October 23, 2020

Market and Financial News Aggregator

UK plan to undermine withdrawal treaty threatens Brexit trade talks

3 min read

The UK is planning new legislation that will override key parts of the Brexit withdrawal agreement, risking the collapse of trade negotiations with Brussels. 

Sections of the internal market bill — due to be published this Wednesday — are expected to “eliminate the legal force of parts of the withdrawal agreement” in areas including state aid and Northern Ireland customs, according to three people familiar with the plans. 

The move would “clearly and consciously” undermine the agreement on Northern Ireland that Boris Johnson signed last October to avoid a return to a hard border in the region, one person with knowledge of the plans said.

Last week, the EU’s chief negotiator Michel Barnier warned that “a precise implementation of the withdrawal agreement” was vital for the success of trade talks and a key issue of trust between the two parties.

“It is a very blunt instrument,” said one of those familiar with the matter. “The bill will explicitly say the government reserves the right to set its own regime, directly setting up UK law in opposition with obligations under the withdrawal agreement, and in full cognisance that this will breach international law.”

The UK internal market bill, outlined in a 100-page white paper in July, is designed to secure the “seamless functioning” of trade between England, Wales, Scotland and Northern Ireland after the UK leaves the EU’s single market and customs union at the end of this year.

But some clauses in the bill will effectively override parts of the so-called Northern Ireland protocol, which was signed alongside the withdrawal agreement in October and has enraged prominent Brexit-supporting MPs who see it as a threat to British sovereignty. 

A government spokesperson said it was “working hard to resolve outstanding issues” with the Northern Ireland protocol. The spokesperson added: “As a responsible government, we are considering fall-back options in the event this is not achieved to ensure the communities of Northern Ireland are protected.”

Under the withdrawal agreement, the UK must notify Brussels of any state aid decisions that would affect Northern Ireland’s goods market, and compel businesses in the province to file customs paperwork when sending goods into the rest of the UK. But clauses in the internal market and finance bills will force the UK courts to follow the new UK law rather than the EU deal, diluting the ability of the protocol to intrude on UK state aid policy.

The autumn finance bill, used to write the chancellor’s Budget into law, is also expected to overwrite a third aspect of the Northern Ireland protocol covering the payment of tariffs on goods entering the region, according to those familiar with the plans. 

Officials say the plans risk poisoning the prospects of an eleventh-hour deal.

Lord Frost, the UK chief negotiator, has already deepened tensions ahead of negotiations that are due to resume in London on Tuesday, saying in a Sunday newspaper interview that the UK would not become a “client state” of the EU.

A second person familiar with the impending bill said that Lord Frost had personally driven the decision to take the “nuclear option” of overwriting the withdrawal agreement, despite progress being made in talks on implementing the Irish protocol.

Christophe Hansen, the European Parliament’s lead MEP for the adoption of the future trade agreement, told the FT that the full respect of the withdrawal agreement was a core “trust” issue and a “litmus test” of the UK’s willingness to honour deals with Brussels. 

“It is very important for us to see that it is put in place,” he said, warning that otherwise, the EU could not be confident that Britain would respect any future-partnership arrangement.


2020-09-06 16:07:51

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