Chequers beyond the politics – 10 practical questions for business

By Peter Watts and Charles Brasted

The complex politics of Brexit are already swirling around the communique issued by the UK Government following the cabinet awayday. The full extent of the UK political fallout will only become clear in the coming hours, weeks and months as will the response from EU leaders. Whether it represents "British pragmatism at its best" or "the worst of all worlds", Chequers is only a potential "base camp" for the UK's efforts - with the clock ticking on the time available to reach the summit.  

For goods, at least, the statement suggests the UK will seek an outcome which results in as little substantive change as possible from the current position by sharing both a common rulebook and a free trade area. In doing so, subject those caveats about the politics, it represents the clearest indication yet of the May administration's objectives for the next phase of the Brexit negotiations.

However, for business in search of a clear framework within which to plan, even on its face the Chequers statement raises almost as many questions as it answers. Here are 10:

1. The UK's adoption of a "common rulebook" of regulations for goods aims to deliver frictionless trade by avoiding the need for goods to be checked against different regulations in the UK and EU but with sovereignty preserved by means of a UK parliamentary veto over adoption of those rules in the UK.

Will the UK seek any formal mechanism which would allow it to input into the contents of the "common rulebook" for goods to avoid the UK Parliament having a simple "take it or leave it" choice as the rules evolve and to reflect the desires we have heard from business that the UK should have a voice in future regulatory debates given the importance of the UK's contribution to regulatory development in areas as ranging from technology to food. Does the UK expect to detail the nature of the anticipated "consequences" of the UK parliament refusing to accept new rules as they emerge from the EU?

2. The common rule book is envisaged to extend to agri-food.

Given the significance and sensitivity of the agri-food sector in any trade negotiations and the acknowledged divergence of EU and North American models, how would any future US/UK free trade agreement be shaped and is it realistic to expect one in the foreseeable future?

3. For many categories of goods, such as life sciences and automotive, the "rulebook" only represents the starting point for current regulatory alignment with the existence of a coordinated EU wide system of approval and enforcement equally important.

Does the UK envisage building on the "common rulebook" to create an enhanced system of seamless mutual recognition of licences, certification, inspection and testing  together with coordinated regulatory decision making and enforcement?

4. In a wide range of areas - environment, climate change, social and employment, and consumer protection – the UK proposes that it would not "let standards fall below their current levels".

How would this commitment be encapsulated into law? More specifically, how would the baseline of the "current level" evolve given the inevitability that the detail of rules in areas such as the environment will need to change over time? Will consumers and non-governmental interest groups such as trade unions or environmental or consumer campaigners have rights to challenge the UK's compliance with this commitment.

5. The statement indicates the UK would aim to "strike different arrangements" for services (including, crucially, financial services) providing greater "regulatory flexibility" whilst  "recognising the UK and the EU will not have current levels of access to each other’s markets".

Will the UK aim to secure any wide ranging institutional framework to facilitate "mutual recognition" scheme with the EU for services or simply deal with services on a sector-by-sector basis?

6. With the rise of digitalisation "smart" goods are increasingly semi-intelligent and/or connected conduits for the delivery of services – monitoring and managing health or security, storing data or content in the cloud, accessing information or entertainment – rather than goods in the traditional sense.

Given the seemingly inevitable blurring of the lines between goods and services, will it really prove practical to draw such a bright line between the regimes governing the two categories looking forward over the next 5-10 years?

7. Moving beyond regulation, the statement envisages the UK and the EU developing a new "Facilitated Customs Arrangement" to treat the two as if they were combined customs territory so removing the need for customs checks and controls between them. This would give the UK the right to apply its own tariffs for goods intended for the UK, and to sign free trade agreement with non-EU partners, including potentially seeking accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (TPP).

This would be a ground breaking proposal and it is unclear whether the UK has developed detailed proposals for the operation of such an arrangement – particularly around the evidencing of different rules of origin and end-destination of goods – and, if so, how those might work across both the EU and UK.

8. The UK previously agreed "backstop" arrangements governing the Northern Ireland border that would – in essence – have kept Northern Ireland within the scope of much of the EU framework to avoid any "hard border" on the island of Ireland. The statement suggest the UK Government believes its proposals would themselves avoid a hard border meaning it could accept the preservation of the backstop on the ground that it will not be needed.

Could this open the door to agreement on an outline framework for a future relationship – and so a final Withdrawal Agreement and transition arrangement – sooner than previously anticipated?

9. Under the Chequers proposals, there would be strong reciprocal arrangements related to open and fair trade which would include a common rulebook on state aid and cooperative arrangements between regulators on competition.

Adopting broadly based alignment with the UK on issues such as state subsidies and anti-competitive agreements and arrangements would imply significant restrictions on the UK's ability to pursue a distinctive "British first" industrial policy. Will the UK look for any exceptions which would allow it a freer hand in specific areas?

10. The new relationship between the UK and EU would be supported by a "joint institutional framework" to ensure consistent interpretation and application the underlying agreements and this would be achieved "in many areas through binding independent arbitration".

Would the UK expect businesses (and individual consumers and employees) to have direct recourse to the anticipated dispute resolution mechanism (including binding arbitration) – allowing them to challenge UK or EU decisions - or will that operate solely on a "state to state" basis?

The answers to these, and other, questions will be essential to a meaningful assessment by business of the opportunities and challenges associated with the UK Government's policy statement meaning the publication of the White Paper later this week remains as important as the next stages of the political drama itself.



Back

Related content

Navigating the Negotiations - A Practical Roadmap

While the fallout from the result of the UK General Election continues, the Brexit process itself is due to enter a new phase, with formal negotiations between the UK and the EU scheduled to begin during the week commencing 19 June.

Brexit toolkit

Following the EU referendum in the UK, businesses around the world are assessing what impact Brexit could have on their operations and relationships in the UK, the EU, and internationally.