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Focus on Regulation

This is the house that Brexit built

The new May Government has now been fully established and has begun getting to work. Judging by last week’s notable developments, foreign affairs is top of the agenda.

Brexit diplomacy: Good cop, bad cop?

The Prime Minister made her first official visits to Germany and France last week to meet Angela Merkel and François Hollande. The reception given to Mrs May by her respective counterparts suggests a possible direction of travel in terms of diplomatic relations between the leaders.

Mrs Merkel took a firm but patient tone in the joint UK-German press conference in Berlin:

  • On the timing for triggering Article 50, Mrs Merkel said it was “absolutely understandable” that the UK Government would need to “take a moment first to try to seek to identify its interests“. However, she stressed that EU rules prohibit formal negotiations with the UK until it triggers the commencement of the Article 50 process.

A good negotiating process and a sensible and constructive one is in all of our interests. So we will wait for the moment when the UK invokes this – and then we will put our guidelines on the table.

  • On the terms of the negotiation, Mrs Merkel did not rule out a future deal between the UK and the EU that combines free trade principles with some controls on immigration. She said:

We are listening to the UK, we are listening to Britain what it actually wants and then we will give the right response….

It is after all to our advantage to have the UK define its negotiating stance in great detail and clarity and if possible also to clearly outline how it sees its future relationship with Europe….

No one wants this to be up in the air. I don’t think British citizens do, nor do EU member states. But we all have an interest in this matter being carefully prepared, positions being clearly defined and delineated. I think it is absolutely necessary to have a certain time to prepare for that.

Mr Hollande did not seem so relaxed about the UK taking its time to trigger Article 50 and commence negotiations.

  • On the timescale for negotiations, he stated that:

For France, the sooner the better… It’s a mutual understanding that triggering this process should happen as soon as possible…. There cannot be discussions or pre-negotiations before the negotiations, but we can of course prepare these negotiations and we can understand that your government, that’s just been formed, needs this time.

  • On the terms of the negotiation, Mr Hollande was more robust than Mrs Merkel:

The UK today has access to the single market because it respects the four freedoms. If it wishes to remain within the single market it is its decision to know how far and how it will have to abide by the four freedoms.  None can be separated from the other. There cannot be freedom of movement of goods, free movement of capital, free movement of services if there isn’t a free movement of people.

The Prime Minister stood firm on the issue of triggering Article 50, saying that “the United Kingdom will not invoke article 50 until our objectives are clear… I understand this timescale will not please everyone but I think it is important to provide clarity on that now“.  She also announced that the Le Touquet agreement between the UK and France, whereby UK border checks are conducted in Calais, would remain, despite claims during the referendum campaign that it would be under threat in the event of Brexit.

She also remained unmoved on the issue of non-UK EU nationals resident in the UK. Mr Hollande announced in the UK-France press conference that “there is no doubt that French people who reside in the UK will be able to continue to work there and that the British people in France will be able to continue to work there and spend as much time as they wish”.  Mrs May did not reciprocate the gesture, neither id she contradict him.

Meanwhile, Mrs May also confirmed to the President of the European Council, Donald Tusk, on 20 July 2016 that the UK will not take up its scheduled Presidency of the Council of the European Union (also known as the Council of Ministers, as distinct from the European Council) in July 2017 because it “will be very busy with negotiations to leave the EU“.

These exchanges have arguably set the tone for the early stages of the diplomatic relations between the respective Governments, although the conversation is still very much at the “getting to know you” stage. Mrs May will be keen in her future exchanges to ensure that the UK’s relationship with its European neighbours does not become defined by (or even confined to) Brexit.  However, with General Elections due in 2017 in both Germany and France, each of Mrs May’s counterparts may well become pre-occupied with their own domestic pressures in the near future, including resisting anti-EU sentiment in their own electorate.  The response to these issues could have an effect on the German and French Governments’ respective negotiating positions on Brexit and even the future policy direction of the union that the UK would be negotiating to leave.

Unity and its discontents

On the domestic front, the Prime Minister has made a point of being seen to pursue a UK-wide approach to Brexit. After a visit to Scotland within the first few days of her Premiership, during which she stressed that “I won’t be triggering article 50 until I think that we have a UK approach and objectives for negotiations“, Mrs May stated on a visit to Cardiff on 18 July 2016 that she wanted Wales to be “involved and engaged” in the Brexit talks.

An early sign of such engagement by the constituent home nations of the UK came in the form of an “extraordinary summit” of the British-Irish Council held in Cardiff on 22 July 2016 – hosted by the First Minister of Wales, Carwyn Jones – to consider the implications of Brexit for Ireland and the UK.  It was attended by the First Minister of Scotland, Nicola Sturgeon, the new Secretary of State for Northern Ireland, James Brokenshire, representing the UK Government, Irish Taoiseach, Enda Kenny, First Minister of Northern Ireland, Arlene Foster and First Deputy Minister of Northern Ireland, Martin McGuinness, as well as government representatives from Jersey, Guernsey and the Isle of Man.

At the summit, Mr Jones argued that any future deal on Brexit should be ratified by all four UK Parliaments, “in order to get the greatest buy-in“.  He argued that the devolved administrations could not be “mere consultees” but that they should “very much be part of that negotiation“.  Mr Brokenshire stated that the UK Government was “in listening mode“.

Mrs Sturgeon stated that she broadly supported the suggestion made by Mr Jones that devolved Parliaments should ratify any trigger process. Mrs Sturgeon also indicated previously in the week that she would consider holding a new independence referendum in the second half of 2017 if necessary for the “best interests of Scotland”.  She has also said that she believes any independence referendum should take place before the UK leaves the EU.

Mrs May is due to visit Northern Ireland on 25 July 2016.

Free trade by the dozen

It is not only the Prime Minister that has been trying to sell the idea of a post-Brexit Britain abroad in the last week.

The UK, through the new Department for International Trade, has reportedly been in contact with 12 countries, including China, the US, Australia and Canada, in connection with the possibility of negotiating new trading relationships post-Brexit.  In theory, there is nothing stopping the UK from commencing informal trade negotiations with non-EU states now.  However, any resultant deals could not legally be signed until after the UK departed the EU and, in practice, the terms of any agreement with non-EU states (and therefore the negotiation of those terms) are likely to be influenced by the nature of the UK’s future relationship with the EU.  This suggests that potential counterparties to such trade agreements are more likely to want to wait until the Brexit negotiations progress before jumping into talks with the UK.

The Secretary of State for International Trade, Liam Fox, is reported to be working on the assumption that the relevant date for Brexit will be 1 January 2019 and has stated that this date could be brought forward if necessary. These assertions are in contrast to the comments made by the Prime Minister about taking time before triggering Article 50 – “not before 2017” – and ensuring the support (if not consent) of the home nations of the UK before proceeding.

Meanwhile, David Davis, the Secretary of State for Exiting the EU, said in an interview in The Mail on Sunday that he intends to take a tough line on pre-Brexit immigration: “We may have to deal with [a surge in immigration]. There are a variety of possibilities.  We may have to say that the right to indefinite leave to remain protection only applies before a certain date.  But you have to make these judgments on reality not speculation”.

Intra-governmental relations

These comments raise questions as to who in the UK Government will be taking the lead on Brexit on the international stage. The conventional wisdom appears to be that the Prime Minister has appointed pro-Brexit ministers to positions relating to the Brexit negotiations so that she can blame them if things go wrong.  This may well be true.  However, Mrs May’s announcement last week that she will be chairing a new Cabinet committee on Brexit suggests that she intends to take a close interest in the work of her three Brexiteers.

The Government Department that may find its role most affected is the FCO. Boris Johnson has had an eventful first week as the new Foreign Secretary.  Events in Nice and Turkey and a visit to Washington DC have meant he has had to jump into the role very quickly.  However, following the creation of two new Government Departments concerning Brexit and International Trade, respectively, the FCO’s role appears to be being redefined.  The Prime Minister announced, in a Written Ministerial Statement about the structure of Government Departments published last week, that the FCO would lose a number of key personnel to the Department for Exiting the EU.  Nevertheless, events last week suggest that there is still an important role for the FCO to play in promoting and maintaining the UK’s reputation abroad, particularly in relation to non-Brexit related matters.

In this context, the FCO must surely have welcomed the report of the Foreign Affairs Committee (the “FAC”) of the House of Commons, published on 19 July 2016, calling on the Government to commit to substantially increase resources for the FCO to boost its capacity in response to Brexit.

The report notes that the FAC had previously called on the Government to protect the FCO budget from cuts during the previous Government’s 2015 spending review and that it had reported in April 2016 on the possible implications of the referendum on EU membership for the UK’s role in the world.

The FAC report states that it:

  1. is “deeply disappointed by the Government’s apparent unwillingness to recognise the urgency and importance of equipping the FCO to manage the most significant re-adjustment of British foreign policy in over 50 years, including a period of intensive diplomacy“; and
  2. calls on the Government to “reverse the recent trend of downsizing [the FCO’s] operations in Europe” and to commit to “a substantial increase in funding available to the FCO commensurate with the enormity of the task it now faces. The FCO should be able to use this additional funding wherever in the world and in whatever capacity it deems necessary“.

In relation to reports that the FCO was expected to lose key personnel to the Department for Exiting the EU, the FAC also warned that “[w]hile it is essential that the Whitehall officials with relevant expertise are identified and put at the centre of managing the exit process, this cannot come at the expense of an already-overstretched FCO or it will threaten other aspects of the UK’s bilateral relations with some of its most important partners.