May proposes a soft Brexit on goods and a hard Brexit on services

(FILE) - Jars of popular savoury spread 'Marmite are for sale in a branch of Tesco in central London, Britain, 13 October 2016 (re-issued 15 March 2018). Unilever on 15 March 2018 said they have decided to move its corporate headquarters from Britain to Netherlands. EPA-EFE/HANNAH MCKAY

May proposes a soft Brexit on goods and a hard Brexit on services


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Theresa May is proposing a hard Brexit for services and a soft Brexit for goods.

The White Paper commitment

The British government published on Thursday a so-called “White Paper,” that is, a consolidated negotiating position on how London envisions its relationship with the 500-strong Single Market after it leaves the EU.

Critics have long said that London has been negotiating with itself, as Theresa May has been struggling to form a single position on Brexit that brings onboard hardline leave campaigners and those seeking to maintain the status quo in economic ties the UK harnessed over the last 45 years of EU membership.

The vision put forward last Friday is now formalized. Seen and treated as a mere formality, the new Brexit Secretary Dominic Raab presented the paper in parliament without distributing a copy of the policy to MPs in advance.

It’s there in black and white

For those that did read the paper – in advance or after its formal release – it presented few surprises.  The main idea is a soft Brexit in goods and a hard Brexit in services.

The UK government proposes a common regulatory framework and a customs’ “combined area,” although a big conceptual gap remains as to how VAT tax collection will be organized.

The proposal also envisages the UK maintaining some sort of Associate membership in key regulatory agencies that set standards in the chemicals, aviation and medicines. The issue is whether this will be possible without a common normative foundation.

In this scheme, Theresa May hopes for a practical and business-friendly Brexit that will not trigger the loss of blue-collar jobs. Over the last two weeks industrial behemoths such as Airbus, Nissan, Land Rover, BMW, Siemens had been warning that the breaking up of pan-European value chains was pushing them out of the UK.

Equally significant is that this plan seems to receiving a nod in Dublin, which means the UK is closer to retaining open borders – and peace – in Northern Ireland.

On services, the main scenario is a hard Brexit based on the concept of “equivalence,” which provides unreliable access to the Single Market based on mutual recognition of standards that can be revoked. For over a year, major lenders, consulting groups and insurers have been setting up officers in a series of cities across Europe to retain so-called “passporting rights.”

As regard to the “freedom of movement,” the UK aspires to freedom of movement for tourists, controlling migration for business purposes.

The red line on the European Court of Justice jurisdiction has been somewhat blurred, as UK tribunals will consult EU case law. However, London insists on international arbitration rather than ECJ jurisdiction.

Half-Empty versus Half-full reactions

No stakeholder is entirely satisfied with the White Paper: some MPs and the service sector express dismay; hardline Brexiteers express outrage; EU leaders reserve the right to express their opinion after they have properly considered the proposal. Meanwhile, Theresa May is back on thin ice.

Following the resignation of the Brexit chief negotiator David Davis and the foreign secretary Boris Johnson on Monday, hardline backbenchers are now taking the lead in calling into question the legitimacy of May’s compromise.

The influential Eurosceptic MP Jacob Rees-Mogg said on Thursday that the paper sets out a “bad deal for Britain.” Taking a step further, Rees-Mogg will try to amend government legislation next week, so as to ensure that Northern Ireland cannot have a separate trade regime than the rest of the UK.

The former Conservative leader Iain Duncan Smith said the plan means the UK will “half leave” the EU.

May reiterated that the plan delivers on the promise to “take back control of our money, our laws and our borders.”

Opposition MPs called for a closer union with the EU, with Labour drawing close to a Norway type deal, while some campaign for a second referendum.

Brussels appears to be responding positively. Both Michel Barnier and Guy Verhofstadt welcomed the UK’s proposal. However, neither of them commented on policy detail.

In any event, the White Paper has been reportedly been drafted with the consultation of EU leaders, including Chancellor Angela Merkel. Chancellor Merkel has made no comment on the subject.

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