The Political Declaration – a commentary

There were two provisional agreements which Mrs May settled with the European Union: the Withdrawal Agreement has been much discussed; the second was the Political Declaration. The Political Declaration should be less contentious, but it is this agreement which will be of more importance in the longer term, as this is the agreement which will guide the shape of a permanent free-trade agreement between the United Kingdom and the European Union.

The Political Declaration is far, far shorter than the Withdrawal Agreement, at just 26 pages, which by EU standards is barely a note. It is of course complex it its construction, with each Part divided into headed Sections, and each subdivided in turn into headed Sub-sections, and further divided into paragraphs. The five main Parts are:

  • Initial Provisions;
  • Economic Partnership;
  • Security Partnership;
  • Institutional and other Horizonal Arrangements;
  • Forward Process

Part I: Initial Provisions

I. Basis for co-operation

The Declaration proposes that the United Kingdom will agree to continue to be bound by the European Convention on Human Rights and that the European Union by the Charter of Fundamental Rights.

Second comes data protection, and requires no commitment to a shared regime, the Declaration expects each side to assess the other’s data protection laws with a view to approving the other for data transfers, as in the EU’s current “Third Country” rules.

II. Areas of Shared Interest

The door is opened to British voluntary participation in EU programmes and European Research Infrastructure Consortiums. Particular mention is made of shared programmes for the peace programme in Northern Ireland.

There is also a steer to the two sides’ engaging in ongoing dialogue ‘in areas of shared interest, with the view to identifying opportunities to cooperate, share best practice and expertise, and act together’ (looking at culture, education, science and innovation). There is no obligation to open freedom of movement, but a recognition of ‘the importance of mobility and temporary movement of objects and equipment’, though it does not mention people. Since free trade in goods is an aim, this seems hardly innovative.

Part II: Economic Partnership

I. Objectives and Principles

Here we find the key aim: the Parties agree to develop an ambitious, wide-­‐ranging and balanced economic partnership. This partnership will be comprehensive, encompassing a free trade area as well as wider sectoral cooperation where it is in the mutual interest of both Parties. It will be underpinned by provisions ensuring a level playing field for open and fair competition’ that ‘should facilitate trade and investment between the Parties to the extent possible, while respecting the integrity of the Union’s Single Market and the Customs Union as well as the United Kingdom’s internal market, and recognising the development of an independent trade policy by the United Kingdom beyond this economic partnership’.

This then is a letter of intent looking forward to the creation of a free trade relationship across the Channel. It does not require a customs union, and implicitly rules one out: the United Kingdom is to develop an independent trade policy outside Europe. This then in close in concept to the ‘Canada +’ model that has been discussed. (The EU’s treaty with Canada is a ‘CETA’: Comprehensive Economic and Trade Agreement.)

There would need to be ‘place of origin’ rules for this to work, as in the Canadian agreement, to ensure that British goods can be traded freely to Europe and vice versa without the Europeans being forced to allow free access to American goods (for example) that they would otherwise have taxed.

II. Goods

Specifics of the above for the movement of goods: a free trade area and co-operation in systems to allow frictionless free trade.

However, contradicting those observations, Sub-section B (‘Tariffs’) states :

The economic partnership should ensure no tariffs, fees, charges or quantitative restrictions across all sectors, with ambitious customs arrangements that, in line with the Parties’ objectives and principles above, build and improve on the single customs territory provided for in the Withdrawal Agreement which obviates the need for checks on rules of origin.

How that could work without a customs union is uncertain.

There follow statements about co-operation in regulatory matters, including an intention to follow international rules in order to ensure there is sufficient mutuality to allow free trade without full regulatory alignment.

III. Services and Investment

Services and investment are to be included in free trade, so as to deliver “a level of liberalisation in trade in services well beyond the Parties’ World Trade Organization commitments and building on recent Union Free Trade Agreements’.

This includes the principle of non-discrimination. (Even within the European Union it has been nigh-on impossible to stop French regulators in particular from favouring their own companies: some work is required here, but the principle is sound.)

IV. Financial Services

Clearly financial services are a vital part of British trade but also, and it is not certain that the negotiators realise this, access to British financial markets is vital for foreign businesses needing finance Financial services are therefore to be included. It is not so solidly written though: the Declaration notes that there is current regulatory alignment and proposes ongoing co-operation in the mutual interest.

There is though no guarantee of continued mutual recognition, as regulatory regimes diverge (as they must – Britain in default has a liberal regulatory regime while European countries are readier to interfere. The Paragraph 39 talks of ‘transparency and appropriate consultation in the process of adoption, suspension and withdrawal of equivalence decisions, information exchange and consultation on
regulatory initiatives’. This appears to be the best that could be achieved consistent with continuing light-touch regulation.

V. Digital

Provisions on digital free trade and co-operation in regulation and competition rules are here, but the provision is cleverer than just trying to look at the ever-transmuting electronic world: it is actually about acceptance of business done and agreements made electronically.

VI. Capital Movements and Payments

Free movement of capital and payments are to be included.

VII. Intellectual Property

One of the key points from Day 1: recognition of intellectual property. This is written into the Withdrawal Act already. It is a necessity for trade, and what is proposed goes no further than the provisions Britain accepts worldwide in any case. Paragraph 44 says the parties should go beyond what the WTO requires; there seems little doubt that this would be extended unilaterally in any case.

VIII. Public Procurement

This has been a troublesome area politically, but should not have been: it may sound populist to allow public authorities to choose locally first but from the customer’s and tax-payer’s perspective, the cheapest is best, wherever the successful tender comes from. The detailed free trade agreement emerging is likely to have some detailed provisions on non-discriminatory public procurement, allowing British companies to tender for foreign contracts equally with locals, and for foreign companies to tender here, but the declaration for now just talks of WTO standards.

The complaint against EU procurement rules has been the burdensome bureaucracy involved. It will be for the government to ensure that rules can work without the red tape.

IX. Mobility

Another key issue has been ending free movement. The Political Declaration does not reinstate it, but it does seek to agree there should be rules on mobility, including:

  • Visa-­‐free travel for short-­‐term visits.
  • Conditions for entry and stay for research, study, training and youth exchanges.
  • Consideration of social security coordination.
  • Any provisions to be without prejudice to the Common Travel Area with Ireland.
  • Continued co-operation with the Hague Convention and international arrangements on matrimonial and child custody proceedings.

X. Transport

Aviation, roads, railways: co-operation to ensure all continue smoothly. Sea navigation: to include continued co-operation on safety and coastguard services.

XI. Energy

Interconnectivity, non-discrimination in energy markets, a commitment to safety and non-proliferation in nuclear energy, and with a framework for exchange of information with Euratom in areas of mutual interest.

Carbon pricing is also mentioned as an area for co-operation, and a possible linking of the British greenhouse gas trading system with that of the European Union. That does not require that such a trading system be maintained (on wither side) though.

XII. Fishing Opportunities

This is a big issue. The perception that foreign boats are plundering British waters was one major issue in the referendum campaign and a reason that fishermen overwhelmingly came out for ‘Leave’ at the referendum. If foreign boats are permitted to continue to fish British waters, these communities will feel abandoned.

The first paragraphs of this Section concern co-operation to conserve fishing stocks, which is unarguable as fish do not carry passports and shoals move between the waters of many states.

The stinger is in paragraphs 75 and 76:

75. Within the context of the overall economic partnership the Parties should establish a new fisheries agreement on, inter alia, access to waters and quota shares.

76. The Parties will use their best endeavours to conclude and ratify their new fisheries agreement by 1 July 2020 in order for it to be in place in time to be used for determining fishing opportunities for the first year after the transition period.

(I should be said that this was written in the context of the Withdrawal Agreement, which would have provided for a transition period to 2020.)

There is no demand for French and Spanish boats to be given access to British waters, but it is strongly suggested, and if it is refused, there could be some difficulty getting the French and Spanish governments to sign a trade deal.

Another affected party is Denmark: Danish boats have been permitted to fish in British waters long before there was a European Community. It seems they will now be cut out.

Another wrinkle is Rockall: a lone uninhabited rock in the wild Atlantic belonging to the United Kingdom and therefore putting a gigantic bulge in our exclusive economic zone, from which Irish and Danish fishing boats will be excluded. The current system limits their access to the zone already hence a territorial dispute over Rockall with Denmark, Ireland and Iceland, each denying either British sovereignty over the island or claiming that by international law such a rock cannot form an exclusive economic zone.

XIII. Global Co-operation

A provision for global co-operation generally and in certain fields seemed trivial when written, but it may also be seen as an unnecessary interference.

There is to be a specific requirement to implement the Paris Accords and international conventions on action to tackle climate change. As the science develops, there may be a need unilaterally to reassess the effectiveness or even counter-productivity of such measures.

XIV. Level Playing Field for Open and Fair Competition

The trade agreement should cover:

  • State aid,
  • Competition,
  • Social and employment standards,
  • Environmental standards,
  • Climate change and
  • Relevant tax matters.

State aid and competition rules are to be expected. Although state aid rules in particular have been a way to kick the EU in the past, there is no free competition if some companies are subsidised from taxpayers’ money. State aid restrictions are becoming standard in international trade agreements. Within the EU system, the Commission has been willing to grant exemptions rather freely in favour of French companies, but if the ban on state aid is in an international trade treaty, it should be easier to hold them to it.

The final four elements are more problematic. Burdensome social and employment rules have beggared European economies and caused mass unemployment, and lower wages for those in employment. One prize of escaping EU rules was to have been further deregulation according to Britain’s own needs and practices.

Again, environment rules are hard to justify as relevant to an international trade agreement. They do tend to get shoe-horned in, perhaps out of virtue-signalling

Tax is a potential issue. If it simply means co-ordination so that VAT can be reclaimed across borders, as at present, or to co-operate to avoid double-taxation or tax loopholes , that is helpful. If it is yet another attempt to force tax harmonisation, that is repugnant. As Daniel Hannan once asked in the European Parliament: when politicians talk about harmonising tax rates, when have they ever mean harmonising down?

Part III: Security Partnership

I. Objectives and Principles

(Co-operation between authorities in fighting crime, with all the fashionable headings added.)

II. Law Enforcement and Judicial Cooperation in Criminal Matters

This is sketchy in its scope, allowing for substantial co-ordination or very little. Paragraph 84 specifies three areas of co-operation: data exchange; operational cooperation between law enforcement authorities and judicial cooperation in criminal matters; and anti-­‐money laundering and counter terrorism financing.

The three areas are then set out in more detail in sub-headings. It is clear in Paragraph 89 that the European Arrest Warrant procedure is anticipated. It is softened though: the paragraph only refers to the “possibility” to waive the requirement of double criminality. (Double criminality is a principle of extradition rules, which states that no one may be extradited to a foreign state unless the act for which they are sought is a criminal offence in both countries. That does not apply to the European Arrest Warrant: a suspect can be arrested and sent abroad for something that would not be a crime in Britain.)

A compromise procedure might be to agree that authorities in the European Union may direct the arrest of their own citizens in Britain under the European Arrest Warrant but not British citizens, and vice versa. However that it no more than speculation.

III. Foreign Policy, Data and Defence

Foreign policy co-operation is a general goal. It shoe-horns in an obligation to implement the United Nations Sustainable Development Goals and the European Consensus on Development. These can change: it is not certain if the United Kingdom must go along with any new “consensus”, but the best interpretation is “no”.

Of more interest is the provision in subheading C anticipating voluntary participation in European Union missions, including specifically military missions.

There is a section about co-operation in defence development. As the EU does not yet have an army, this may give too much of their game away.

Space: “The Parties should consider appropriate arrangements for cooperation on space.” That’s it.

IV. Thematic Co-operation

Themes are revisited, with little of interest added. It all treats the European Union as the counterparty state though most of the areas covered are matters for the member states so the future agreement will have to be with the Union and with each member state. This is quite standard for European Union treaties.

V. Classified and Sensitive Non-Classified Information

There is to be Security of Information Agreement: understandable as sensitive information is to pass between them.

Part IV: Institutional and other Horizonal Arrangements

I. Structure

Nothing is laid down for certain as to the institutional structure of the future relationship. An “overarching institutional framework” is anticipated, which one might read as “a large bureaucracy”. It is said that it “could take the form of an Association Agreement”.

II. Governance

“In order to ensure the proper functioning of the future relationship, the Parties commit to engage in regular dialogue and to establish robust, efficient and effective arrangements for its management, supervision, implementation, review and development over time, and for the resolution of disputes and enforcement based on the arrangements provided for in the Withdrawal Agreement, in full respect of their own legal orders.”

Detail set out in the following sub-headings does not give much detail, beyond having a “Joint Committee”.

Dispute resolution however is of more relevance, since ending the jurisdiction of the Court of Justice of the European Union was a key issue for Brexit. In the even, this sub-section appears to follow international standard practice: discussion, negotiation, then referral to independent arbitration. Some eyes may be raised at a provision for referral t the CJEU: in fact this refers only to points where an interpretation of European Union law is needed, not to determining a dispute itself.

In case of enforcement, where the arbitration panel makes a determination, either side may impose “proportionate measures” (retaliation in short) if the loser of the case does not abide by the decision.

III. Exceptions and Safeguards

A Party may “activate temporary safeguard measures that would otherwise be in breach of its commitments in case of circumstances of significant economic, societal or environmental difficulties”, and the other side may make balancing arrangements.

Part V: Forward Process

I. Before Withdrawal

There is little time to run before withdrawal, and the Agreement might only be finalised after withdrawal, which was not anticipated when the Political Declaration was drawn up.

It requires preparatory organisation work: this has in the event been done.

II. After Withdrawal

Following Brexit, immediate negotiations should begin for the free trade agreement and other agreements anticipated in the Political Declaration.

III. Review Points

The final three lines of the Declaration:

The Parties will convene a high level conference at least every six months from the date of the United Kingdom’s withdrawal from the Union to take stock of progress and agree, as far as is possible between them, actions to move forward.

See also:

Books

Beyond Brexit:

On the Brexit campaign and the referendum:

Others: