Brexit Briefing No.5

Another quiet week in the Brexit negotiations with all EU eyes focused on Jean Claude Juncker's annual state of the union speech to the European Parliament.

The state of the union concept doesn't work as well in Strasbourg as it does in Washington, mainly because the President of the Commission doesn't set the political direction of the EU, this is done by the member states. However the speech is a major EU set piece even though it rarely contains anything too radical.

This year's speech saw Mr Juncker focus on EU renewal post-Brexit, the main headline being his call for a single pan-European President combining the roles of Commission and Council President. He also called for a eurozone finance minister and further EU enlargement in the Western Balkans as well as expanding the schengen free movement area to Romania and Bulgaria. In fact so focused on the future was Mr Juncker that he only mentioned Brexit once in passing.

president juncker

 

At the end of last week the EU followed the UK's lead and published five position papers setting out the EU position on a variety of areas ahead of future negotiations. These papers were mainly aimed at addressing the immediate problems which will happen on the day after the UK leaves the EU. For example, how will British goods be treated if they have been imported into the EU before the 30th March 2019, but have not yet been sold by that date. In addition there are a number of other practical details, for example how to protect data that companies have collected prior to Brexit, currently this data has to comply with the EU Data protection rules but the EU fears that the UK could ignore these rules post brexit. Public procurement rules are another, in particular how to deal with ongoing tenders for public projects or contracts which have been awarded to EU companies in the UK before Brexit.

In general these papers propose that goods, services, data and intellectual property that have been generated before Brexit should continue to be governed by the EU rules until they have been exhausted. So for example if a British company shipped lots of cars to Europe in March 2019, they could all be sold tariff free in the EU after that date. Similarly data generated before Brexit should comply with EU rules until an adequacy agreement between the EU and UK can be agreed. This adequacy agreement would compel the UK to ensure data of Europeans is protected at least up to EU levels, as is the case with the EU-US privacy shield.

For public procurement the same demand is made, that existing contracts should be honoured and any tendering process or contract ongoing on the date of Brexit should continue under EU procurement rules.

These guarantee EU companies an equal opportunity to get the business as UK companies, and vice versa. However the reality of public procurement is much more subjective than that. For example in Air Traffic Control (ATC) German companies have won significant contracts at British airports, yet despite operating under the same procurement rules, NATS, the main UK provider,has not been able to win any contracts at German airports. The rail industry tells a similar story. Public procurement rules alone don't therefore guarantee equal access to markets.

However the most interesting EU paper was the one on intellectual property, mainly because it included a section on geographical indicators (GI's). The EU proposes to continue recognition of intellectual property rights post brexit if they were held prior to the UK leaving. However by defining GI's as intellectual property in the same paper the EU has inadvertently revealed one of its greatest weaknesses in these negotiations.

parma ham

GI's are normally a key EU demand in any trade negotiation. They relate to agricultural products such as champagne, Parma Ham and Melton Mowbray pork pies. However they are controversial because they undermine the system of trademarks which operates in much of the rest of the world. For example champagne has to be produced in the champagne region of France. Coca Cola for example can't come in and buy the name and start producing it in California. As a result many other countries think they are a protectionism mechanism designed to protect European monopolies and to stop other countries getting into the market.

The EU has to work very hard and expend significant political capital in trade deals to ensure that other countries agree to them. Normally the EU gives away a lot in return for recognition of GI's. Although the UK has developed some GI's we are nowhere near as focused on the system as many EU countries, and this worries the EU.

In addition, GI's are not normal intellectual property, they are squarely related to the future trade deal. To demand the issue is addressed now and not in the future trade negotiations undermines the EU's own stance of only negotiating the future trade deal once the UK has agreed to pay a divorce bill and addressed the citizens rights issue.

So the EU's papers are full of contradictions, this can clearly be seen with their paper on Ireland which also came out this week. In it the EU makes it clear that it wants special rules for Northern Ireland which ensure no hard border, Ireland remaining in the single market and customs union and that any solution here can't be used as the basis of the rest of the UK trade deal. In other words it wants the UK/EU border to be in the North Sea. As I explained in a previous blog (https://www.danieldaltonmep.co.uk/news/brexit-briefing-no3-ireland) this will not be acceptable to the UK in any situation.

So the EU's papers do not move us along very far. If anything they highlight the need for negotiations on the future trading relationship to start as soon as possible, because until they start both sides will continue to posture and to make unrealistic demands.

Some have suggested that the UK positions are not realistic, but judging by the EU papers released this week the EU is being just as unrealistic. All the issues of what happens immediately after Brexit, can be solved if the future trading relationship is agreed, yet it appears that it will be some time before these negotiations even start.