16 February 2017

The Guardian: French senate report says UK must not be better off after Brexit

The scale of Britain’s task in negotiating a successful Brexit has been underlined by a cross-party report from the French senate vowing that the UK must not be allowed to leave the EU in a better-off position than it is now, and if necessary a withdrawal without an agreement has to be considered.

The report also rules out sectoral agreements giving some UK industries privileged access to the EU single market.

The document – the product of an eight-month inquiry chaired by the former French prime minster Jean-Pierre Raffarin – also vows that the talks on the UK’s future relationship with the EU cannot start until the terms of the divorce have been completed.

It also suggests that the UK will lose many of its jobs in the City since the euro area cannot allow the City to oversee euro-trading once the UK has left the EU. As many as 200,000 jobs are at stake the report says, pointing out that half of those working in the City of London are EU citizens.

The inquiry, which has taken evidence from EU negotiators, technical experts and British politicians, stresses the French senate will be vigilant to ensure the UK cannot be in a more advantageous position by being outside the EU than inside, adding this rule must apply both in the withdrawal agreement and to the agreement setting the framework for future relations between the EU and the UK. Cherry picking cannot be allowed if this means keeping the benefits of EU membership but none of its responsibilities.

Insisting the debate about the future of the EU must not be taken hostage or damaged by Brexit, the report also claims national parliaments in Europe in the interests of democracy must be allowed to vote on any deal on the UK’s future.

Insisting the divorce and future trade relations agreements are separated, the report issued on Wednesday states from a legal point of view that the United Kingdom should not be able to sit on the European council while being in the position of the third party negotiating a trade agreement. It cannot be its own judge and jury.

The report also expresses frustrations, given the ambitious timescale for the talks, about the lack of clarity in the current demands of the British prime minister. “It is clear that the United Kingdom wants to evade the European Court of Justice, but Theresa May says nothing about the supranational body that will arbitrate future trade disputes”.

The report also points to UK vulnerabilities in the negotiations, saying the UK does not want to be left without an agreement for the future after two years of negotiations and have to face a leap into the unknown.

It describes May’s speech at Lancaster House setting out the terms of Brexit as a “mixture of veiled threats and pledges of goodwill”. Although she had presented herself as a champion of free trade, she had also suggested the UK could resort to tax dumping if it did not get sufficient access to the European market. It suggests the possible upheaval of the UK economic model would be costly for the European Union, but also disruptive for the UK, and lead to a backlash in British public opinion.

Her speech, the senate committee suggested, ignored “the thousands of jobs that European citizens undertake in the medical sector, agriculture and several other sectors where a low-skilled labour force is needed”. The speech left unclear whether EU nationals will have priority over those of the rest of the world.

Although the report accepts the UK economy has weathered the Brexit storm better than forecast, Brexit could amplify four current weaknesses in the UK economy: rising household debt, a weakening of the commercial real estate market, the current account deficit and the devaluation of sterling.

The report leaves open the future role of the City of London but suggests a localisation of euro clearing in the eurozone seems to be necessary.

The report acknowledges the risk of fragmentation, and costs, to the markets if euro transactions were to migrate to the euro area, but says this has to be weighed against the very serious risk of maintaining the present situation – the ECB would ultimately lend to institutions not supervised by the eurozone.

Full article on The Guardian

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