The UK left the European Union on 31 January 2020. There will be a transition period until 31 December 2020 to agree a future trading relationship. The Political Declaration (§§3, 5, 17) states that both sides would seek a ‘broad, deep and flexible partnership across trade and economic cooperation with a comprehensive and balanced free trade agreement [FTA] at its core; the future relationship should be approached with high ambition with regard to its scope and depth, but it cannot amount to obligations/benefits of membership’.1

In his New Year good will message to the British people, Michel Barnier, EU chief negotiator for the future trading relationship, said ‘any free-trade agreement must provide for a level playing field on standards, state aid, and tax matters’.2 He reiterated this point in a speech in Brussels on 3 February 2020 setting out the EU’s negotiating guidelines.3 The European Commission published 12 background documents on its website in January 2020.4 These make clear that the EU wants a:

Balanced, ambitious and wide-ranging free trade agreement [with the UK] “insofar as there are sufficient guarantees for a level playing field”.

The aim should be to prevent unfair competitive advantage that the UK could enjoy through undercutting of levels of protection with respect to, inter alia, competition and state aid, tax, social, environment and regulatory measures and practices.

This will require a combination of substantive rules aligned with EU and international standards, adequate mechanisms to ensure effective implementation domestically, enforcement and dispute settlement mechanisms in the agreement as well as Union autonomous remedies, that are all commensurate with the depth and breadth of the EU-UK economic connectedness.

The future partnership should address global challenges, in particular in the areas of climate change and sustainable development, as well as cross-border pollution, where the Union and the UK should continue close cooperation.5

So it is clear that the EU’s key requirement for a future trade relationship with the UK is a ‘level playing field’.

However, a playing field needs to be level at both ends, and the EU negotiating guidelines seek to ensure that the playing field is level at our end, while conveniently ignoring the uphill slopes in its own half of the pitch. There are twelve critical issues that need to be addressed to ensure a genuine level playing.

As background, we note that in 2018, the UK had an overall trade deficit with the EU of -£66 bn. While there was a surplus of £28 bn on trade in services, this was outweighed by a deficit of -£94 bn on trade in goods. The EU accounted for just 45% of all UK exports in 2018, down from a high of 55% in 2006. It accounted for 53% of all UK imports in 2018, down from a high of 58% in 2002. In 2018, 50% of UK goods exports and 40% of services exports went to the EU; while 54% of imported goods and 48% of imported services came from the EU.6 In 2019, the EU27 had a trade surplus of €125 bn with the UK: this is 62% of the EU27’s total global trade surplus in goods last year.7 The UK will account for around 40% of EU exports to the rest of the world in 2020.8

Goods

One, goods. The EU Customs Union with its tariff and non-tariff barriers (NTBs) was originally set up in the 1950s to protect, in particular, German industry (especially automobiles and chemicals/pharmaceuticals), French agriculture and Italian clothes manufacturers. The EU imposes relatively high tariffs on imports of these products as Table 1 shows.9

Table 1: Average EU tariff by product type (%)10

Dairy products 44.8
Sugars and confectionery 28.3
Beverages and tobacco 19.8
Animal products 17.8
Cereals and preparations 17.8
Cars, trucks and lorries 16.0*
Fruit, vegetables and plants 11.8
Clothing 11.5
Fish and fish products 11.4
Textiles 6.6
Coffee, tea 5.9
Oilseeds, fats and oils 5.8
Other agricultural products 5.0
Chemicals 4.5
Leather, footwear etc 4.2
Transport equipment 4.1
Petroleum 3.1
Electrical machinery 2.4
Other manufactures 2.4
Minerals and metals 1.9
Non-electrical machinery 1.7
Wood, paper etc 0.9
Cotton 0.0
Sources: Final bound duties, WTO, World Tariff Profiles 2019, p.90; https://www.wto.org/english/res_e/booksp_e/tariff_profiles19_e.pdf* 2016-17 data; https://publications.parliament.uk/pa/ld201617/ldselect/ldeucom/169/16906.htm

The effect of the high tariffs on these products is to raise the prices for consumers compared with what they could pay if they could buy equivalent products on world markets.  This particularly affects UK consumers buying imported goods where there is no domestic production. As a simple example of EU tariffs consider oranges. UK consumers have to pay a tariff of 16% on imported oranges to protect Mediterranean orange growers from cheaper oranges imported from outside the EU from countries such as South Africa.11 This has no benefit for them at all.

An example of NTBs that the EU likes to use is so-called ‘rules of origin’. For example, in its Free Trade Agreement (FTA) with South Korea, the EU will only allow South Korean goods duty-free into the EU Single Market if they are accepted as being ‘made in South Korea’ which means that they both satisfy EU standards and have a minimum percentage of components that are made in South Korea. For cars, this is around 55%. A UK-built car currently has only about 25% of its components made in the UK, with the bulk of the other parts coming from Germany, France and Spain. This means that a UK-built car would not count as ‘made in the UK’ after Brexit.12 The EU could therefore impose a 10% tariff on UK cars if the EU and UK end up trading on World Trade Organization (WTO) terms. These cars would also face WTO tariffs if they were exported to other countries on WTO terms, which could make them difficult to sell.

The EU wants to continue to have tariff-free and quota-free access for goods to the UK. This is because, according to a study by Civitas,  if the UK and EU traded on WTO terms after Brexit, EU exporters to the UK would have to pay £12.9bn a year in tariffs to the UK, while UK exporters to the EU would only have to pay 5.2bn a year in tariffs.13 The reason for this is that we buy mainly high tariff goods from the EU and sell mainly low tariff goods to them, as well as selling less than we buy. The worst affected industry would be car manufacturing which would pay £3.9bn in tariffs. The study found that 22 of the EU27 member states would pay higher net tariffs, with Germany and France paying the most. It is clear why the EU wants frictionless access to our goods markets.

Nevertheless, M. Barnier made clear in his speech on 3 February: ‘It is important…to understand that, even if we do achieve such a “best-in-class” free trade agreement, it will not be “business as usual”. We will have two separate markets instead of one single market. Rules of origin and customs formalities will apply between the UK and the EU. Access to the EU market will be subject to certification and market authorisation and supervision activities. …As a result, goods entering the Union will, for example, be subject to regulatory checks’. This would have implications for our car exports to the EU.

Services

Two, services. The EU Single Market is woefully incomplete in terms of services.14 There is much less cross-border trade in services compared with goods. The UK is a major producer of services, which account for 80% of UK GDP, yet only 5.7% of UK GDP is exported as services to the EU.15 Germany is the UK’s biggest buyer of services at £21.2bn (6.7% of total services exports), but average UK services exports to the EU27 states is just £4.7bn. The US is the top buyer of UK services at £76.3bn (24.1% of the total). Switzerland, Japan and even Australia, at £13.2bn, £7.7bn and £6.8bn, respectively, buy more UK services than the EU average.16

When it comes to the future agreement on services, the EU does not want to have the equivalent EU-wide deal for services as it wants for goods. Instead, it is proposing to allow market access under host state rules – on the grounds that ‘the UK will become a third country and the [European] Union and the UK will no longer share a common regulatory, supervisory, enforcement and judicial framework’.17 So when it comes to goods (where it has a huge trade surplus), the EU is presenting itself as a single bloc, yet when it comes to services (where is has a significant deficit), it is presenting itself as 27 separate countries and the UK is expected to negotiate 27 separate agreements on services. Each of the 27 member states submits its own schedule of commitments under the WTO’s General Agreement on Trade in Services (GATS).

Capital markets and financial services

Three, capital markets and financial services. The EU Single Market is even more incomplete in terms of capital markets and the UK is Europe’s dominant producer of financial services.  The ‘passporting’ of financial services will end.18 This is unavoidable since passporting requires a common rule book and both parties seek regulatory and decision-making autonomy. The alternative proposed by the EU is ‘equivalence’ of regulations with ‘unilateral assessments by both sides with no negotiation’.

The EU’s position is that ‘[b]oth Parties have equivalence frameworks in place that allow them to declare each others’ supervisory and regulatory regime equivalent. Parties should start assessing equivalence with respect to each other under these existing frameworks as soon as possible after the UK’s withdrawal, endeavouring to conclude assessments before the end of June 2020. Parties will keep their respective equivalence frameworks under review’.19

The EU said it will seek to apply the following principles: ‘Equivalence decisions are unilateral and discretionary: [this is] relevant for the future relationship, but not subject to negotiations. The EU [will] decide on the basis of an assessment and in protection of its own interests. The EU’s autonomy on equivalence [is] not to be restricted by the Free Trade Agreement Process. [There are] around 40 equivalence areas. Most equivalence decisions deliver prudential benefits, some provide for burden reduction and some can lead to market access. All areas [will] be assessed. The best endeavour [is] to finalise assessments by June 2020.  [The] assessment of UK legislation and supervision [will take a] risk-based and proportional approach; as for other third countries, the higher the possible impact on EU markets and interests, the more granular the assessment’.20

While equivalence is mentioned in the Political Declaration, it is not an acceptable basis for operating a financial system, since the EU’s acceptance of ‘equivalence’ can be withdrawn unilaterally at short notice.21 Instead, what is needed is a modified version called ‘enhanced equivalence’.22 Unlike the passport regime, where mutual recognition is premised on home and host states applying identical rules, the equivalence concept provides for the recognition of home state regimes where the home state rules achieves similar high-level outcomes to those of the host, rather than a line-by-line comparison. Further, enhanced equivalence could not be withdrawn unilaterally at short notice. A tribunal would adjudicate on the matter. Enhanced equivalence would then constitute a genuine level playing field when it comes to financial services.

Citizens’ rights

Four, citizens’ rights. While the EU is concerned to protect the security and the safety of its citizens living and working in the UK after Brexit, it has been much less generous to British citizens living and working in the EU. It has only agreed to allow British citizens to continue working in the member state where they currently have a job, with no guarantee that they can work in another country in the EU. This is another example of the EU operating as separate countries when it chooses to do so.

Mobility of persons

Five, mobility of persons. The free movement of people (known as ‘natural persons’ in EU parlance) is one of the four freedoms of the Single Market (along with goods, services and capital). Around 3.5mn EU citizens exercised their right to live and work in the UK during the UK’s membership of the EU’s Single Market, while around 1mn British people went to work in the rest of the EU. While the vast majority of EU workers in the UK have made a valuable contribution to the UK economy – often doing jobs British workers refuse to do – they together with immigrants from the rest of the world (ROW) have also added to the strain on the UK’s social and economic infrastructure, in particular the health service, schools and transport.  Immigration was an issue in the UK Referendum debate.

The EU accepts that the UK has decided that the principle of free movement of persons between the Union and the UK will no longer apply, but then points to the Political Declaration which states that ‘the Parties should establish mobility arrangements, …based on non-discrimination between the Union’s Member States and full reciprocity. … The Parties also agree to consider addressing social security coordination in the light of future movement of persons. …Those commitments should not be nullified by the right of either Party to apply their respective laws, regulations and requirements regarding entry, stay and work’.23 This looks like the EU is trying to re-establish free movement by the back door and this would put EU citizens in a privileged position relative the citizens of other countries, including Commonwealth countries, who would be subject to the UK’s proposed new points-based immigration system.24

Fishing

Six, fishing.  The EU wants to maintain access to UK fishing grounds on the same terms as it has now: In the overall context of the FTA, existing reciprocal access to fishing waters and resources should be maintained’.25 Mr Barnier says he wants to ‘avoid economic dislocation for Union fishermen that have traditionally fished in the United Kingdom waters’.

Again this shows the asymmetry of treatment with other activities.  The UK could not walk into a German factory or a French vineyard and take away cars and wine in the way that the EU can come and take our fish. The EU says: ‘A non-member of the Union…cannot have the same rights and enjoy the same benefits as a member’.26 The same must apply to the EU in terms of our fishing grounds. To paraphrase the EU’s own proposals, the UK ‘will preserve its autonomy as regards its decision-making, which excludes participation of the European Union as a third-country in our fishing grounds’. The UK must re-establish the sovereign control, as an independent coastal state, over all waters and marine resources in the Exclusive Economic Zone that Edward Heath cavalierly gave away to the EU in 1973 when we joined the European Economic Community. Barnier did not care greatly for the British fishing jobs that were lost when Heath did this.

State aid

Seven, state aid. The EU seeks the ‘application of EU state aid rules to and in the UK’.27 It wants ‘anticompetitive conduct and concentrations of undertakings that threaten to distort competition to be prohibited unless remedied’ and ‘state-owned enterprises, designated monopolies and enterprises granted special rights or privileges must not distort competition or create barriers to trade and investment’. It wants to see the establishment in the UK of an independent enforcement authority that ‘will work in close co-operation with the [European] Commission’ to oversee its state aid decisions.

However, the UK prime minister, Boris Johnson, wants discussions over state aid with the EU to be between ‘sovereign equals’ and says that Brexit will make it easier for the government to help UK firms in difficulties.  The EU says it will use Johnson’s support in January 2020 for UK regional airline Flybe in the form a deferral of the payment of air passenger duty and possible £100mn loan ‒ and other examples, such as Theresa May’s letter of reassurance to Nissan after the 2016 Referendum ‒ to put pressure on UK negotiators fall in line with EU rules.28 This is despite the fact that in September 2019, the German government gave a €380mn loan to German carrier Condor after the collapse of its owner Thomas Cook, a company which the UK government did not bail out.29 Further, UK state aid levels are already amongst the lowest in Europe. UK state aid is 0.38% of GDP, compared with 0.78% in France and 1.31% in Germany. The UK could therefore increase state aid significantly without breaking EU rules.  In addition, key EU member states have had significantly more infringement actions taken against them (29 in France, 45 in Italy, and 67 in Germany) than the UK (4) in the last 21 years.30

More significantly, the EU is very adept at disguising its state aid. One example of this is the way in which it bails out its insolvent banks in defiance of its own rules.  Under the EU’s Bank Recovery and Resolution Directive (BRRD),31 when a bank is ‘failing or likely to fail’, the resolution authority (the Single Resolution Board, SRB) has the power to ensure shareholders and creditors of the bank bear losses equivalent to 8% of the bank’s liabilities, through a bail-in.  If public money is used to bail-out the bank, then an immediate 8% write-down of equity or conversion of (junior and then senior) debt into equity is required as a matter of law, prior to any other resolution steps being taken. However, this requirement is routinely ignored. Here are some examples.  In Italy, the SRB took the view that the BRRD and the 8% rule did not need to be applied because the failure of  Banca Popolare di Vicenza S.p.A  and Veneto Banca S.p.A. was not expected to have a significant adverse impact on financial stability and neither bank provided critical functions.32 In Greece, the resolutions were rushed through before the 8% write-down rule came into effect and local legislation was re-written to prioritise Greek government debt.33 The Cyprus Cooperative Bank Ltd was recently resolved with an overt avoidance of the application BRRD on the purported basis that its resolution involved a continuation of steps taken before the law came into force ‒ which is not an approach generally recognised as legitimate in law.34 In December 2019, the European Commission approved a €3.6bn package of restructuring aid for German state-owned bank NordLB, which was stated not to breach the 8% rule on the basis that private investors would, the EU determined, have accepted similar terms, so declared that no state aid was provided.

Another example is the European Investment Fund (EIF) which is part of the European Investment Bank (EIB) Group. The EIB describes itself as ‘the lending arm of the European Union’.35  Established in 1958, with EU member states as shareholders, the EIB makes loans for the purpose of promoting European integration and social cohesion.  The EIF was established in 1994 to provide finance for small and medium sized enterprises (SMEs, including microfinance) in order to ‘foster EU objectives in support of entrepreneurship, growth, innovation, research and development, and employment’.36  It does not lend money to SMEs directly.  Instead, it provides finance through private banks and funds, principally through venture capital and in guaranteeing loans. Under current Basel Rules, there is a minimum of 7% ‘Common Equity Tier 1 Capital’ (CET1) requirement for banks. Since the EIF is not a bank, it is not required to have regulatory capital. That ability allows the EIB to leverage its on-balance sheet capital under the Basel Rules Leverage Ratio by a factor of 20, enabling the EIF to lend €500 bn with negligible regulatory capital. This plus the loan guarantees constitute huge levels of state aid that are not reported in official EU figures.

Yet another example relates to fishing subsidies, as Shanker Singham points out: ‘Subsidies are especially pernicious as they artificially increase fishing above sustainable levels.  We should factor this into our access negotiations. Many EU member states, especially Spain and France have very large subsidies to fish in other people’s waters (and not their own – a real beggar thy neighbour policy if ever there was one). To the extent that this creates an unlevel playing field for UK fishermen, we should factor that into the negotiations’.37

Finally, it is important to understand the insidious long-term consequences of the EU’s state aid rules, as lawyer James Webber explains: ‘Over time, the reach of the state aid rules has expanded significantly. State aid includes not just bail-outs of heavy industry and operating subsidies to state-owned airlines. It is the main tool the European Commission has – directly rather than via legislation – to regulate bank resolution; control tax competition; environmental policy; control infrastructure spending. The single unifying factor driving this expansion has been the fact that the rules give executive power to the European Commission. …[It explains] why state aid plays such a prominent role in the EU’s often repeated demands for a “level playing field” from the UK. If the EU can get the UK to accept their state aid rules – the European Commission and CJEU [Court of Justice of the European Union]38  will retain control over much UK fiscal decision making and control the ability of the UK to compete against the EU going forward. Whatever the merits of subsidisation as a policy choice, the UK Government should be concerned about state aid for the same reason’.39

Of particular relevance in this context is the Northern Ireland Protocol to the European Union (Withdrawal Agreement) Act 2020.40 It could be used by the EU to influence state aid in Great Britain by claiming that it infringes EU state aid rules as they apply to Northern Ireland. An example would be a subsidy to Nissan in Sunderland on the grounds that Nissan cars produced there could cross the Northern Irish border into the Republic of Ireland.41

Taxation

Eight, taxation. The EU also seeks a level playing field in taxation. Indeed, it wishes the UK to align its tax regime to that of the EU and to ‘curb harmful tax measures, notably by ensuring the UK reaffirms its commitment to the Code of Conduct for Business Taxation’.42

There are legitimate concerns about tax havens and unfair and distortionary taxes. One current example is Ireland’s use of corporate tax to become, in effect, the EU’s tax haven for multinational companies. Ireland has a corporate tax rate of just 12.5% and has used this to attract US tech companies which have since 2014 been moving their intellectual property assets there. Corporate tax revenues in Ireland rose from €4bn in 2014 to €10.9bn in 2019. However, Ireland has faced an international backlash for enabling multinationals to avoid paying their fair share of tax. Joseph Stiglitz, the Nobel prize-winning economist, accused Ireland of being a ‘bad neighbour who stole other countries’ tax dollars’.43

Another example – and one that is closely related to the previous one ‒ is a digital services tax. From April 2020, the UK government said it will introduce a new 2% tax on the revenues (in excess of £25m) of search engines, social media platforms and online marketplaces, such as Facebook, Amazon, Google and ebay, which derive value from UK users. The government’s argument is that the ‘application of the current corporate tax rules to businesses operating in the digital economy has led to a misalignment between the place where profits are taxed and the place where value is created. …Under the current international tax framework, the value a business derives from user participation is not taken into account when allocating the profits of a business between different countries. This measure will ensure large multinational businesses make a fair contribution to supporting vital public services’. The UK government ‘strongly supports G7, G20 and OECD discussions on the different proposals for reform. The government is committed to dis-applying the Digital Services Tax once an appropriate international solution is in place’.44  Despite this, there was a hostile response from the US. According to the Financial Times, ‘the US claims a tech levy unfairly discriminates against American companies. …The UK and US were on a collision course over digital tax after Washington threatened retaliatory tariffs if the British government did not back down on plans to impose the levy from April’.45

The reform of corporate tax rules – and dealing with tax havens and unfair and distortionary taxes ‒ is on the agenda across all advanced economies – and is clearly highly controversial, as the issue of digital services taxation makes clear. But this is a fundamentally different issue from what the EU proposes.  The EU has some of the highest tax rates in the world, especially corporate taxes – see Figure 1.46 It needs these high taxes to fund its generous state welfare and pension system and to support its economic model which involves significant state regulation and direction of economic activities.

Figure 1: Corporate tax rates across Europe

Picture2

The EU has an innate aversion to what it describes as our ‘Anglo-Saxon’ free markets model – because of the risk that markets disrupt its well-laid plans.47 It would be completely unacceptable for the EU to try and impose its social-economic model – with its requirement for high personal and corporate taxes ‒ on the UK as part of a FTA. In the ‘Anglo-Saxon’ free markets world, taxes are used to provide incentives to companies and individuals. For example, low corporate taxes provide incentives for companies to invest which increases the productivity of their workers which raises both output and salaries – which in turn raises more tax revenues. It is entirely wrong to describe this as unfair taxation.

The EU is also quite happy to use tax incentives when it suits it, as, for example, when French President Nicolas Sarkozy offered UK bankers long-term tax breaks to tempt them to move to Paris.48

Standards

Nine, standards. The UK can correctly argue that it already has high social and environmental standards and low levels of state aid. For example, the UK has higher standards than the EU minima in most areas of social policy, e.g., it has 39 weeks paid maternity leave compared with 14 weeks in the EU, and it has one of the highest minimum wages, whereas some EU states have no minimum wage. But the EU is concerned that the UK will become a low tax, low regulation, ultra-competitive ‘Singapore on Thames’. So it wants the UK to adopt both its labour and social protection standards and its environmental standards after Brexit. It also wants ‘dynamic alignment’, so that the UK adopts all future changes in standards introduced by the EU, despite being an independent sovereign state which has no say on what new standards are introduced.

In terms of the former, the EU seeks ‘non-regression from common standards in place at the end of the transition period in labour and social protection in relation to at least: fundamental rights at work, occupational health and safety, including the precautionary principle, fair working conditions and employment standards, information and consultation rights at company level and restructuring, and protection and promotion of social dialogue on labour matters among workers and employers, and their respective organisations, and governments’. It wants the UK to impose an ‘effective system of labour inspections, [including] administrative and judicial proceedings, [and a] dispute settlement [arrangement]’.49

In terms of the latter, it seeks ‘non-regression from common standards, …taking into account that the EU and UK share a common biosphere in relation to cross-border pollution, …[and] respect of principles such as the precautionary principle and the “polluter pays” principle’.50

This is another example of the EU wanting the UK to adopt its labour and social model after Brexit ‒ something which no other country has accepted in a trade agreement with the EU. The reason why no other country has accepted this is very clear. The EU’s model makes firms reluctant to take on workers, since it is very difficult to fire them in a downturn and, hence, leads to some of the highest unemployment rates in all developed countries. Across the EU, the unemployment rate is 6.3%, while it is 7.5% in the Eurozone (EZ). It is 16.6% in Greece, 13.9% in Spain, 9.7% in Italy, 8.6% in France, and 7.7% in Cyprus. This compares with 2.5% in Switzerland, 2.2% in Japan, 3.5% in the US and 3.8% in the UK. Within the EU, only the Netherlands at 3.2% and Germany at 3.1% have comparable low figures.51

The rate of youth unemployment is considerably worse. Across the EU, the unemployment rate amongst young people is 14.3%, while it is 15.6% in the Eurozone. It is 35.6% in Greece, 32.1% in Spain, 28.6% in Italy, 18.9% in France, and 17.2% in Cyprus. This compares with 2.4% in Switzerland, 3.8% in Japan, 8.1% in the US and 11.4% in the UK. Even Netherlands at 6.7% and Germany at 5.9% have a significant problem with youth unemployment.52

The UK already has significant problems of its own with youth unemployment – due largely to poor educational attainment, skills and motivation. UK employers have dealt with problem by ignoring it and instead recruited low-wage workers from the poorer parts of the EU.53 Post-Brexit, much more needs to be done to get our young workers into meaningful well-paid jobs.  The last way to do this is keep the EU’s labour and social model – and end up with levels of unemployment that is devastating the EU’s next generation.

In terms of the environment, the ‘polluter pays’ principle ‒ those who produce pollution should bear the costs of cleaning up the environment ‒ is now standard in international agreements and is part of a wider set of principles dealing with sustainable development worldwide and originating in the 1992 Rio Declaration.54 But that is the point – it is an international standard. The UK is willing to adopt the highest international standards on the environment – and indeed other matters – but not have these monitored and enforced by the EU – which it what it seeks in the negotiations. Indeed, Barnier’s concerns about the environment are a sham, according to Ambrose Evans-Pritchard. He provides two striking examples: the Naples mafia (Camorra), which for decades has been dumping toxic waste on the lower slopes of Mount Vesuvius poisoning the local water supply, has turned illegal dumping into a global business by linking up with criminal gangs in the Balkans and China; and the German state of North-Rhine Westphalia opened a new coal-fired power station in January 2020, ignoring the UN’s request that no coal plant should ever again be built. The polluter is clearly not paying in these cases. The EU’s CO2 emissions have fallen by 23% in the EU since 1990, compared with 42% in the UK, following the 2008 Climate Change Act which was the first piece of legislation anywhere in the world to enshrine in national law cuts in CO2 emissions.55

Another issue is the EU’s ‘precautionary principle’. This seems on the face of it to be quite innocuous, but it is far from being so. It is supposedly there to ‘protect’ consumers and prevent a ‘race to the bottom’ in terms of product standards. We all welcome safe and reliable products. But the EU freely admits that its precautionary principle is used as ‘disguised protectionism’ – to protect EU companies and industries from international competition.56 It is also being used to stifle innovation in the science and technology sectors.

One key example of this relates to farming as reported by Owen Paterson MP, a former Secretary of State for Environment, Food and Rural Affairs. The EU has long opposed genetic modification, but it is now putting the same regulatory hurdles on gene-editing. Scientists from the University of Minnesota and Calyxt have used a gene-editing method, TALEN, to produce a wheat resistant to powdery mildew and therefore in need of less fungicide spray. Genetic technologies have reduced pesticide use by 36.9% on average around the world, while increasing yields by 21.6%. Yet, these technologies are banned in the EU. Mr Paterson argues that the precautionary principle is condemning the EU to be the ‘museum of farming’. He says that accepting the EU’s proposals ‘would forfeit the UK’s regulatory independence and see it yoked to the EU’s extreme technological risk aversion. We would not be free to stimulate our own research centres. We would not be able to recalibrate our regulations to focus on outcomes over uniform bureaucracy. We would not be able to improve our environmental and animal health standards. We may not even be able to enact the once-promised ban on live-animal exports’.57

Governance

Ten, governance. The EU is proposing a framework with three components: ‘ongoing management/supervision; resolving disagreements through a Joint Committee and dispute settlement proceedings; and remedies and compliance, involving financial compensation and suspension of the agreement in whole or in part, including across policy areas’. A key EU aim is to ‘preserve the autonomy of the EU legal order’.  If there is a dispute with no agreement, ‘either Party can request: [the] establishment of an arbitration panel [and] referral to the CJEU through the arbitration panel’. If the dispute concerns a question of Union law, the ‘arbitration panel shall refer the question to CJEU for binding ruling… Once the CJEU rules on the question, the arbitration panel resolves the dispute’.58

This clearly gives the opportunity for the EU to argue that virtually any part of the agreement is a ‘question of Union law’ and any dispute must go the CJEU in order to ‘preserve the autonomy of the EU legal order’.  The EU can then rely on the ‘purposive’ nature of EU law which allows the CJEU  to interpret and reinterpret the wording of EU laws in line with the EU’s (often changing) intentions.59 There would be no legal certainty for the UK if it conceded to this governance framework. It is unprecedented in international agreements that a dispute between two sovereign bodies is resolved through the courts of one of those bodies rather than to international arbitration.

Zero dumping

Eleven, zero dumping. Ursula Von der Leyen says the EU is ‘ready to design a new partnership with zero tariffs, zero quotas, zero dumping’.60 It is ironic that the new German president of the European Commission calls for zero dumping, when her own country is one of the world’s biggest dumpers of goods onto world markets. The OECD defines dumping as ‘the practice by firms of selling products abroad at below costs or significantly below prices in the home market. The former implies predatory pricing; the latter, price discrimination’.61 This definition needs to be modified in the case of Eurozone countries to ‘the practice by a country of selling products abroad at artificially low prices due to the distorted international value of its currency’.

Germany has had the world’s largest current account surplus ‒ which measures the flow of goods, services and investments ‒ for each of the last four years: in 2019, it was $276 bn.62 The explanation for this is the way in which the euro and Eurozone (EZ) were set up in 1999. Table 2 shows the weights of the 11 original constituent currencies of the euro.63

Table 2: Weights of the original 11 constituent currencies of the euro

Currency FRF ITL ESP NLG BEF IE£ FIM ATS PTE DEM
Weight (%) 17.47 12.94 5.40 10.53 7.66 4.72 3.22 2.38 1.30 34.38

Over a third (34.38%) of the value of the euro is represented by the Deutschmark (DEM). If all 11 members were equally productive, the particular weights would not matter.  But this is not the case. Table 3 shows the average annual growth rate in productivity of the 11 members between 1995-2005.64 Germany had the second highest productivity growth rate at 1.9%, while Italy and Spain had the lowest at 0.5% and 0.0%, respectively.

Table 3: Average annual growth rate in productivity of the original 11 Eurozone members, 1995-2005

Country FR IT ES NL BE IE FI AT PT DE
Productivity growth (%pa) 1.8 0.5 0.0 1.7 NA NA 2.6 1.8 NA 1.9

This has a very important implication. The low productivity EZ member states pulls down the value of the euro on the international currency markets compared with the Deutschmark. In other words, the introduction of the euro has completely distorted the market in traded goods between the EZ and the ROW.  Germany – and to a lesser extent the Netherlands ‒ has been the biggest beneficiary of this distortion. Notwithstanding the high quality of German goods, this is equivalent to dumping its artificially low-priced goods onto world markets. This especially affects the UK which until Brexit was a convenient captive market for German goods.

Sequencing

Twelve, sequencing. The EU wants to control the sequencing of the negotiations. It wants to lock in deals as soon as possible in areas where it has most to gain over the UK – such as fishing and financial services – and delay for as long as possible in areas where the UK has most to gain – such as (non-financial) services. Having locked in the deals that benefit it most, it can then refuse to make concessions in other areas.

The EU’s idea of a level playing field

The EU’s idea of a level playing field post-Brexit is:

  1. Continue to have tariff-free access to our markets for its goods (where it has a huge trade surplus) and use rules of origin as a bargaining chip.
  2. Impede access to our trade in services (where the EU has a deficit) by making them subject to home state approval in each member state.
  3. Impede our financial service exports by making them subject to equivalence approval which can be removed at short notice with no negotiation.
  4. Treat UK citizens less favourably than EU citizens by restricting their right to work only in the member state where they currently work, whereas EU citizens can work in any of the UK’s four constituent countries.
  5. Use the new mobility arrangements to re-establish free movement by the back door.
  6. Continue to have access to our fishing grounds on the same basis as it currently has.
  7. Continue to use state aid – in increasingly disguised forms – to protect its own industries, while attempting to block the UK’s use of state aid, despite the UK spending less than the EU on average.
  8. Force the UK to align its tax regime to that of the EU where high personal and corporate taxes are used to finance its increasingly unaffordable social-economic model of high state welfare and pension benefits.
  9. Force the UK to adopt and keep in dynamic alignment with the EU’s labour and social protection standards and its environmental standards after Brexit – whereas these standards should either be set by the parliament of an independent sovereign state or should be set at an international level and not enforced by the EU.
  10. Adopt a governance framework that gives the CJEU a role in determining disputes rather than using international arbitration as is standard in international agreements.
  11. Prevent dumping by the UK, while continuing to dump its products in the UK as result of the persistently undervalued euro.
  12. Allow the UK to be disadvantaged by the sequencing of the negotiations.

In short, the EU wants to maintain the status quo when it comes to activities where it has a significant advantage – as in demanding free access to our fishing waters – but it does not want to maintain the status quo where it has a trade deficit – as in services and particularly financial services.  It also chooses to operate as a single entity when it suits it, while choosing to be 27 separate states when it doesn’t. In addition, it wants certain agreements – those where it has an advantage that it wants to lock in, such as the fishing agreement – to be concluded and ratified as soon as possible – by 1 July 2020.  Yet it wants to keep the negotiations on other agreements where the UK has an advantage such as services hanging in the air until the end of the negotiating period at the end of 2020. In fact, M. Barnier believes a full trade deal in 2020 is unrealistic, arguing that it would take three years to complete.65 He will clearly try to push the negotiations into 2021 and beyond, so the EU can keep charging us for the EU Budget.66 Yet M. Barnier can complete a fishing agreement in a few months when he puts his mind to it.

This is not a level playing field, it is ‘cherry picking’ – something the EU has constantly accused the UK of wanting to do and says it will prevent in the Brexit negotiations.67

How UK negotiators should respond

The UK’s negotiators should insist on a genuine level playing field that must:

  1. Give the UK the same access to the EU’s service market as the EU wants access to the UK goods market, i.e., EU-wide not on a country by country basis. Either the EU is a trading bloc or it’s just a collection of individual states – it can’t be allowed to pick and choose when it suits it.
  2. Allow the mutual recognition of standards in financial services, e.g. in the form of enhanced equivalence.
  3. Treat EU and UK citizens equally when it comes to work in the UK and across the EU respectively.
  4. Treat EU and ROW citizens equally when it comes to mobility arrangements.
  5. Treat the UK’s fish stocks symmetrically with the produce of German factories and French farms, etc.
  6. Ensure full mutual transparency concerning state aid, based on WTO commitments, as initially proposed by Boris Johnson in a statement on 29 November 2019. James Webber argues that this is sensible for three reasons: ‘first, it is the only other multi or plurilateral system of subsidy control; second, the legal terms (and hence concepts) underlying it are distinct from EU state aid; third, the UK will as a signatory to the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement) be subject to its disciplines in future international trade matters. The SCM Agreement is designed to restrain use of subsidies in tradeable goods by authorising WTO members to impose tariffs to “countervail” the effect of subsidies given by another WTO member. In most cases it is necessary to show that the subsidies caused injury before imposition of countervailing tariffs is lawful. The SCM Agreement only covers tradeable goods’.68 In particular, the UK should legislate to resolve the ambiguity in the Northern Ireland Protocol and end any requirement to report state aid in Great Britain to the European Commission after the end of transition period. Webber proposes that ‘The safest course now for the UK is to strip out EU legal concepts from the forthcoming Free Trade Agreement – and to use this as an opportunity to withdraw from the EU state aid regime…in favour of a more certain, evidence-based and transparent framework’.69
  7. Allow for full tax sovereignty, while recognising that dealing with tax havens and unfair and distortionary taxes is a matter for international agreement.
  8. Allow for full autonomy on standards, while recognising that goods and services entering each other’s markets must conform to local standards, while other standards (e.g., on the environment) should be set by international agreement. In other words, there is no need for the harmonisation or dynamic alignment of standards. Rather standards should be mutually recognised, with a dispute mechanism to assess whether one party’s standards have too far out of line with what the other party originally accepted.
  9. Allow the agreement to be subject ultimately to international arbitration not the CJEU.

We need to turn Barnier’s level playing field argument completely on its head and make it work in our favour and not against us. If we do not do this, we will find ourselves in another one of his traps which he so skilfully set over the last 3 years for our previous useless set of negotiators.

This is essential if Boris Johnson wishes to achieve the objectives he laid out in a speech in Greenwich also on 3 February 2020: ‘There is no need for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar any more than the EU should be obliged to accept UK rules. I hope you’ve got the message by now. We have made our choice: we want a comprehensive free trade agreement, similar to Canada’s. But in the very unlikely event that we do not succeed, then our trade will have to be based on our existing Withdrawal Agreement with the EU’. He also emphasized the ‘need for full legal autonomy, [because] the reason we do not seek membership or part membership of the customs union or alignment of any kind, is at least partly that I want this country to be an independent actor and catalyst for free trade across the world’.70 The EU removed 98.7% of tariff lines in its trade deal with Canada, 99% with Japan and 99.5% with Korea. None of the three countries is required to have any dynamic alignment on standards, and commitments on workers’ rights and the environment are not enforceable through the arbitration mechanism nor subject to sanctions.71

Clearly a cooperative solution involving a mutually beneficial free trade agreement would be preferred, but the government must be prepared for the non-cooperative solution of trading on WTO terms and use the credible threat of walking away if the EU does not accept operating on the level playing field outlined above.72  It is the same strategy that the EU is going to take as Guy Verhofstadt, the Belgian MEP who chaired the European Parliament’s Brexit Steering Group, has made clear: ‘The UK Government says no to EU standards, a far reaching fishery agreement, free movement. But it does want zero tariffs, zero quota and full access for the City’. Unless the UK backs down, the trade talks will be ‘very brief’, he said.73

Others commentators agree with this approach.  For example, economist Harry Western, writes: ‘the EU’s extreme posture in recent weeks reflects a basic lack of interest in their part in having a free trade deal. Having already got what they wanted in the withdrawal agreement in terms of the financial settlement, Northern Irish protocol and citizens’ rights, an FTA is only of interest if it comes with all the other things on their wish list, which together add up to putting the UK in a position of economic and political servitude. As a result, we would propose that the UK start making plans now for EU trade to move to a WTO basis at the end of the year, including reducing the costs of adjustment for UK firms by the maximum extent using various easements (delayed customs declarations, easier reporting rules etc) and laying out plans to help the small number of industries where trade dislocation will be considerable’.74

Similarly, Ambrose Evans-Pritchard: ‘The EU’s strategic aim is to compel Britain to swallow the Acquis even though much of this legislation is either dysfunctional or incompatible with 21st Century science and technology. It aims to pin down this country as a legal colony with no way out later other than the pariah step of treaty abrogation.  …Mr Barnier has put forward an extraordinary doctrine, that the UK cannot have a sovereign trade relationship because it is too big and because it sits on the EU doorstep. What this really means is that Britain will be subject to special punitive terms as an ex-EU member if it opts to be a self-governing state under its own laws. …[The EU] is already offering so little in trade talks that the differential cost of the WTO option is trivial. …[Y]ou cannot negotiate with these people. Britain should forget about a trade deal with Europe and look to the world. …It should pursue a fast-track accord with the US, given that Washington wants the same thing and is lavishing us with affection’.75

The EU confirmed its negotiating guidelines on 27 February 2020.76 The EU had promised the UK a Canada-style free trade deal in 2018,77 but is now reneging on that promise.78 It wants to be able to suspend whatever deal is agreed if the UK ignores rulings made by the dispute panel or the CJEU.79 It is also advising member states to refuse the ‘mutual recognition agreements’ that are needed to certify UK goods satisfy single market regulations, despite these being standard in WTO agreements, and the UK has already has them in place with major trading partners such as the US, Japan and Canada.80

On 27 February 2020, Michael Gove, Chancellor of the Duchy of Lancaster, announced the UK government’s negotiating position in the House of Commons: ‘We want the best possible trading relationship with the EU. But in pursuit of a deal, we will not trade away our sovereignty. We respect the EU’s sovereignty, autonomy and distinctive legal order and we expect them to respect ours. We will not accept nor agree to any obligations where our laws are aligned with the EU or the EU’s institutions, including the Court of Justice’. The government’s negotiating guidelines show that the government is prepared to walk away from trade talks in June unless there is the ‘broad outline’ of a deal in place by then which would be ‘rapidly finalised’ by September.  The government ‘will not negotiate any arrangements in which the UK does not have control of its own laws and political life’, and will instead revert to trading with the EU on WTO terms if progress on a comprehensive deal cannot be made, instead focussing ‘solely on continuing domestic preparations to exit the transition period in an orderly fashion’.

It really is time to walk away from this increasingly ludicrous institution.

This article was first published on Briefings for Britain, and is republished with permission. You may not use, copy, distribute, publish, syndicate, sub-license and transmit the whole or any part of such material in any manner and in any format and/or media without the permission of the original publishers.

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CC-BY-4.0: © European Union 2019 – Source: EP

Footnotes

  1. Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom, 19 October 2019; https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/840656/Political_Declaration_setting_out_the_framework_for_the_future_relationship_between_the_European_Union_and_the_United_Kingdom.pdf
  2. Michel Barnier’s three wishes for Britain and the EU in 2020 – The European Union’s chief negotiator for Brexit maps out the path to securing a trade deal within the coming 12 months, by Michel Barnier, Financial News, 23 December2019; https://www.fnlondon.com/articles/michel-barniers-three-wishes-for-britain-and-the-eu-in-2020-20191223
  3. Statement by Michel Barnier at the presentation of the Commission’s proposal for a Council recommendation on directives for the negotiation of a new partnership with the UK, Brussels, 3 February 2020; https://ec.europa.eu/commission/presscorner/detail/en/speech_20_185

    See also: Recommendation for a COUNCIL DECISION authorising the opening of negotiations for a new partnership with the United Kingdom of Great Britain and Northern Ireland, Brussels, 3.2.2020 COM(2020) 35 final; https://ec.europa.eu/info/sites/info/files/communication-annex-negotiating-directives.pdf

    And: Future EU-UK Partnership: European Commission takes first step to launch negotiations with the United Kingdom, press release, Brussels, 3 February 2020; ehttps://ec.europa.eu/commission/presscorner/detail/en/ip_20_176

  4. https://ec.europa.eu/commission/brexit-negotiations/negotiating-documents-article-50-negotiations-united-kingdom_en
  5. Derived from General principles – §5 of European Council guidelines of 29 April 2017, §3,7, 8, 9 and 12 of European Council guidelines of 23 March 2018, reported in European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship: “Free trade agreement”, UKTF (2020) 2 – Commission to EU 27,  13 January 2020;   https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200113-fta_en_0.pdf
  6. Statistics on UK-EU trade, Briefing Paper Number 7851, 16 December 2019; https://researchbriefings.files.parliament.uk/documents/CBP-7851/CBP-7851.pdf
  7. EU finally shows how badly it needs UK’s business, revealing 2019 figures, Brexit Facts4EU.Org, 15 February 2020; https://facts4eu.org/news/2020_feb_uk_trade_essential_for_eu27
  8. Liam Halligan (2020) The EU is fatally complacent about the crisis that is about to engulf it, Daily Telegraph, 17 February 2020; https://www.telegraph.co.uk/politics/2020/02/17/eu-fatally-complacent-crisis-engulf/
  9. The EU’s tariffs outside these sectors is much lower: the trade-weighted average EU tariff for non-agricultural products was 2.7% in 2018 and 8.1% for agricultural products. Similarly, the EU average tariffs for industrial products at 4.3% is only a little higher than the US at 3.8%. Source: WTO, World Tariff Profiles 2019
  10. https://researchbriefings.files.parliament.uk/documents/CBP-7851/CBP-7851.pdf
  11. Kevin Dowd, The EU’s thousands of senseless tariffs simply serve to punish the poor, 16 September 2017; https://brexitcentral.com/eu-thousands-senseless-tariffs-punish-poor/. Note, the tariff rates are subject to frequent changes.
  12. What would ‘trading on WTO terms’ mean for the UK?, The UK in a Changing Europe, undated; https://ukandeu.ac.uk/wp-content/uploads/2018/12/What-would-trading-on-WTO-terms-mean-Long-Guide.pdf
  13. Justin Protts, Potential post-Brexit tariff costs for EU-UK trade, Civitas, October 2016; https://www.civitas.org.uk/content/files/potentialpostbrexittariffcostsforeuuktrade.pdf
  14. See David Blake, Why does the EU go on about the ‘integrity’ of the Single Market when it has been such a failure?, Briefings for Brexit, 13 August 2019;  https://briefingsforbrexit.com/why-does-the-eu-go-on-about-the-integrity-of-the-single-market-when-it-has-been-such-a-failure/
  15. The UK exported £120bn in services to the EU in 2018 and UK GDP in that year was £2.11 trn (Statistics on UK-EU trade, p.8, and https://www.statista.com/statistics/281744/gdp-of-the-united-kingdom-uk-since-2000/).
  16. ‘Brexit Britain is servicing the World’ – latest official figures are revealed, Facts4eu, February 2020; https://facts4eu.org/news/2020_feb_UK_services_the_world
  17. §8 of European Council guidelines of 23 March 2018, reported in European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship: “Free trade agreement”, UKTF (2020) 2 – Commission to EU 27, 13 January 2020;   https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200113-fta_en_0.pdf
  18. So long as a financial institution is regulated in one member state, it can offer financial services in any other member state – in the same way an EU citizen can visit any other member state so long as they show their passport.
  19. §§35-37 Political Declaration, reported in European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship: “Free trade agreement”, UKTF (2020) 2 – Commission to EU 27, 13 January 2020;   https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200113-fta_en_0.pdf
  20. Reported in European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship:

    “Personal data protection (adequacy decisions); Cooperation and equivalence in financial services”( III. Equivalence assessments), UKTF (2020) 1 – Commission to EU 27,  10 January 2020;   https://ec.europa.eu/commission/sites/beta-political/files/seminar_20200110_-_data_protection_adequacy_-_financial_services_en.pdf

  21. The minimum is 30 days.
  22. Barney Reynolds (2017) A Template for Enhanced Equivalence, Politeia, 10 July.
  23. §§48-49 (IX. MOBILITY) of the Political Declaration. See also European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship:  

     “Mobility of persons”, UKTF (2020) 10 – Commission to EU 27,  20 January 2020;   https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200120-mobility_en.pdf

  24. How could a UK points-based immigration system work?, BBC News, 28 January 2020; https://www.bbc.co.uk/news/uk-48785695
  25. §8 of European Council guidelines of 23 March 2018, reproduced in European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship: “Fisheries”, UKTF (2020) 3 – Commission to EU 27,  14 January 2020;   https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200113-fta_en_0.pdf
  26. §7 of European Council guidelines of 23 March 2018, reproduced in European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship: “Law enforcement and judicial cooperation in criminal matters”, UKTF (2020) 7 – Commission to EU 27,  16 January 2020;   https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200116-lawenf_en.pdf
  27. European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship: “Level playing field”, UKTF (2020) 4 – Commission to EU 27, 14 January 2020 (II. Competition –State-owned enterprises: Substantive Rules);   https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200114-lpf_en.pdf
  28. James Crisp, EU will use Flybe bailout to heap pressure on UK Brexit negotiators, Daily Telegraph, 16 January.
  29. Tobias Buck and Alice Hancock, Germany agrees to back Thomas Cook’s Condor with bridge loan, Financial Times, 24 September 2019.
  30. https://www.gov.uk/government/speeches/pm-speech-in-greenwich-3-february-2020
  31. Directive 2014/59/EU.
  32. SRB (2017) Decision of the Single Resolution Board in its executive session of 23 June 2017 concerning the assessment of the conditions for resolution in respect of Banca Popolare di Vicenza S.p.A., non-confidential version, (SRB/EES/2017/12) and SRB (2017) Decision of the Single Resolution Board in its executive session of 23 June 2017 concerning the assessment of the conditions for resolution in respect of Veneto Banca S.p.A., non-confidential version, (SRB/EES/2017/11).
  33. World Bank (2016). Bank resolution and bail-in in the EU: selected case studies pre and post BRRD (English). Washington, D.C.: World Bank Group).
  34. See European Commission press release, ‘State aid:  Commission approves aid for financing the orderly market exit of Cyprus Cooperative Bank Ltd, involving sale of some parts to Hellenic Bank’, 19 June 2018.
  35. https://www.eib.org/en/about/index.htm.
  36. https://www.eif.org/index.htm.
  37. Shanker Singham, Opportunities and challenges for UK agriculture and fishing post Brexit, GlobalVision, 14 February 2020https://globalvisionuk.com/opportunities-and-challenges-for-uk-agriculture-and-fishing-post-brexit/
  38. More commonly known as the European Court of Justice.
  39. James Webber, All Change? UK State Aid after Brexit.What Law? Whose Courts?, Politeia, 13 February 2020; https://www.politeia.co.uk/all-change-uk-state-aid-after-brexit-what-law-what-courts-by-james-webber/
  40. http://www.legislation.gov.uk/ukpga/2020/1/contents/enacted
  41. Sheila Lawlor in Foreword to James Webber, All Change? UK State Aid after Brexit.What Law? Whose Courts?, Politeia, 13 February 2020; https://www.politeia.co.uk/all-change-uk-state-aid-after-brexit-what-law-what-courts-by-james-webber/
  42. European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship: “Level playing field”, UKTF (2020) 4 – Commission to EU 27,  14 January 2020 (III. Taxation: Substantive Rules);  https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200114-lpf_en.pdf,The Code of Conduct Group (Business Taxation) was set up by the Economic and Financial Affairs Council (ECOFIN) in March 1998. While not legally binding, its adoption requires the commitment of member states to abolish existing tax measures that constitute harmful tax competition and refrain from introducing new ones in the future.
  43. John Walsh, End of the ‘double Irish’ creates a taxing time for Dublin, Daily Telegraph, 21 January 2020.
  44. HM Revenue & Customs, Introduction of the new Digital Services Tax, 11 July 2019; https://www.gov.uk/government/publications/introduction-of-the-new-digital-services-tax/introduction-of-the-new-digital-services-tax
  45. Chris Giles and Jim Pickard, UK to push on with digital tax in face of US anger: Trump officials threaten tariffs if London does not back down, Financial Times, 21 January 2020.
  46. Source: Daily Telegraph.
  47. This thinking can be traced back in history, appearing, for instance, in a plan for a European Economic Community discussed at the University of Berlin in 1942.  See David Blake, Striking Similarities:  The Origins of the European Economic Community, Briefings for Brexit, 20 May 2019; https://briefingsforbrexit.com/striking-similarities-the-origins-of-the-european-economic-community/.
  48. Alistair Dawber, Sarkozy woos City bankers with promise of Paris tax break, Independent, 23 August 2010; https://www.independent.co.uk/news/business/news/sarkozy-woos-city-bankers-with-promise-of-paris-tax-break-2059472.html
  49. European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship: “Level playing field”, UKTF (2020) 4 – Commission to EU 27, 14 January 2020 (IV. Labour and social protection: Substantive Rules);   https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200114-lpf_en.pdf
  50. European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship: “Level playing field”, UKTF (2020) 4 – Commission to EU 27, 14 January 2020 (V. Environment: Substantive Rules);   https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200114-lpf_en.pdf
  51. https://tradingeconomics.com/country-list/unemployment-rate. Accessed 26/01/20.
  52. https://tradingeconomics.com/country-list/youth-unemployment-rate. Accessed 26/01/20.
  53. UK employers’ organisations, like the Confederation of British Industry (CBI), want to continue doing this after Brexit by having temporary visas for unskilled migrants, as reported in Ben Gartside, Stand-off between CBI and other lobby groups over immigration letter, Daily Telegraph, 24 January 2020; https://www.telegraph.co.uk/business/2020/01/24/stand-off-cbi-lobby-groups-immigration-letter/
  54. What is the polluter pays principle?, London School of Economics, 11 May, 2018; http://www.lse.ac.uk/GranthamInstitute/faqs/what-is-the-polluter-pays-principle/
  55. Ambrose Evans-Pritchard (2020) Barnier’s environmental and labour demands are a sham: Britain should stop trying to negotiate with the EU, Daily Telegraph, 19 February; https://www.telegraph.co.uk/business/2020/02/19/barniers-environmental-labour-demands-monstrous-sham-britain1/
  56. David Blake, Ten reasons that justify the UK’s decision to leave the European Union, Briefings for Brexit, 26 October 2018; https://briefingsforbrexit.com/ten-reasons-that-justify-the-uks-decision-to-leave-the-european-union/
  57. Owen Paterson, Sorry Mr Gove, but Theresa May’s Brexit deal traps Britain in the EU’s failing museum of farming, Daily Telegraph, 3 January 2019.
  58. European Commission Task Force for Relations with the United Kingdom, Internal EU27 preparatory discussions on the future relationship:  “Governance”, UKTF (2020) 9 – Commission to EU 27,  20 January 2020;   https://ec.europa.eu/commission/sites/beta-political/files/seminar-20200120-governance_en.pdf
  59. http://e-lawresources.co.uk/Purposive-approach.php
  60. Speech at the London School of Economics, 8 January 2020
  61. https://stats.oecd.org/glossary/detail.asp?ID=3201
  62. https://www.reuters.com/article/germany-economy-trade/germany-to-run-worlds-largest-current-account-surplus-in-2019-ifo-idUSL5N2641DF
  63. Note, the Belgian and Luxembourg Franc are aggregated. Source: http://fx.sauder.ubc.ca/euro/
  64. Labour productivity is defined as real value added per working hour.   Source: Table 1 of Steffen Elstner, Lars P. Feld, and Christoph M. Schmidt (2018) The German Productivity Paradox – Facts and Explanations, Ruhr Economic Papers #767, RWI – Leibniz-Institut für Wirtschaftsforschung, Essen, Germany, 2018: ISSN 1864-4872; http://www.rwi-essen.de/media/content/pages/publikationen/ruhr-economic-papers/rep_18_767.pdf
  65. Michel Barnier: Full UK-EU trade deal in 2020 is ‘unrealistic’, Euronews, 15 January 2020; https://www.euronews.com/2020/01/09/michel-barnier-full-uk-eu-trade-deal-in-2020-is-unrealistic

    Cynthia Kroet, Michel Barnier: EU-UK trade deal could take 3 years, Politico, 24 October 2017; https://www.politico.eu/article/michel-barnier-eu-uk-trade-deal-could-take-3-years/

  66. This strategy has virtually been confirmed by Phil Hogan, the European commissioner for trade, who has warned the UK that a full trade deal by the end of the year is ‘just not possible’ and that the EU was ‘certainly’ not going to be able to meet Boris Johnson’s ambition of having a comprehensive agreement in place by 31 December. He also warned Boris Johnson that ‘gamesmanship and brinkmanship are not going to work’, reported in Jon Stone, Full Brexit trade deal by end of year ‘just not possible’, EU trade chief says, Independent,16 January 2020; https://www.independent.co.uk/news/uk/politics/brexit-trade-deal-eu-uk-boris-johnson-timetable-a9287416.html
  67. ‘No “cherry picking” is one of the General principles – §5 of European Council’s Guidelines of April 2017 and §3 and 7-8 of the European Council’s Guidelines of March 2018.
  68. James Webber, All Change? UK State Aid after Brexit.What Law? Whose Courts?, Politeia, 13 February 2020; https://www.politeia.co.uk/all-change-uk-state-aid-after-brexit-what-law-what-courts-by-james-webber/
  69. Op Cit.
  70. https://www.gov.uk/government/speeches/pm-speech-in-greenwich-3-february-2020
  71. Global Vision Briefing, 17 February 2020.
  72. This strategy is explained in detail here: David Bake, Here’s how the next Prime Minister can ensure we leave the European Union by 31st October, BrexitCentral, 30 June 2019; https://brexitcentral.com/heres-how-the-next-prime-minister-can-ensure-we-leave-the-european-union-by-31st-october/
  73. Brian McGleenon, Guy Verhofstadt threatens the UK as he demands the EU hold ‘very brief’ Brexit trade talks, Daily Express, 11 February 2020; https://www.express.co.uk/news/politics/1241010/guy-verhofstadt-brexit-uk-eu-trade-talks-fisheries-freedom-of-movement
  74. Harry Western, On the terms being offered, EU deal is not worth it, Briefings for Britain, 3 February 2020; https://briefingsforbritain.co.uk/on-the-terms-being-offered-eu-deal-is-not-worth-it/. See also Harry Western, The EU isn’t interested in free trade with the UK, just political domination, Briefings for Britain, 20 February 2020; https://briefingsforbritain.co.uk/eu-isnt-interested-in-free-trade/
  75. Ambrose Evans-Pritchard (2020) Barnier’s environmental and labour demands are a sham: Britain should stop trying to negotiate with the EU, Daily Telegraph, 19 February; https://www.telegraph.co.uk/business/2020/02/19/barniers-environmental-labour-demands-monstrous-sham-britain1/
  76. https://www.consilium.europa.eu/en/press/press-releases/2020/02/25/eu-uk-relations-council-gives-go-ahead-for-talks-to-start-and-adopts-negotiating-directives/
  77. Donald Tusk, then president of the European Council, said: ‘From the very beginning, the EU offer has been not just a Canada deal, but a Canada+++ deal. Much further-reaching on trade, on internal security and on foreign policy cooperation. This is a true measure of respect and this offer remains in place’. Reported in Owen Bennett (2018) Donald Tusk offers UK a Canada-style trade deal in blow for Theresa May’s Brexit plan, City A.M., 4 October; https://www.cityam.com/donald-tusk-offers-uk-canada-style-trade-deal-blow-theresa/
  78. Christopher Hope (2020) Boris Johnson team ‘infuriated’ as EU reneges on free trade deal, Daily Telegraph, 1 February; https://www.telegraph.co.uk/politics/2020/02/01/boris-johnson-infuriated-eu-reneges-free-trade-deal/
  79. James Crisp (2020) EU seeks power to suspend any deals it makes with Britain over Brexit, Daily Telegraph, 10 February; https://www.telegraph.co.uk/politics/2020/02/10/eu-wants-power-freeze-post-brexit-uk-eu-deals-punishment/
  80. Ambrose Evans-Pritchard (2020) EU dashes hopes for Boris bounce, but faces its own slow crisis, Daily Telegraph, 23 January; https://www.telegraph.co.uk/business/2020/01/23/eu-dashes-hopes-boris-bounce-faces-slow-crisis/
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