EU Exit Update - January 2020

As the UK leaves the EU and embarks on a transitionary period due to end on 31 December 2020, the BVRLA is providing regular updates to keep members aware of developments.

Monthly update for members on EU exit developments

Leaving the European Union

Since the election, the new government has moved to implement its manifesto commitment. MPs gave their assent to legislation needed to give legal force to the UK’s exit from the EU by January 31st.

The House of Lords is currently scrutinising the legislation and is expected to also pass this.

There are some key differences in the legislation reintroduced by the government after the general election, compared to the previous proposals that were rejected by MPs in October 2019. These differences could significantly alter MPs’ ability to shape the future direction of trade talks, which will officially begin after January 31st:

  • MPs can no longer require ministers to seek an extension to the transition period (February 2020- December 2020).
  • They can’t approve the terms of the Government’s negotiating mandate on trade talks with the EU.
  • Some additional checks on ensuring workers’ rights and environmental protections have been removed from the Withdrawal Agreement. This means that it is possible for a future government to change these via domestic law, once the UK leaves the EU.

The most important difference is that the government has proposed that no minister be allowed to seek an extension to the transition period, making it ‘illegal’ that this could be run on past the end of December 2020.

In effect, this ties the government’s own hands and creates extra pressure on both the UK and EU27 to agree a full trade deal in less than a year.

This has increased the risk of a disruptive exit from the EU at the end of 2020, and unless a sector specific deal for the automotive sector is agreed in time raises the odds of negative consequences for businesses as they may not know how the future looks until late in the day.

Trade talks with the European Union

The EU has confirmed that trade talks will not start before the end of February 2020.

Since the referendum in 2016, discussions between the UK and EU have focused on the terms of leaving, specifically how much money the UK should pay to fulfil its legal obligations, citizens’ rights and preventing a border between Northern Ireland and Ireland.

Of relevance to BVRLA and members is that the trade talks will cover bigger and wider issues: goods, services, public procurement, intellectual property, the ‘level playing field’ (referring to provisions on state aid, environment, labour laws and competition), as well as energy co-operation, transport and mobility (including travel) and data sharing. In addition, internal security will also be a major issue (policing and criminal justice).

The EU has started to hold several internal seminars on major aspects of the future trade talks, which give an indication of the areas it considers important. These seminars include a focus on transport & energy, financial services and data, and also on mobility of persons (labour).

The links to the slides from the seminar on the free trade agreement and on transport can be accessed via the hyperlinks.

On transport, the EU27 want ”comparable access for freight and road transport operators underpinned by appropriate level playing field considerations.” Those level playing fields considerations are focused on drivers and operators and also vehicles e.g. ensuring modern tachograph technology.

The EU27 has expressed concerns that the UK government may seek a harder Brexit since it is seeking to legislate to prevent a transition extension and has removed provisions on workers’ rights/environmental protections from the Withdrawal Agreement (which is a legally binding treaty).

Ursula Von der Leyen, the new EU Commission President who took over from Donald Tusk, has commented “We must ask ourselves seriously if all these negotiations are feasible in such a short time.

EU Trade Commissioner, Phil Hogan, accused Prime Minister Boris Johnson of Brexit “brinkmanship”, saying that his determination not to prolong Britain’s post-Brexit transition period beyond the end of the year had “unwisely” created a tight deadline for the EU and UK to broker a trade deal. 

Sajid Javid, the UK chancellor, said in an interview with The Financial Times, that “there will be no alignment with the EU. There will not be alignment, we will not be a rule taker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year.

The EU’s view is that the more there is a move away from the level playing field, then less access is possible into the EU single market.

As in the talks about the Withdrawal Agreement, it is the EU Commission and Michel Barnier who will lead the trade talks for the EU.

The government’s view is that it is possible to negotiate a trade deal before the end of the year. The Brexit department will be shut down after the end of January. The Cabinet Office will have lead responsibility for coordinating trade talks in the UK Government (called ‘Taskforce Europe.’).

One key date to look out for is July 1st 2020. This is when the UK and EU27 would need to agree any transition extension past December 2020. It is not clear if this date is set in stone in international treaty law though, so it may be possible to extend this.

But by July 1st, we will know if there is even higher risk of a hard Brexit and the possibility of tariffs or non-tariffs barriers in the automotive and other sectors. In the absence of a satisfactory automotive specific trade deal, the government will still need to help our sector mitigate new tariffs/non-tariff barriers, possibly in a second Budget during 2020, or as part of a three year Spending Review.

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