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News & Insights on Europe

News and Views on Europe – 4 May 2018

posted by eucentresg

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Brexit conundrum: customs union, Irish border and governance
Before the Brexit negotiating teams reconvened in Brussels Wednesday (2 May) for another round of talks, the UK’s Brexit secretary David Davis told a parliamentary committee that he has “no intrinsic objection” to the idea of an association deal between the UK and the EU similar to one the bloc has with Ukraine. The Ukraine association deal offers tariff-free access for goods and passports for services, and customs cooperation, with the requirements to align with the EU on competition, state aid, anti-dumping and public procurement rules. There is no freedom of movement of people but instead a system of visas and work permits. Ukraine also has the option of joining certain EU programmes, for example in science and research — something Britain has left open.

While Davis sounded somewhat favourable towards the prospect of a softer-Brexit, there seemed to be a split within the British government regarding the post-Brexit relationship with the EU. The British Prime Minister Theresa May reportedly received a 30-page ultimatum on Wednesday (2 May) from 60 parliamentarians led by Jacob Rees-Mogg who asserted that any customs union with the EU is unacceptable. Though Rees-Mogg denied the issuance of such ultimatum swiftly saying he is absolutely supportive of Ms May, he is known to be one leading hard Brexiteer who wants a clean break with the EU. He commands the support from international trade secretary, Liam Fox, the foreign secretary Boris Johnson and the environment secretary Michael Gove. On the other side of the argument, Chancellor Philip Hammond is said to be making the case for a customs partnership, in which the UK mirrors EU customs rules with some scope for differentiation. He is supported by business secretary Greg Clark and at least 12 Conservative MPs in the House of Commons who advocate soft Brexit.

Apart from the divisive debate on customs partnerships, two thorny issues persistently threaten to knock Brexit negotiations off-course. One as expected is the Irish border issue. On the one hand, the current official position of London is that Brexit means quitting the EU customs union. The leader of the far-right Democratic Unionist Party, Arlene Foster, also criticised the EU for not understanding their unionist culture. On the other hand, Brussels and Dublin say maintaining a customs union is the only way to avoid re-establishing a border between Northern Ireland and the Republic of Ireland. At stake, they say, is the 1998 peace accord that ended decades of strife. This huge gap led Politico to lament that “There’s little hope the UK’s. and Europe’s red lines on Brexit can be woven together into a compromise on Northern Ireland.”

While all eyes are on the Irish border stalemate, there’s another Brexit issue where the UK and the EU are miles apart: governance. The European Parliament had called for the creation of a “coherent and solid governance system” to oversee the Brexit process and the withdrawal agreement, with a mechanism for resolving any disputes that arise. The Parliament also insisted that the European Court of Justice should be involved at any point in the event of any legal disputes, that London disagrees vehemently. But apart from calling the proposal “judicial imperialism”, the UK has yet provided any counter-proposals for discussion.


European Commission released first draft of the EU’s post-Brexit budget for 2021-2027
On Wed (2 May), the Commission released its first draft of the EU Multi-annual Financial Framework for 2021-2027. This would be the first long term budget after Brexit. According to Commissioner Gunther Oettinger, the 2021-2027 long-term budget aims at the development of a modern financial system designed to address challenges through policies that maximize European added value. This financial framework boasts a new, modern, pragmatic twist in managing the Union’s different priorities. In light of the UK’s withdrawal, ongoing discussions focus on the development of the Own Resources Division, as well as the eventual cessation of the rebates mechanism. At the same time, the Commission continually strives towards upholding democratic values and the respect for rule of law based on a specific set of criteria, aiming to encourage its Member States toward abidance to the EU’s core values.

As expected, the draft budget drew different reactions from member states and stakeholders. Particularly, tensions revolve around the introduction of a new funds allocation criteria. The allocation criteria will be based upon principles such as youth unemployment, rule of law and the accommodation of asylum seekers in determining the distribution of funds. Consequently, this rebalances the budget allocation and seems to shift budget funds towards the South, much to the chagrin of Central and Eastern European countries. This implicitly seems to send strong signals at national governments such as Poland and Hungry, countries that have come under fire for violating democratic values, placing pressure on these states to abide by EU norms. Such tensions threaten to deepen the rift between two halves of the continent, spelling potential disharmony and mistrust.

Apart from growing divisions amongst Member States, developmental NGOs criticize the Commission for allegedly downgrading its developmental aid policy. Campaigners argue that the long-term budget reflects a reorientation away from regional development, accusing the EU as being overly invested on self-interests. In addition, a de-emphasis on the Union’s Common Agricultural Policy has sparked concern amongst farmers, as direct subsidies are projected to be cut, effectively retrenching a traditional focus on agricultural interests.

Moreover, in light of Brexit, existing Member States have to be prepared to provide additional financial support for new and existing priorities in order to make up for the shortfall in the UK’s national contributions. While countries such as France and Germany seem ready to commit, other countries do not seem as supportive. Heads of governments have also taken to various social media platforms, deeming the proposed budgetary plans to be unrealistic, and that a “smaller EU should mean a smaller budget!”. As further discussions proceed, it is hoped that the Member States will be able to reach an effective consensus. But this will probably only come after months of fierce debates.

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