Towards a 'proper' Brexit

Transcription

1 Pieter Timmermans Chief Executive Officer To Count Paul Buysse, Chairman of the High Level Group on Brexit Mr Kris Peeters, Deputy Prime Minister and Minister of Employment, Economy and Consumer Affairs, in charge of Foreign Trade Date 20 January 2016 Our ref. c.c. Re bm FEB input to the interim report of the High Level Group on Brexit of 30 January 2017 MEMO Towards a 'proper' Brexit 1 Introduction On the occasion of the publication of the interim report by the High Level Group (HLG) on Brexit on 30 January 2017, in this memo, based on talks with its sectoral federations, committees and working groups, FEB wishes to share a number of basic principles and multi-sector recommendations with the HLG recommendations that are important to the Belgian economy. As soon as Article 50 is triggered and negotiations between the EU and the United Kingdom (UK) begin, these principles and recommendations can be adapted to the prevailing situation and further developed into positions. This memo takes up where the first memo sent to the HLG on 25 August 2016 left off. Together they constitute a single document and should be read as such. This memo is not a response to the speech by British Prime Minister Theresa May on 17 January General Management T F cva@vbo-feb.be VBO VZW Ravensteinstraat 4 B Brussels T F info@vbo-feb.be Member BUSINESSEUROPE 2 A 'proper' Brexit In a referendum held on 23 June 2016, the British people voted to leave the European Union. FEB respects, but also regrets, that choice. After all, we attach great importance to the continuation of the European integration process, which has had positive effects for a small, open economy like ours. Brexit constitutes a step backwards in this integration process and will be painful both for the UK and the EU. Furthermore, it will weaken the EU's voice and bargaining position as an actor in the international arena, for example when negotiating trade and investment agreements. Since 90% of global

2 > Page 2 of memo of 20 January 2016 growth over the next few decades will take place outside the European Union, in the globalised world we need a strong EU that continues to liberalise world trade in keeping with our standards and values. Brexit constitutes a step backwards in this respect, too. FEB refuses to become party to either a 'hard' Brexit that ignores the significant flow of trade between Belgium and the UK, or a 'soft' Brexit that fails to heed the risk of a domino effect and the further disintegration of the European Union. Instead, FEB is calling for a 'proper' Brexit, meaning: - Firstly a 'proper' Brexit in the sense of a fair Brexit. FEB is calling for a fair separation conducted in a calm and orderly manner. - Secondly, a 'proper' Brexit in the sense of an 'appropriate' Brexit. In addition to working out the 'terms of the divorce', efforts need to be made to establish a sustainable future trade relationship that, on the one hand, is conducive to maintaining maximally efficient major trade flows between the EU and the UK and, on the other hand, to guaranteeing the smooth functioning of the European Single Market and promoting further economic integration by the other EU Member States. 3 Negotiating a 'divorce' Various studies indicate that of all the EU Member States, Belgium is among those most likely to suffer adverse effects from Brexit. So our country has a very strong interest in ensuring that the Brexit saga does not escalate. As soon as the UK government triggers Article 50 of the Treaty of the European Union to start exit negotiations, swift steps must be taken to arrange an orderly separation and thereby minimise uncertainty for those Belgian companies that trade with the UK or have investments there. The scenario to be avoided at all costs is the so-called 'cliff-edge' Brexit, entailing a British withdrawal from the EU without a 'divorce settlement' and with no prospect of a sustainable future trading relationship. For that would represent a lose-lose situation for both the United Kingdom and the EU. For now, however, we must wait until the British government triggers Article 50. In the meantime, FEB is calling on the various governments in Belgium to make thorough preparations for these negotiations and devise a clear, joint strategy and identify the offensive and defensive interests of the Belgian economy, which by definition may not correspond to the interests of the other EU Member States. With this in mind, FEB is advocating a global approach that benefits all sectors of the Belgian economy. 4 Transitional measures As soon as article 50 is triggered, a two-year negotiating period will begin. This two-year period may be extended, subject to unanimous agreement.

3 > Page 3 of memo of 20 January 2016 Although details of the UK's priorities for a future post-brexit relationship are not yet fully known, the British government seems to have its sights set on "a bold and ambitious free-trade agreement with the EU". The reaction of the EU Member States is also not yet clear. Assuming that the 'divorce settlement' takes two years and the negotiation of a free-trade agreement lasts several years (as was the case when negotiating free-trade agreements between the EU and other partners), some time will elapse between the UK's present situation as a full member of the EU and its future situation as a (privileged) trading partner. FEB is calling for the minimisation of the uncertainty facing businesses during this transitional period and the avoidance of too great a difference between the present and future situation. There are several possible ways of avoiding this uncertainty and preventing such a difference. The choice will depend on the strategy and attitude adopted by both partners. One possible way is to opt for a temporary transitional agreement. Another alternative would entail postponing the separation until an agreement on future relations has been reached (by invoking the unanimity rule) or suspending it (by adding a clause in the divorce agreement). Whatever the choice made, the important thing for FEB is that during this transitional phase the key economic relations between our country and the UK are able to remain efficient and that any disruption is avoided. Furthermore, trade must be conducted in accordance with enforceable legal rules, and the principle of a level playing field and fair competition must be respected. In addition, the transitional situation must not be more advantageous for the United Kingdom than its current situation as a full Member State of the EU, since that could undermine the EU's bargaining position in the negotiations on a future relationship. 5 Future relations The UK is a major economic partner for Belgium, namely its fourth largest customer and its fifth biggest supplier, with a positive trade balance built up over recent years. For many sectors and Belgian businesses, maintaining smooth trade flows is crucially important. Over the past few years, the EU has already concluded various trade agreements with key partners around the world (e.g. with South Korea, Vietnam and Canada) and it is continuing to champion a further liberalisation of world trade (e.g. with Japan and the USA). So FEB is counting on the EU to demonstrate the post-brexit will and ambition to conclude a comprehensive trade agreement with the UK. The EU also has privileged relations with a fair number of nearby countries which are members of the European Economic Area (namely Norway, Liechtenstein and Iceland), with Switzerland (maintaining bilateral relations)

4 > Page 4 of memo of 20 January 2016 and with countries with which it has concluded a customs union (e.g. Andorra and Turkey). Should the UK wish to join one of these existing privileged partnerships though this currently seems not to be the case, we will again rely on the EU showing goodwill with a view to maintaining existing trade relations as far as possible. As with the negotiations on the UK's withdrawal from the EU, in any talks on future relations between them FEB advocates the adoption of a global approach that promotes the interests of all sectors of our economy. Whatever form the future relationship may take, care must be taken to ensure that a country is not better off outside the European Union than in it. This will avoid a domino effect whereby several more Member States opt to petition to leave the EU or request opt-outs, thereby creating an 'à la carte Europe'. Further economic disintegration along such lines would be even more detrimental to the Belgian economy than Brexit. Of course, we should not seek to keep the EU intact by making it very difficult to leave the Union, either: instead, EU cohesion must be based on the many benefits yielded by EU membership. So future relations should, on the one hand, facilitate trade between the EU and the UK and, on the other hand, not disrupt the smooth functioning of the European internal market. Depending what the United Kingdom and the EU want and decide, future trading relations must respect at least the following principles 1, i.e.: - promote trade in goods and services without tariff and non-tariff barriers, both for imports and exports; - make the free movement of goods and services entirely subject to the EU-defined rules and regulations that apply to the internal market (cf. the relations between the EU and Switzerland); - base trade on enforceable legal rules that guarantee a 'level-playing field' and fair competition; - permit professional mobility, such as transfers of personnel between locations on the European continent and the UK or in connection with cross-border service provision; - offer adequate protection of both existing and future intellectual property rights; - offer sufficient protection of investments; - allow cooperation on certain European-funded cooperation projects, like those covering innovation and R&D (cf. Horizon 2020) subject to a financial contribution; We also need to ensure that the future relation between the EU and the UK does not jeopardise any of the many existing privileged partnerships. In other 1 These principles may vary, depending on the wishes and requirements of both partners and of the pursued strategy, and are not exhaustive.

5 > Page 5 of memo of 20 January 2016 words, the future relation need to be balanced against the rights we grant and the obligations we impose on our other partners, for example as regards contributions made to the European budget, adopting or complying with European rules and standards, respecting the case law of the European Court of Justice and so on, as is the case for Norway for example. 6 The future of the EU without the United Kingdom 6.1 In the short term, the UK's withdrawal from the EU will raise a number of practical questions, particularly regarding the EU's many self-imposed goals and objectives. For instance, FEB wonders how the current objective of reducing CO 2 emissions by 40% by 2030 will be divided between the Member States when the British are no longer involved in this effort. Indeed, the same question arises for all other objectives set by the 28 EU Member States where the burden associated with meeting these objectives is shared between the various Member States. We will also need to consider Brexit's potential impact on any quotas agreed in free trade agreements. In this context, FEB proposes respecting the principle of legal certainty and not making burdens heavier than they already are now. Furthermore, the loads imposed on EU Member States must not be any more exacting than those borne by our privileged partners, since that would play into the hands of unfair competition. Another practical problem facing us is how to finance the EU budget. For following the British withdrawal from the EU, the UK will either no longer contribute to the EU budget or only make a much smaller contribution. Every year the British government contributes a net total of around 7 billion to the EU. According to FEB, the EU has to take up this issue with a view to further enhancing its operational efficiency. Another possibility to be considered is reallocating resources to budget items that boost the competitiveness of our economy (such as Horizon 2020 for R&D, COSME for SMEs, the Connecting Europe Facility for energy, transport and digital infrastructure, and so forth). It is essential to avoid a scenario in which the remaining Member States end up having to pay in more to make up for any post-brexit deficit. 6.2 Apart from the practical short-term effects of a country's withdrawal from the Union, it is important that European leaders take steps to maintain the project of European cooperation in the long term. After all, European economic cooperation is crucially important to the Belgian economy. As pointed out in the first memo to the HLG, FEB believes that Brexit should serve as a wake-up call for European politicians and policy makers, who must prove capable of asking themselves how Brexit could be allowed to happen in the first place. The fact that the general public (and not only in the UK) is feeling less and less affinity with the EU has partly to do with the fact that in the past the Union busied itself with too many minor issues and is still doing so today to some extent, but also because it plays too little on its strengths. In order to bring the general public and businesses closer to the EU, FEB recommends two measures: firstly, the EU cannot and should not regulate

6 > Page 6 of memo of 20 January 2016 everything. FEB believes Europe needs to focus more on its core tasks and deal effectively with the major challenges facing us. The real issues here, then, include waning competitiveness, trade and investment agreements, the digital revolution, the convergence of national economies, the high costs of and dependence on energy and raw materials, 'missing links' in infrastructure and the asylum crisis. Secondly, the EU and national and regional authorities must do a better job of communicating the tangible benefits of EU membership for citizens in their daily lives and also of explaining the necessary reforms at European level, without laying the blame at the EU's door. That said, communication alone is not enough. Europe has to achieve results! 7 Opportunities for Belgium As already set out in the first memo to the HLG, despite Brexit's many negative repercussions, it may also give rise to a number of opportunities, in both the short and long term. Belgium has to do its utmost to attract current UK-based foreign investments, for example luring certain financial activities away from the City of London or tempting multinationals currently established in the UK to come here. Quite a few European countries and/or cities (e.g. Frankfurt, Paris and Amsterdam) have already initiated campaigns and made promises to foreign investors. To be successful in attracting investors, our country must continue apace with much-needed reforms. How can Belgium make itself more attractive as a country to invest in? Among other things by strengthening its competitiveness, making our labour market more flexible, reforming the tax system, facilitating innovation and preventing serious traffic congestion. The UK is also currently home to a number of established European agencies, the main ones being the European Medicines Agency (EMA) and the European Banking Authority (EBA), which will have to relocate to the European mainland after Brexit. It would be a great boon to Belgium if we became these institutions' new host country. FEB calls on the governments here in Belgium to prepare to attract these institutions (including, amongst other things, by finding an appropriate location and building and working out an appropriate regime for their employees and their families, etc.). However, for now FEB is not saying more about the strategy to be pursued to successfully attract these institutions (e.g. campaigning hard from the outset or rather waiting to put itself forward later as an alternative candidate). Here, too, it is important that the various governments in our country develop a coherent, unified strategy. Contact person at FEB: Benoit Monteyne, Deputy Adviser European & International Affairs bm@vbo-feb.be