Brexit and Parliament: A Second Capitulation or Sovereignty Regained?

The judiciary has spoken, most clearly. Parliament must authorise the triggering of Article 50, in essence because it failed to spell out the legal effects of the referendum in the EU Referendum Act 2015. If it had done so, the Miller litigation would not have been necessary.

The judgments in Miller are orthodox and, frankly, unremarkable as to their outcome. A different result could only have been reached if the judges had chosen completely to disregard the nature and effect of EU law, as endorsed by the European Communities Act 1972 and all relevant subsequent legislation. The size of the majority confirms the degree of orthodoxy: all three (very senior) judges at the Divisional Court and eight out of eleven Supreme Court justices. The reasoning of the majority is unitary, meaning that the argumentative road to their ruling was uncontested. The dissent of Lord Reed is built upon a reading of the ECA which implies that, in 1972, Parliament was wholly agnostic about EU membership, and adopted this statute merely for the purpose of enabling the Government to opt for EU membership for as long as that Government saw fit. Parliament as the handmaiden of the executive. This may be a recurring political fact even in the most vibrant liberal democracies, but, with greatest respect, to construct constitutional case law on it undermines the proper balance between the executive and parliaments, and representative democracy as we know it.

For an EU lawyer the need for a parliamentary decision on triggering Article 50 is wholly unremarkable. All EU Treaties and all accessions have been approved by the parliaments of all Member States, as a condition for their entry into force. The term “in accordance with its constitutional requirements” in Art 50(1) is also used in the Treaty provisions on amendments and accessions. If anything, the legal road to the bare finding that Parliament needs to pull the trigger would have been even straighter if the terms of Article 50 had been put at the centre of the argument. It speaks of a “decision” to withdraw, notification of which is a purely procedural device. Who else, in a system whose alpha and omega are the sovereignty of Parliament, could take such a seismic decision than Parliament itself? The politically contested nature of the Miller litigation finds its origin in the fact that Parliament (and the Government) pretended that it was for the people to take that decision, in a referendum, but did not lay this down in any statute. Parliament’s first capitulation.

The question now is what Parliament will do with the sovereignty it has regained. The Miller litigation was imprecated with the mantra of the clear distinction between law and policy. Litigants and judges were adamant that the issues were purely legal, and had nothing to do with the politics of Brexit – no doubt in order to shield themselves from excessive public contestation. The somewhat unfortunate side effect is that the rulings went no further than confirming the bare need for a statute, and refrained from saying anything else about the role of Parliament in the Article 50 process. The result is a two-section Bill that is wholly confined to the notification of the intention to withdraw. Nothing about any further Parliamentary involvement.

The judges could perhaps not have been expected to say more, but the distinction between law and policy is not as neat as they portray it. Clearly, it is possible – and indeed desirable – to reflect about the proper role of Parliament in a treaty-withdrawal process as momentous as Brexit, and to do so in a constitutionally principled way. The very referendum debate showed the strong desire to confirm domestic representative democracy in the face of EU (and international) competence creep. The Brexit negotiations are a great opportunity for strengthening the involvement of parliaments in international negotiations. They are not just about international matters, but about the rights and obligations of citizens, and about domestic policies across the whole spectrum of the public realm. They are “about legislation” (a concept coined by the former German Constitutional Court judge Lübbe Wolff in Current Legal Problems). When I say parliaments I mean, at a minimum, both the UK Parliament and the European Parliament. In light of the referendum debate, which expressed the deep democratic concerns of voters, it would be paradoxical in the extreme for the future relationship between the UK and the EU to be determined through a wholly outdated intergovernmental negotiation process that is far worse, in democracy terms, than the ordinary process of EU law-making.

In that context, there is an imperative need to debunk the myth of executive superiority to negotiate the “best deal” for the UK. The Brexit negotiation spectrum is so wide that overall cost-benefit balancing is impossible, on either side. What constitutes the “best deal” involves political decisions, on issues as diverse as the future trade relations; cooperation in regulatory matters ranging from the environment and food safety over financial services to intellectual property; criminal justice cooperation; migration; etc etc. Those decisions ought to be subject to proper democratic deliberation, if control is really to be taken back. To lump them all together in a big negotiation exclusively governed by executive decision-making behind closed doors is an affront to representative democracy – to parliamentary sovereignty, in other words.

So Parliament cannot capitulate again. It simply needs to get involved with the Brexit negotiation. However, the most important question is what happens at the end of the negotiation? It is true that Mrs May has promised that Parliament will have a vote on the “final deal” (the withdrawal agreement). But the reading of Article 50 which all actors appear to adopt seems to give Parliament a mere nuclear option of either accepting the agreement, or voting it down, with in the latter case no time to renegotiate: a fall off the Brexit cliffs. This reading of the two-year deadline must be resisted. EU law recognises the principle of representative democracy (Art 10 TEU – there are advantages to a written “constitution” expressing constitutional principles). This can be argued to mean that the relevant actors have to allow the Parliament to say no, followed by renegotiation. This could be done by reading Article 50 in such a way that the signature of the withdrawal agreement stops the clock. The withdrawal agreement itself could provide for such a mechanism; or it could be done by way of a European Council decision extending the Article 50 deadline.

It would clearly be preferable for these questions to be considered by the UK Parliament at this very point in time, when it is authorising the Government to trigger Article 50. Further capitulation to the Government is not a proper response to the democracy concerns which the referendum expressed.

 

Miller and the Art 50 notification: revocability is irrelevant

It befits even academics to change their mind, on careful consideration and reflection. Along with many others I have thought for some time that the Miller litigation turns on whether the Art 50 notification is revocable or not. If the Government can, at any point, inform the EU that the Brexit process is discontinued, then its act of starting that process does not directly interfere with the rights which the European Communities Act (ECA) incorporates in UK domestic law. It is this alleged interference which takes the Art 50 notification outside the sphere of the Crown prerogative: the Government cannot use the prerogative to interfere with acts of Parliament.

It is well known that in Miller the Government has accepted that the notification is irrevocable. As there was agreement on this with the claimants, the High Court did not examine the point (see paragraph 10), and assumed that both parties were right. But there is speculation on whether the Government will modify its position in the appeal proceedings. This gives rise to intense speculation, reaching even the BBC, about a possible reference to the European Court of Justice (ECJ). The Supreme Court is obliged to refer questions of EU law, of relevance to the proceedings before it, to the ECJ, unless the meaning of the relevant provision is clear (“acte clair”). Art 50 is anything but.

This blogpost does not examine whether the Art 50 notification is revocable or not. Instead it argues that, for the Miller litigation, this does not matter.

The High Court judgment is principled. Its foundation is general UK constitutional doctrine, reaching back several centuries, about parliamentary sovereignty, and its genesis and evolution as a fundamental brake on the unilateral powers of the Crown. Against that canvas, the High Court examined whether the power to notify withdrawal from the EU rests with the Government, or with Parliament. In doing so, it conflated the decision to withdraw (Art 50(1)), with its notification (Art 50(2)) (paragraph 16). For the judges it was immaterial to focus on one or the other, as, on the facts of the Brexit process, the notification will encompass the decision to withdraw – there is no separate, prior decision, at least not in legal terms.

All of this matters because it shows that the High Court ruled that the decision to withdraw from the EU (not just the notification) is not for the Government, but for Parliament. The sovereignty of Parliament demands this. That I think is critical. The question in Miller is not about what can or cannot happen in the further Brexit process. It is about who has the authority to decide on Brexit in the first place, in light of the unwritten constitution. How could that be affected by the question whether the notification, once given, can be revoked, and Brexit consequently halted? Such a revocation would be a further act, which could trigger its own set of questions about the division of powers. Imagine, hypothetically, that Parliament decides that Brexit must go ahead, and that the Government, before the end of the two years, withdraws the notification contrary to Parliament’s will. Or that the Government notifies, without first going to Parliament, and Parliament subsequently seeks to reverse the process. These are all distinct issues.

The latter hypothesis sheds further light on why revocability does not matter. Those who consider that it does, point to the fact that revocability means that Parliament can always halt the Brexit process. Nothing definitively happens with notification. But how relevant is this for the Brexit division-of-powers question? No one argues that Parliament cannot limit the prerogative of withdrawing from an international treaty. All are agreed: parliamentary sovereignty means that Parliament can make any laws, and that such laws can always limit or cancel certain types of prerogative powers. So to say that, if notification is revocable, this means that Parliament can always intervene does not answer the question whose power it is to decide on Brexit in the first place (compare with Miller, paragraph 64). All revocability does is to make the Brexit process as such less definitive upon notification.

But, my critics will say, all of this does matter. If the Government notifies, negotiates a withdrawal agreement, and brings this before Parliament to be ratified, Parliament simply has a chance to stop the whole process – provided the notification can be revoked. The Government has said, including in the hearing before the High Court, that the withdrawal agreement will need to be ratified (see here). So Parliament can always stop Brexit.

Except that it cannot. Withdrawal is not like accession or treaty change. Any accessions or changes to the founding treaties can only enter into force upon acceptance by all Member States, in accordance with their constitutional requirements (Arts 48 and 49 TEU). Remember the Constitutional Treaty, voted down by the Dutch and the French in referenda, and that was that. The withdrawal agreement is not set up in this way. Art 50(3) is clear: if there is no withdrawal agreement within two years, Brexit ensues. So the Government might fail to find an agreement with the EU, and there would then be no Parliamentary approval phase. Or the Government might put an agreement before Parliament, and Parliament could reject it, and still Brexit would go ahead: there would effectively be no duly approved withdrawal agreement, and the two-year period would do the trick (see Miller, paragraph 14). It is only if the withdrawal agreement provides that actual exit is conditional on the UK Parliament’s approval that Parliamentary sovereignty would not be affected by the notification. Now the Government might try to negotiate such a clause, but there are no guarantees, at this point in time, that the EU would ever agree; nor that the Government will be inclined even to ask for this.

So to sum up:

  1. It is no answer to say that, if the notification is revocable, Parliament can always force the Government to stop Brexit. This the Parliament can do on any understanding of the scope of the royal prerogative.
  2. It is no answer to say that the withdrawal agreement will be put before Parliament. There may simply not be such an agreement, and Parliament could do nothing about that. If there is an agreement, and Parliament rejects it, that does not stop Brexit from happening.
  3. It is no answer to say that the withdrawal agreement could provide that Brexit is conditional on the UK Parliament’s approval. This would need to be negotiated by the Government, and agreed by the EU. It is not in Parliament’s control.

The conclusion is that the revocability of the Art 50 notification does not matter for the fundamental question now pending before the UK Supreme Court. This also means that no reference to the ECJ is called for.

The remarkable Government case in the Art 50 litigation

It is now about a week since the hearings concluded in the litigation, before the High Court, on whether the UK Government can trigger Art 50 TEU, or whether instead an Act of Parliament is required. The transcript of the hearing makes for fascinating reading. We will have to see what the judges decide, but I cannot refrain from making the point that the Government’s case is weak. Government lawyers are of course confined in what they can argue, and what not, by what their client, i.e. politics, wants. It seems like the client has not dealt them a good hand. For the Government’s case is built around a set of propositions which are in huge tension with one another. They are:

  1. The 2015 Referendum Act, which organised the referendum, did not confer on the Government the power to trigger Art 50. At most, it did not disturb a pre-existing power (the Royal Prerogative).
  2. The Art 50 notification cannot be revoked. In the words of Lord Pannick QC, once the bullet has left the gun it will definitely hit the target: exit after 2 years, or at such time as the withdrawal agreement enters into force.
  3. The Government can make treaties and withdraw from them. But for there to be effect in domestic law of either the making a treaty, or withdrawing from it, Parliament must be involved. This last proposition is confirmed in the following, fascinating exchange between the Lord Chief Justice and the Attorney-General, acting for the Government:

“THE LORD CHIEF JUSTICE: I think, sorry, if I understood my Lord’s question, you accept that if the government wanted to amend the treaties or withdraw from them so that effect was given to withdrawal in domestic law, there would have to be an Act of Parliament.

THE ATTORNEY-GENERAL: Yes.

THE LORD CHIEF JUSTICE: Whether it is amending or withdrawing, it doesn’t make any difference.

THE ATTORNEY-GENERAL: Yes.

THE LORD CHIEF JUSTICE: I think that was the point. It is the effectiveness in domestic law. There is no difference between amending and withdrawing, you have to have a statute?

THE ATTORNEY-GENERAL: Yes, in order for there to be an effect in domestic law we accept that Parliament’s involvement would be necessary.”

At the end of this exchange the Attorney-General confirms that Parliament’s involvement would be necessary to give domestic effect to Brexit. In other words, the Government could negotiate a withdrawal agreement, but such an agreement could take effect in UK law (much like the conclusion of a new treaty) only if Parliament legislated to such effect. But this is contradicted by proposition (2). That proposition accepts that, once the trigger has been pulled, withdrawal is outside the Government’s control. It will happen, whether the Parliament legislates or not. Crucially, this includes the effect in domestic law. The UK cannot, in its domestic law, keep all extinguished EU membership rights and obligations alive. That is so, quite simply, because at least some of those rights and obligations require membership, and the cooperation of the EU institutions and other Member States. Just one example: UK citizens will no longer be able to vote for the European Parliament, after withdrawal, and it is wholly irrelevant whether the UK Parliament leaves such a right on its statute book or not.

In the Government’s case withdrawal is therefore completely different from the law and practice of negotiating and approving new EU Treaties (or amendments to them) – contrary to what it claims. That law and practice is such that a new Treaty cannot enter into force unless it has been ratified by each member State in accordance with its constitutional requirements (i.e. approved by its parliament): see Art 48 TEU (there is a simplified revision procedure, but even that allows national parliaments to block). The logic is that the EU does not finally agree new rights and obligations until all national parliaments have approved them, and incorporated them into domestic law. So the logic of the prerogative not interfering with domestic legislation is fully respected for the negotiation of new treaties. But for withdrawal the Attorney General effectively argues the reverse: the UK Government can decide on withdrawal, including its inescapable domestic effect, and it doesn’t need Parliament’s approval.

Proposition (1) is relevant because it means that the Government is not arguing that the 2015 Referendum Act conferred a power on it to give effect to a negative referendum result, by triggering Art 50. So Parliament never authorised the triggering, and it cannot, once the bullet has left, undo withdrawal, either at the international plane or at the domestic level.

I cannot see how these three propositions could be reconciled. The most remarkable one, from the perspective of the Government’s case, is the second. If the Government argued that the Brexit bullet can be pulled back to the gun – in other words that the UK Government could always revoke the notification – there would be a much stronger case for the exercise of the prerogative, as many have noted. Parliament could then, at any stage of the negotiations, force the Government to withdraw from withdrawal. But for political reasons the Government doesn’t argue this. The big question looming over the litigation is whether the courts can simply assume that the Art 50 notification is irrevocable, when that point is so critical.

The UK decision to withdraw from the EU: parliament or government?

The litigation concerning the triggering of Art 50 TEU is under way, with hearings this week and next. It is the constitutional case of the century. The government’s skeleton argument has been published. This reveals that one of the pillars of its defence is that the decision to withdraw from the EU has already been taken. Consequently, all that is in issue is the authority to notify the EU of that decision, and to start the two-year negotiation period provided for in Art 50. That, the government’s case goes, is a decision of high policy which is rightly in the government’s hands, and not in those of parliament.

In an excellent blog Mark Elliott and Alice Young dissect and critique this framing of the litigation. They point out that it is difficult to identify who took the momentous Brexit decision, given that the referendum was advisory and there is no formal government decision either – only political statements. Their critique is informed by UK constitutional authority.

In this blog I also want to focus on this question, but more from an external and EU law perspective. The theses I want to present are twofold. First, and at the expense of coming across as completely divorced from reality, I argue that there is as yet no Brexit decision. Second, if the principle of UK parliamentary sovereignty is to continue to have real meaning, the decision has to be taken by parliament, not the government.

Ever since the debate about the respective roles of parliament and government in the Brexit process gathered steam, there has been an excessive focus on the notification question: is it for the government to “trigger” Art 50 by notifying the EU, or is it for parliament? This kind of framing of the debate overlooks the wording of Art 50 TEU. The first paragraph of that provision proclaims that “any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements”. The second paragraph states that “a Member State which decides to withdraw shall notify the European Council of its intention”. So first, there must be a constitutionally orthodox decision to withdraw. The notification is secondary.

The first paragraph of Art 50 distinguishes the article from standard treaty clauses governing termination. Those clauses usually conflate the withdrawal decision and its notification. They reflect a traditional international law and international relations paradigm, according to which foreign affairs are mostly a matter for the executive. The clauses themselves do not mention the executive, but they treat states as unitary actors, and the practice is simply that the state expresses itself internationally through executive action. It is the government which acts on the international plane. How such executive action comes about as a matter of domestic law is irrelevant, except in blatant cases (see e.g. Art 46 on provisions of internal law regarding competence to conclude treaties). By contrast, Art 50 expressly requires that there is first an internal decision to withdraw, adopted in accordance with the Member State’s own constitutional requirements. Once that decision has been taken, the Member State must notify, and I have no issues whatsoever with the position that this is properly governmental action. Indeed, it is the European Council which needs to be notified, and that EU organ is itself composed of heads of state and government. Nor would I argue that it is for anyone else than the Member State concerned to determine what its own constitutional requirements are, for taking the withdrawal decision. The other Member States and the EU institutions do not, on the face of things, have the power to review whether the withdrawal decision is constitutionally orthodox.

And yet the reference to such a constitutionally orthodox decision is critical. The EU is not a classical international organisation. It establishes an ever closer union among the peoples of Europe (Art 1 TEU). It is founded on representative democracy (Art 10 TEU), with both direct representation (in the European Parliament) and indirect representation (democratically accountable governments acting in the European Council and in the Council). EU law directly confers rights on individuals (Van Gend en Loos judgment). These rights are extensive and significant, ranging from free movement, over trade, to fundamental rights in the EU Charter, including social rights, to a panoply of rights in EU legislation (consumer rights; environmental rights; rights to agricultural subsidies; company law rights; transport rights; rights to enforce foreign judgments; rights to asylum; etc etc). As far back as 1974 Lord Denning likened the then EEC Treaty to an incoming tide, flowing into the estuaries and up the rivers, and said that it could not be held back because parliament had decreed that it was part of UK law. It is undeniable that since then the tide has waxed tremendously, but the point remains the same. EU law is automatically part and parcel of UK law for as long as the UK is an EU Member State. Or for as long as parliament maintains the effect of EU law, through the European Communities Act (ECA). UK courts fully accept this.

It cannot therefore come as a surprise that Art 50 requires that a decision to withdraw be taken in accordance with a Member State’s constitutional requirements. Indeed, in a large majority of other EU Member States the constitution makes provision for EU membership, and withdrawal would require constitutional amendment.

Much of this EU law orthodoxy may not be to the liking of Brexiters and Leave voters. But if the UK chooses to withdraw in conformity with its international obligations (which the ECA makes part of UK law!), rather than through some type of revolutionary act, Art 50 must be taken seriously. And these international obligations are not trivial, precisely because they have created all these rights, effectively for the whole of the populations of both the UK and of the other Member States.

So when the matter is looked at from an EU law perspective, there is a great legal question looming over Brexit: has the decision to withdraw been taken, and if so when and by whom? I fully realise that even asking this question invites ridicule. Politically, the Brexit decision is a fact. But politics and law are distinct, and for good reason, as a core function of the law is to constrain politics in order to establish and safeguard liberal democracy. And from a legal perspective, the difficulty to locate the Brexit decision needs little elaboration. Parliament organised the referendum without spelling out its consequences, and it is generally accepted that the vote was merely advisory. There is no formal government decision to withdraw, nor has parliament taken such a decision. Just read the government’s skeleton argument in the current litigation and Elliott and Young’s blog to see for yourself what intellectual contortions are required to argue that there is indeed a Brexit “decision”.

Why is this the case? For the following reasons I would surmise. The present government does not want to recognise that the Brexit decision is for parliament because it fears that the parliamentary debate may turn out to be uncontrollable, and lead to constraints on its margin for negotiating manoeuvre. Besides, institutions usually claim that they have the power to do things themselves. But nor is the government willing to adopt a formal Brexit decision, separate from its notification, because that would expose that decision’s lack of constitutional orthodoxy. I do not claim particular expertise in UK constitutional law. But looked at from a distance, there are clearly major questions. What is really left of the sovereignty of the UK parliament if a decision as seismic as that of withdrawing from the EU, a decision with leads to the effective revocation of the ECA, this enormous estuary through which all these EU law rights flow into the UK, can be taken by the government and does not require an “act” of parliament? Of course, the people have voted. But it is equally obvious that parliament did not fully contract out the withdrawal decision to the popular vote.

I wish to state emphatically that I do not think that the UK parliament should kick Brexit into reverse. That would be an affront to the vote, and thus to democracy. But there is a clear need for parliament to get involved because the British people (and indeed those from other Member States affected by Brexit) deserve an open debate among democratically elected representatives about what Brexit means, and how best to organise the future relations between the UK and the EU. And I think it would put the UK in a much better negotiating position if its proposals emanated from such democratic debate, rather than from mere cabinet meetings and Conservative party cenacles.

 

 

Brexit and trade: the view over the hill

In a recent TV debate, a member of the audience complained to Michael Gove, one of the leaders of the Leave campaign, that Leave were like a WW I general shouting “over the top” to his troops, without anyone knowing what awaits them there. Gove called it an arresting image, and I agree. Here is an attempt to make some sense of what may await the UK “over the top”, with respect to international trade.

If the UK leaves the EU, it will have to set up its own external trade regime. The only exception to that requirement is if the UK were to keep its current customs union with the EU, and therefore also keep the EU’s external trade regime. A customs union means free trade between the parties, and a common trade regime – the EU is a customs union. That is an unlikely scenario, though, as it would effectively also mean keeping the UK inside the internal market. Indeed it would make little sense for the UK to give up its opportunities for determining its own trade regime, and for concluding trade agreements with other countries, without also maintaining full access to the internal market. At any rate, the customs union/internal market option involves the kind of transfer of sovereignty which Brexiters find so objectionable. Note also that both the Norway and Switzerland models are not customs unions. Both Norway and Switzerland maintain their own external trade regime.

The UK has not had a trade regime of its own since its accession to the EEC. What does setting up a trade regime involve?

First of all, the determination of customs tariffs for all physical products (goods) which could be imported into the UK. As a member state, the UK applies the EU tariffs. Of course the government might attempt to find shortcuts, such as keeping the equivalent of a number of EU tariffs. Still, the exercise is a big one, and a wholesale adoption of the EU tariffs seems to me unlikely. Tariffs are a way both to protect domestic producers and to raise revenue. There are surely economic sectors for which the UK would want a different tariff regime from the EU one.

Second, the UK needs to adopt trade legislation of its own. For example, the EU operates a detailed and extensive Customs Code, which will need to be substituted with UK legislation. Also on other trade matters, such as anti-dumping, safeguard, and anti-subsidy measures, etc etc, new legislation will be needed.

Third, the UK will have to look into trade in services, to see whether it wants to change any rules on access to its services markets.

If the UK does not keep the customs union with the EU, there will need to be a WTO negotiation on the UK’s new external trade regime. The WTO Director General has already warned the UK about this. Why is this required, and what does it involve? The reasons are very simple. Tariffs are “bound” in the WTO. Where the UK makes changes to the pre-existing tariffs (in this case the EU ones), particularly changes involving an increase, it needs to negotiate these “bindings” with any other WTO member (basically any other country around the world) with an export interest in the products concerned. Effectively, this looks very similar to a WTO accession. Of course, the UK is already a member, but it does not have a trade regime of its own. So in substance the withdrawal from the EU is comparable to a full WTO accession, and accession negotiations can easily take years. These negotiations would need to be completed before the UK starts negotiations with other countries on free trade. This is the logical sequence: you determine your external trade regime, which applies to all your trade, and you can then conclude free-trade agreements with preferred partners.

Some might say that this WTO negotiation will be straightforward, because the UK will adopt more of a free-trade position: not raising tariffs, but cutting them. One of the Brexit economists, Patrick Minford, even suggests completely free market access – meaning no tariffs. Of course other WTO members would like that, yet there are quite a few comments to be made on that course of action.

First, if the UK opted for total free trade (no tariffs), it would be giving up revenue – and it would be interesting to see how that would affect the alleged financial gains resulting from non-membership of the EU. Currently the income from customs tariffs is part of the UK’s financial contribution to the EU. The UK would also lose most bargaining chips in any future trade negotiations. Why would countries around the world still be interested in negotiating free-trade agreements with the UK, if they already have full access to the UK’s market because of the UK’s free-trade regime? The free-trade model is wholly inconsistent with the idea that the UK will be able to strike better trade deals than the EU. Trade negotiations are about reciprocity, and if you have nothing to offer, others will simply not be interested. Complete, unilateral free trade is of course also an ultra-liberal policy, giving up on any protection of domestic industries.

Second, even with a cut in tariffs, or with complete free trade, other WTO members are likely to call for a negotiation, in which the EU will also need to be involved. The reason? Well, there will be EU tariffs on imports from the UK into the EU. Even if the UK concludes a free-trade agreement with the EU (the ‘Canada’ option), such an agreement covers only products originating in the respective parties. This means that products which are imported into the UK from outside the EU, will no longer benefit from free circulation in the EU. So other WTO members lose the advantage of having the UK as one of the gateways into the EU internal market. For example, it is not inconceivable that an EU-UK free-trade agreement might mean that cars assembled in the UK by Japanese car manufacturers, do not benefit from free access to the EU market: the agreement’s rules of origin may determine that these are not UK products, because of the use of imported components. Also, the EU market effectively becomes smaller. So WTO negotiations there will need to be. And the potential effects on companies’ investment in the UK are obvious: if such investment does not guarantee free access to the EU internal market, there will inevitably be cases were certain companies decide to invest inside the EU, to have guaranteed market access, and not in the UK.

In other words, the first enemy encounters over the top are not so nice, and it may take a long time to get past them.

But then the UK will be able to start a golden age of concluding its own free-trade agreements (FTAs)! The conception among Brexiters appears to be that the UK will not be the last in the queue, and that, with its dynamic and flexible economy, it will in fact find it easier to conclude FTAs than does the EU. Again there are quite a few hurdles, though.

First, the UK will need to catch up, compared to its current position as a member of the EU benefiting from a whole series of EU-concluded FTAs. The view that the UK will be able to maintain its contracting-party status to those agreements seems to me politically and legally untenable. It is true that most of these EU FTAs are so-called mixed agreements, with the UK as a contracting party in its own right. But UK exit will change the terms of trade, and for the same reasons as those requiring a WTO negotiation, the terms of free trade between the UK and existing EU-FTA partners will need to be renegotiated. As was pointed out by Thomas Sebastian at a recent seminar, the rules of origin do not allow the UK to be an autonomous party to such FTAs.

Second, the UK’s market is but a fraction of the EU internal market. It is hardly realistic to think that no major economy will take that into account in determining its trade policy priorities. Access to the EU internal market is a much bigger prize.

Third, modern trade negotiations are as much, if not more, about regulatory issues than about pure trade measures, such as customs tariffs. The EU is a regulatory giant – on that much there is agreement between Leave and Remain. I have argued, before, that Brexit is not an escape from EU regulation. The UK may aim to replace EU regulations with its own, but to the extent that it keeps trading with the EU – currently accounting for a little less than half its trade – it will be a regulation-taker, and it will of course lose its ability to influence those regulations. This is a further reason why major economies will be less interested in negotiating with the UK.

So what could be the gain, really? What does the conquest of the last bulwark, deep down in the valley which lies beyond the hill, actually offer? What a long and uncertain battle to reach a position where the UK is most unlikely to be an important player in international trade policy, and where it is most unlikely that its terms of trade will be any better than the ones resulting from current EU membership. And that is leaving to one side the loss of full access to and participation in the internal market, which accounts for more than 40% of the UK’s external trade.

 

 

The Real Record of the EU Charter of Fundamental Rights

Reposted from UK Constitutional Law Association blog, at https://ukconstitutionallaw.org/2016/05/06/piet-eeckhout-the-real-record-of-the-eu-charter-of-fundamental-rights/

Brexit debates have started focusing on the EU Charter of Fundamental Rights, after it has become clear that the economic effects of the UK departure from the EU are likely to be negative.  Michael…

Source: Piet Eeckhout: The Real Record of the EU Charter of Fundamental Rights