The White Paper

2 February 2017

This note is a bit longer than I would wish, but it gives the essence of today’s White Paper, which builds on the twelve principles of Theresa May’s speech on 17 January at Lancaster House. The paper adds little to the speech, just enough to satisfy requests for a policy framework. The key points are:

Guarantees of funding should silence complaints from the farming and academic lobbies - as if anything could shut up the latter!

Prolonged discussions of dispute resolution are unlikely to take the sting out of walking away from the European Court of Justice.

The proposal to phase the implementation of new immigration rules is bait which Brussels may not be able to take.

Tory amendments to guarantee the rights of EU nationals would prematurely deprive HMG of one of its most cogent challenges to the unity of the EU27, though the UK will decline to engineer the worst of EU disunity if it really wants a deal.

The guarantee of workers’ rights is weakened by a “review of…new business models”, but is probably enough to keep Corbyn off balance.

The paper dwells on the enmeshment of the French aerospace industry in ours, but is strangely silent on the similar condition of the German motor industry.

Spanish fishermen are gently reminded of their privileged access to our waters.

Financial services show up as in a stronger position than the supine City lobbies would have it.

The Trade in Services Agreement (TiSA) is mentioned, but without any nod to my pet scheme of flushing out the futility of negotiations by making separate UK representation a precondition.

The paper repudiates the Common External Tariff and the Common Commercial Policy, also stating that the UK will negotiate its own agreements with third parties. It fails, however, to recognise that this rules out any sort of customs union.

The country’s future trade policy is wholly unexplored, save for an almost imperceptible hint about free trade.

May restates her timetable and her willingness to take no deal rather than a bad one, without however reiterating the hints in her Lancaster House speech that “plan B” might involve a low-tax regime.

The paper concludes with a hearty commitment to international engagement, no doubt with a view to seeing off the hangover following May’s visit to Trump.

Here are the details.

- o -

Theresa May’s foreword

We do not approach these negotiations expecting failure, but anticipating success.

Comment. This softens “no deal is better than a bad deal” (repeated later in the paper), without contradicting it. Unlike May, I make no bones of expecting failure.

1. Providing clarity and certainty

Section 1.13 - Funding commitments

We recognise the importance to business of having certainty about funding arrangements over the coming years. We have already acted quickly to give clarity about farm payments, competitive grants, including science and research funding, and structural and investment funds.

Comment. This silences complaints from the farming and academic lobbies (if anything could!)

2. Taking control of our own laws

Dispute resolution mechanisms

2.4 We recognise that ensuring a fair and equitable implementation of our future relationship with the EU requires provision for dispute resolution.

2.5 Dispute resolution mechanisms ensure that all parties share a single understanding of an agreement, both in terms of interpretation and application. These mechanisms can also ensure uniform and fair enforcement of agreements.

2.6 Such mechanisms are common in EU-Third Country agreements…

Comment. This throws up smoke with a view to taking the sting out of repudiating the jurisdiction of the European Court of Justice - an inflammatory matter for the EU.

5. Controlling immigration

5.4 …In future, therefore, the Free Movement Directive will no longer apply and the migration of EU nationals will be subject to UK law.

Comment. This is the red line underpinning HMG’s overall stance. With no “freedom of movement”, there can be no halfway houses.

5.10 …There may be a phased process of implementation to prepare for the new arrangements….

Comment. This bone thrown to Brussels may be beyond the capacity of its negotiators to take up.

6. Securing rights for EU nationals in the UK, and UK nationals in the EU

6.3 Securing the status of, and providing certainty to, EU nationals already in the UK and to UK nationals in the EU is one of this Government’s early priorities for the forthcoming negotiations...

6.4 The Government would have liked to resolve this issue ahead of the formal negotiations. And although many EU Member States favour such an agreement, this has not proven possible. The UK remains ready to give people the certainty they want and reach a reciprocal deal with our European partners at the earliest opportunity. It is the right and fair thing to do.

Comment. Any Tory amendment on this topic would take away one of the UK’s most effective crowbars upon the door to bilateral negotiations - at present resolutely closed. Mind you, weakening the EU’s negotiators in this way would be a mixed blessing: with no agreed EU position, a deal is less likely. That’s always been my view of the outcome and maybe that’s the plan.

7. Protecting workers’ rights

7.1 As we convert the body of EU law into our domestic legislation, we will ensure the continued protection of workers’ rights...

7.6 …an independent review of employment practices in the modern economy is now underway. The review will consider…modern business models, such as: the rapid recent growth in self-employment; the shift in business practice from hiring to contracting; the rising use of non-standard contract forms and the emergence of new business models such as on-demand platforms.

7.7 …Moreover, we will ensure that the voices of workers are heard by the boards of publicly listed companies for the first time.

Comment. Mixed messages: the general assurance (7.1) is weakened by the “review” (7.6), while workers on the board (7.7) is as bonkers as ever. Probably this doesn’t matter, save to make it even harder for Corbyn to catch his breath.

8. Ensuring free trade with European markets

8.2 We do not seek to adopt a model already enjoyed by other countries.

8.3 [An] agreement may take in elements of current Single Market arrangements in certain areas…on a fully reciprocal basis…

8.8 Producers in other EU Member States…rely on UK firms in their supply chains...

8.9 …For example, in Aerospace the wings for the Airbus A350 XWB are produced in the UK. The wings are…designed and produced through cooperation between specialist teams in Germany, Spain, France and Filton, near Bristol.

Comment. This reminds the French in particular of their enmeshment in Aerospace joint ventures, but is silent about BMW’s similar situation.

8.10 We continue to supplement our analysis of trade data with a wide range of other analysis and engagement cover[ing] over 50 specific sectors.

Comment. This just isn’t going to happen: there aren’t enough hours in the day for agreements encompassing the details of fifty sectors. This may be a signal that HMG is less certain of an agreement than it’s willing to admit at this point.

8.16 In 2015, EU vessels caught 683,000 tonnes (£484 million revenue) in UK waters…Given the heavy reliance on UK waters of the EU fishing industry…it is in both our interests to reach a mutually beneficial deal that works for the UK and the EU’s fishing communities.

Comment. A shot across the bows of Spain.

8.20 The EU is a party to negotiations on the Trade in Services Agreement (TiSA) with more than twenty other countries. The UK continues to be committed to an ambitious TiSA and will play a positive role throughout the negotiations.

Comment. But will it ask for separate representation to flush out the EU’s basic attitude to negotiations? This would be a way of avoiding wasting time on what I’m calling as futile negotiations.

Financial Services

Boxed text “A European global financial centre”

Citizens, businesses and public sector bodies across the continent rely on the City to access the services that they need. Over 75 per cent of the EU27’s capital market business is conducted through the UK. The UK industry manages £1.2 trillion of pension and other assets on behalf of European clients. The UK is also responsible for 37 per cent of all European Initial Public Offerings, while the UK receives more than one third of all venture capital invested in the EU.

Comment. This is of a piece with a report leaked on 1 February from the European parliament’s committee on economic and monetary affairs (Econ). This noted that UK-based financial services account for 40% of Europe’s assets under management, 60% of its capital markets business, and that UK-based banks provide more than £1.1tn of loans to the other EU member states. It concludes that

The exclusion of the main European financial centre from the internal market could have consequences in terms of jobs and growth in the EU.

The City lobbies increasingly look supine and any bullying sessions from the US investment banks at Davos would have been poorly-judged.

A mutually beneficial new customs arrangement

8.43 After we have left the EU, we want to…take advantage of the opportunity to negotiate our own preferential trade agreements around the world. We will not be bound by the EU’s Common External Tariff or participate in the Common Commercial Policy.

8.45 …There are a number of options for any new customs arrangement, including a completely new agreement, or for the UK to remain a signatory to some of the elements of the existing arrangements….

Comment. It is understandable that journalists find this tricky: repudiating the Common External Tariff and the Common Commercial Policy (8.43) rules out every option in 8.45 but a “completely new arrangement”.

9.Securing new trade agreements with other countries

9.8 Work is underway to define the Government’s approach to trade policy. In due course the Government will want to consult business and other interested parties on the detailed positions it should adopt.

Comment. This is so weak as to make sense only as holding out the tantalising prospect of (be still, my beating heart!) altogether tariff-free trade. But then my guileless hopes are dashed by

9.17 As part of leaving the EU the UK will need to establish our own schedules covering trade in goods and services at the WTO…

Comment. To my mind this is necessary only to keep our powder dry and would be better altogether abandoned. But that’s just me.

12.Delivering a smooth, orderly exit from the EU

12.1 We will formally trigger the process of leaving the EU by invoking Article 50 of the Treaty on European Union no later than the end of March this year.

12.2 …[W]e want to have reached an agreement about our future partnership by the time the two year Article 50 process has concluded. From that point onwards, we believe a phased process of implementation…will be in our mutual interest…The UK will not, however, seek some form of unlimited transitional status.

Comment. This robustly restates May’s timetable, though “an agreement about our future partnership” plus “a phased process of implementation” is such a burden as fully to confirm her intention to be “ambitious”.

12.3 [T]he Government is clear that no deal for the UK is better than a bad deal for the UK. In any eventuality we will ensure that our economic and other functions can continue, including by passing legislation as necessary to mitigate the effects of failing to reach a deal.

Comment. This equally robustly restates May’s willingness to engage with a Plan B, without giving any hostages as to what it might be.

Conclusion

We will honour the UK’s profoundly internationalist history and culture by building a truly global UK…[W]e will continue to be reliable partners, willing allies and close friends.

Comment. This denies Trump-like protectionism and makes the right noises about our commitment to the rules-based international order.