The Internal Market Bill passed through the House of Commons by 77 votes despite abstentions by government backbenchers. The Bill covers the principle of mutual recognition and non-discrimination to ensure there are no new barriers to business trading across the UK, should key decisions and issues fail to be resolved with the EU. It also gives powers to amend how the UK implements the Northern Ireland protocol – already agreed as part of the Withdrawal Agreement. The Bill caused tensions amongst MPs after the Northern Ireland Secretary, Brandon Lewis, told the House of Commons that the Bill would break international law in a “specific and limited way”, as it would allow ministers to amend regulations on state aid and customs procedures for trade from Northern Ireland, inconsistent with the UK’s obligation under the Withdrawal Agreement.
Negotiations resumed on 7 September in London. The negotiations continued to focus on issues pertaining to the level-playing field, fisheries and trade in services and investment, amongst other issues. Differences remain on fisheries and state aid provisions and the UK Chief Brexit Negotiator, David Frost, told journalists that the UK Government was ready to trade with the EU without a formal deal, if necessary. The EU have set a deadline of October to reach agreement on the FTA text, which would need full ratification and translation by the European Commission, European Parliament and EU Council.
The Government confirmed that, from 1 January 2021, the UK will follow World Trade Organisation (WTO) subsidy rules and other international commitments, replacing the EU state aid laws. The Government also confirmed that the UK will adhere to any international obligations on subsidies agreed under future free trade agreements. The WTO rules ban subsides that are dependent on how much a company exports or the use of domestic goods over imports. The Business Secretary Alok Sharma said that UK aims to achieve “a competitive, dynamic market economy” that backs British businesses and makes the UK an attractive place to start a business. Guidance will be published before the end of the transition period for public authorities and will explain WTO rules and any commitments on subsidies agreed through trade agreements, and legislation will be brought forward to remove redundant EU state aid rules from the UK statute book. It was also noted that a consultation will be published on whether the UK should implement further legislation beyond its international commitments.
Speaking at the Treasury Select Committee inquiry into the Economic impact of Coronavirus on 2 September, Bank of England Governor, Andrew Bailey expressed concerns about the EU’s approach to granting equivalence in the UK. He told the Committee a large amount of the value in equivalence-based cross-border activity would be in investment services and stated that he could not see “how we can have an equivalence process [where] the EU says “we are not going to even judge equivalence because our rules are going to change””. He commented that the EU’s approach to equivalence was a rule-taking process and he felt that little progress had been made.
International Trade Secretary, Liz Truss, has launched eleven new Trade Advisory Groups to increase engagement with British industry in international trade talks. The groups will cover a range of key sectors, including financial services, investment, tech and telecoms, professional advisory services and life sciences. The Department of International Trade will use their input to inform the Government’s negotiating position and provide benefits to the whole UK, including market access to a variety of products and “cutting-edge digital trade rules”. Liz Truss said the initiative was about “bringing business closer to the negotiation table and using their expertise to help secure the best possible deals”. The CEO of TheCityUK, Miles Celic, said the organisation was “very pleased to join two of the new Trade Advisory Group [as] closer consultation with industry will help develop out national ambitions and priorities and ultimately best support the UK economic recovery in the aftermath of Covid-19”.
In 2018, the Government commissioned the OECD to conduct a review into the UK’s international regulatory cooperation (IRC) practices. The Government noted in its response to the review that considerations of IRC was increasingly important Britain’s “global ambitions” post-Brexit and its desire to regain “regulatory competencies”. The OECD recommended that the UK builds a holistic IRC vision with clearly defined roles; embeds IRC considerations in policy tools throughout the Government to guarantee genuine and systematic consideration by UK departments and regulators; increases awareness and understanding of IRC across the departments and regulatory, and; increases stakeholder engagement to inform IRC initiative development. The Government response welcomes the recommendations and outlines its plans to address and achieve the recommendations. As part of this, a call for evidence was launched on 2 September for those impacted by IRC considerations to provide feedback on priorities and future opportunities.
The National Audit Office has published a report that attempts to identify what the Government can learn from its experience dealing with Brexit preparations and negotiations. The report concluded that Brexit preparations lacked adequate planning and transparency from ministers and that the country was not prepared for all potential scenarios. The report also noted that the Government had undertaken limited work before the EU referendum took place to identify the overall impact of leaving and, despite an Article 50 extension, many key systems and operation were not ready. The National Audit Office stated that there remained a lot of work to be done regarding Brexit, particularly around the Northern Ireland Protocol, and that the concision with other major challenges such a climate change and Covid-19 meant a fast-paced, innovate policy response was needed with effective external communication and transparency.
Tech Nation’s report, Unlocking Global Tech, predicts that post-Brexit UK digital tech exports will grow by 35% by 2025, resulting in an additional £8.15bn worth of tech exports. The report stated that the UK should be looking to the US, Israel, Canada, Germany and the Netherlands as the most attractive export markets, as well as Brazil and Singapore as the fastest rising global opportunities for UK trade. The UK currently sits at first place in Europe for the number of tech unicorns produced and third globally and is the fifth biggest digital exporter globally.
Please feel free to contact the Policy Team for further information on any of the matters raised in this update.
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