What the EU-Singapore court decision means for a post-#Brexit trade deal? (Spoiler Alert: disaster)

| May 16, 2017 | 0 Comments

Many Brexiteers brushed off the problems that the UK might face outside the Single Market, European Economic Area and Customs union as poppycock. For Brexiteers, everything is very simply resolved; their riposte: ‘We’ll just become a Singapore-on-Thames: low taxes, little in the way of labour rights and a good deal sunnier. Bingo!’ I paraphrase, but you get the gist, writes Catherine Feore.

Needless to say, this suggestion was met by a collective raising of eyebrows across the EU-27 and in the hallowed walls of the European Commission, which has exclusive competence for negotiating trade deals.

To be fair to the Brexiteers they aren’t the only ones not to have fully grasped the Commission’s role in trade agreements. The EU acting on the negotiating mandate agreed by all EU states is pretty much in charge. When the author of The Art of the Deal and current US President Donald Trump proposed a bilateral trade agreement with Germany to Angela Merkel, he was told 11 times by his guest that this was not possible and that he would have to do a deal with the EU; once this had sunk in, the Trump pragmatically agreed that in that case the US “could do a deal with Europe then”.

The EU-27’s negotiating guidelines already make it clear that competition law and unfair tax provisions will be part of their negotiating position. However, in today’s (16 May) ruling, the European Court of Justice sets an even more worrying prospect for the UK – something that Brexiteers should applaud – member states and sometimes regions flexing their sovereign rights. The European Court of Justice has ruled that the provisions of the agreement relating to non-direct foreign investment and those relating to dispute settlement between investors and states do not fall within the exclusive competence of the European Union, so the EU-Singapore free trade agreement can only be concluded with the agreement of all member states – and in some countries that means the regional governments.

We would ask readers to cast their minds back to the debacle over the CETA agreement between Canada and the EU. The Commission decided that it would be ratified by the EU and national parliaments. This was when Europe discovered that Belgium’s federal arrangements meant the region of Wallonia  – with a population of 3.5 million – could scupper the entire deal.

Why this matters a lot for the UK

Theresa May has made it clear that the UK wants to have a deep and comprehensive trade agreement with the EU post-Brexit. This agreement would be similar to the EU-Canada deal, covering a wide range of issues, including services, investment and an investment dispute-resolution mechanism.

The court found that agreements that included non-direct foreign investment (‘portfolio’ investments made without any intention to influence the management and control of an undertaking) and the regime governing dispute settlement between investors and states would have to be ratified by member states. This means that a deal that included these measures – and almost any deal will require a dispute resolution agreement – will have to receive the consent of all member states. That means that Wallonia, France, Italy, Spain (think Gibraltar) and any other EU-27 member can veto the UK’s future trade arrangements.

In the torrid atmosphere of a general election any appeal to reason and self-interest is likely to fall on deaf Brexiteer ears;  Theresa May is seen as the only candidate capable of facing-down a perfidious EU and she is still holding a ‘hard Brexit’ line  – or if you consider this wording partisan  – a deal that takes the UK not only out of the EU but out of any other sensible possible arrangement, be it in the EEA (a la Iceland, Lichtenstein and Norway) or Customs Union (Turkey, Andorra, San Marino, Guernsey). The Leaver will no doubt argue that the UK will be happy to walk away from current arrangements  – around 50% of the UK’s current trade is with the EU –  and trade with the rest of the world, like it used to do, a British Empire 2.0. If the UK held this line, it would be disastrous for the British economy.

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Category: A Frontpage, Brexit, Economy, EU, European Commission, UK

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