Stephen Booth is Head of the Britain in the World Project at Policy Exchange.
David Frost will on Monday take his place in Cabinet, in charge of coordinating the UK’s new relationship with the EU as Minister of State in the Cabinet Office. The appointment – irrespective of the speculation about what it means in the context of the recent Downing Street shake-up – makes good sense.
The new Cabinet-level role – which highlights that the EU will continue to loom large in UK political life – usefully draws the different elements of the UK-EU relationship into one place in government. Frost will take the UK seat in the Partnership Council, which will supervise the operation of the UK-EU Trade and Cooperation Agreement (TCA), and in the UK-EU Joint Committee, previously chaired by Michael Gove, which oversees the implementation of the Withdrawal Agreement and Northern Ireland Protocol.
Frost was the chief negotiator of both the reworked Northern Ireland Protocol and the TCA, so knows the detail of the agreements and the strategic thinking driving the bargains that were reached. He is clearly trusted by the Prime Minister and is a known quantity in Brussels.
In addition to representing the UK in these two key EU-facing committees, the role includes “co-ordinating relations with the EU institutions and the 27 member states, working closely with the FCDO and other Departments”; “working on domestic reform and regulation to maximise on the opportunities of Brexit”; and “leading on central coordination and policy resolution on international trade policy, working closely with DIT”. These are wide-ranging duties that overlap with others’ turf but they reflect the breadth of the strategic landscape facing post-Brexit Britain.
Some may have hoped that the conclusion of the TCA will pave the way for an early rapprochement with the EU and a chance to rebuild closer ties. There may come a time for that, there might not.
However, the recent rows over vaccines and the Northern Ireland Protocol have demonstrated that simply implementing, rather than supplementing, the new relationship envisaged under the TCA will be a tricky task, due to the strained political atmosphere. As Frost recently told the House of Lords EU Committee: “the EU is still adjusting somewhat, as we thought it might, to the existence of a genuinely independent actor in its neighbourhood.”
And having fought so long and hard to gain sovereign independence from the EU, one would suspect that this government’s primary objective for European policy will be to stabilise and bed down the new relationship with Brussels, in order to allow it to focus on the domestic and non-EU strands of the UK’s post-Brexit future. Indeed, while Frost recently acknowledged that various technical challenges arising from the new relationship needed tackling, he added, “We like to think that there is not much more negotiating to do for the time being about new elements to come into this.”
Of the various issues with the TCA that have been raised by industry groups, some can be addressed by the government unilaterally – such as helping ports and businesses adjust to the introduction of UK import checks on EU goods. Resolving others inevitably requires solutions agreed with the EU, and recent evidence suggests these will not necessarily be easily forthcoming.
Some recent good news is that, on Friday, the European Commission granted preliminary approval for transfers of personal data between the EU and the UK. Once approved by member states, this “data adequacy” decision, would replace interim measures that are due to expire on 30 June 2021 and provide smooth and cost-effective data transfer mechanisms for businesses and law enforcement. The European Commission’s press release announcing the decision notes that “EU law has shaped the UK’s data protection regime for decades.” The decision will be reviewed in four years, when the EU will determine whether UK rules retain adequate data protection.
The same logic – that the current UK rules have been shaped by EU rules – should apply to the EU’s decision on whether to grant the UK “equivalence” status for most areas of financial services, which would allow greater access to EU markets. This status has been granted in various forms to Canada, the US, Australia, Hong Kong and Brazil. The UK and EU are currently holding talks on a “memorandum of understanding” but EU drafts, leaked last week, suggest this is unlikely to pave the way for equivalence and is more likely to result in informal mechanisms for dialogue between regulators.
Inevitably, this is a political process and the EU has insisted that the UK must outline its plans for future regulation of the City before it can consider granting equivalence. The Governor of the Bank of England, Andrew Bailey, recently complained that, “This is a standard that the EU holds no other country to and would, I suspect, not agree to be held to itself.” Brussels appears to be equivocating in the hope that it can pressure as many firms as possible to relocate to the continent.
However, Lord Hill, the ex-European Commissioner for Financial Services, who is leading an independent review into the UK’s listing regime, notes that despite four years of Brexit turmoil and European efforts to attract business, nowhere in the EU has proven capable of seriously rivalling London. “That says our competition is American and Asia, so let’s see what they are doing,” he said. The EU’s approach illustrates that the UK needs to be prepared to cut the limited losses to EU markets and focus on the UK’s competitive position relative to the rest of the world. Frost may judge this applies to other fields as well.
The most difficult challenge to resolve is the ongoing argument about the Northern Ireland Protocol. The Government is simultaneously trying to find technical fixes with the EU and facing increasing calls from Northern Ireland’s Unionist parties to scrap the Protocol altogether – including a potential legal challenge under judicial review. Lord Trimble, who was awarded the Nobel Peace Prize for his role in the Good Friday/Belfast Agreement, has said that he would join the action if it ended up in court.
A UK-EU veterinary agreement could alleviate Great Britain-Northern Ireland trade friction when it comes to food and plants, where much of the worst practical disruption has been felt. But there are different models of veterinary agreements. Switzerland’s agreement with the EU requires regulatory alignment, whereas New Zealand’s is built on the concept of equivalence, where rules can differ so long as the outcomes are similar.
The UK is likely to resist anything which requires alignment and Unionists’ objections to the Protocol are not limited to this point. Meanwhile, Maros Sefcovic, vice president of the European Commission and EU representative in the Joint Committee, has said the UK must exhaust all flexibilities available within the Protocol before the EU will discuss further easements. Ultimately, the Prime Minister hasn’t ruled anything out, including overriding parts of the Protocol via Article 16. This debate may still have a way to go yet.
It has always been clear that Brexit is a process rather than an event. The UK left the transition period at the turn of the year. But the legacy of nearly fifty years of European integration means that the EU is still both “foreign” and “domestic” policy – in the short-term at least. The TCA offers the UK the freedom to diverge but charting a successful course outside the EU will unavoidably require some triangulation between the government’s domestic agenda, the non-EU trade relationships it is seeking to develop, and implementing the new relationship with Europe.
All of which underlines the need for a joined up and strategic approach, co-ordinated across government.