum policies, but the UK’s expertise, assistance and advice on home affairs, justice and security is greatly valued.
Relationships with the Single Market
A key issue is economic links and the future relationship between the UK and the EU. Whilst Brexit will bring the opportunity to negotiate new bilateral trade deals with other parts of the globe, we should also focus on maintaining our trade with the EU Single Market as this currently accounts for nearly half of all British exports.
At a high level it appears that agreeing a “custom built” deal with preferential trade terms should be mutually beneficial to both the UK and EU. Britain does have a large trade deficit with the EU, we buy more than we sell and Brits make up their largest customer group. Furthermore, the relatively barrier free trade between EU countries over the past 40 years has led to an elaborate intertwining of industrial supply chains between the UK and the continent especially in the automotive,aeronautical, chemical and pharmaceuticals sectors. These cannot be rapidly reconfigured. Industrialists across the continent are concerned about the impact on their own production if new trade barriers are erected – it’s not currently possible to make an Airbus without its “made in Britain” wings.
But the trade benefit is not at all equally spread across the other 27 countries. Some of them have very little trade with Britain. Some countries will be tempted by the prospect of new barriers to trade if this were to result in some production relocating from the UK to their own backyards. Agreeing a new trade deal on goods, let alone services and digital products, will require detailed consultation and political goodwill.
Fundamental to the Single Market debate is the thorny issue of regulatory equivalence. If we are to maintain relatively barrier-free trade then continental producers will demand their UK competitors also have to comply with any EU rules and product standards. However, frustration with EU regulations was given by many people as their personal reason for voting Leave. My own inbox has been full of complaints on diverse issues like restrictions on glyphosate and other agri-chemicals, vacuum cleaner bans, proposed limits on firearms used for pest control, let alone bankers’ bonus caps – all areas where British public opinion does not support a one-size-fits-all EU approach.
There are areas where international trade requires agreement on international regulations and it will clearly not be politically acceptable if our Westminster Parliament has no say on those rules, only a rubber-stamping role similar to that of Norway. Currently British voices influence EU regulations not only through the European Council and our MEPs but also via the myriad of specialist stakeholder groups and trade associations where British experts from public and private sectors often hold leading roles. A new strategy will be needed. One suggestion is to look at the “regulatory co-operation” proposals of the latest EU/Canada trade deal but this is a very far cry from the current relationships between UK regulators and those of our EU neighbours. Instead, I would propose to consider a sector-by-sector approach, focusing co-operation primarily where there is true international need for a cross border consensus; certain areas of financial services and the digital economy as well as key manufacturing sectors come to mind.
There is much discussion on what approach the UK should take to Customs Union. Again this is an issue that I think needs to be broken down into component parts. Being able to sell goods across borders at the VAT rate of one’s own country does simplify trade especially for small businesses – as was so firmly evidenced by the chaos and furore that occurred when this was changed for online sales of digital goods. However the unanimous consent of all countries required to change any elements of EU VAT is also deeply frustrating as we found out during the debates on the tampon tax. If we choose to exit Customs Union and negotiate new tariff agreements with other parts of the world there will be additional decisions needed on how to allocate appropriate duties when the component parts of export goods are sourced from multiple jurisdictions.
Customs Union is not just about VAT and tariffs – though these are the parts that policy wonks in Treasury Departments tend to focus on – there are also areas like work on anti-counterfeiting and action on trade in illegal goods where the UK may wish to continue co-operation. Furthermore, being able to import goods from outside the EU into the UK and then transport them on across the EU with little additional paperwork brings a huge amount of business and jobs into British ports. The impact of any potential changes need to be carefully considered.
Science and Research
One debate close to my heart is that on science and research. The East of England has world leaders in areas like cancer research, crop protection, aeronautics and data analytics. The EU, through it’s £70 billion Horizon 2020 Fund (which the UK championed), has become a major funding stream for British-based research. Bids for research funding are fiercely competitive and it is helpful that the Chancellor has announced that the UK will guarantee research funding up to 2020. However, this debate is not just about money. The success of many of these organisations relies on easy international collaboration. Science is fundamentally a people business. Just as British-based experts have come here from all over the world, so they can easily relocate. If we want to remain at the forefront of world science and innovation we need to send a clear message that we are open to scientists from across the world.
The most sensitive negotiating element is that of free movement, and reactions to the detailed stance we take will affect how others positions themselves in other areas. The UK has benefited greatly from EU migrants and many British businesses, large and small, have relied on their great skills and hard work. However, in the past decade, the East of England has witnessed the largest inflow of EU migration anywhere across Europe. In Fenland towns where this was particularly concentrated there has been genuine pressure on local services and local communities. This built resentment and contributed to the very strong Leave vote in these areas. The Cameron negotiations on rights to benefits were clearly considered insufficient. Free movement as we have had it to date in the UK can not continue.
It is not only the UK where there has been growing concern about the impact of unlimited free movement especially on lower paid jobs. I believe new solutions can be found. Switzerland (a non-EU Country) is due to take its own action on its migration referendum by January and reactions to this will provide insight as to how views are developing elsewhere.
UK negotiators should not underestimate how deeply cherished the right to free movement is in other parts of Europe, especially those that were held under Communist rule where there are recent, often emotionally painful, memories of the heavy restrictions on movement. We should be sensitive to how “points based” systems are perceived as these can easily be interpreted as an attempt to brain-drain talent and skills from others. Different countries even within the EU have their own systems to ensure fairness especially regarding fiscal contributions and benefits, for example the Belgian social security card system, but in the past there has been resistance in the UK to considering this type of domestic reform.
A post-Brexit Britain is clearly going to need significant changes to how we control migration whilst also managing access to services and welfare contributions. A detailed analysis of how this is achieved in other countries both inside and outside the EU would provide valuable comparisons and fruitful ground for new ideas.