Brexit & UK General Election
Let me start by addressing the seemingly endless question of Brexit. We can only hope that the general election next Thursday will bring some clarity and help to unblock the paralysis. If there is a Conservative-led government, the likelihood of Boris Johnson’s deal going through is high. If there is a Labour-led government or a hung parliament, the likelihood of a softer Brexit and a second referendum is high.
But I would urge extreme caution for business leaders: we are not out of the woods yet. The risk of Brexit happening without a ratified deal still exists. It could happen at the end of January, or at the end of 2020. So I therefore urge you to continue your work on Brexit preparedness. We are certainly doing this at all levels of the European Commission, and we will continue to do so.
There is intense speculation in UK and Irish media about whether an extension of the transition period beyond December 2020 will be required to complete a free trade agreement (FTA) with the UK. We should not engage in this academic exercise. We should resolve to complete the work as soon as possible.
There are lots of soundbites. Some say it is easily achievable. Some say it is completely impossible. A number of British newspapers quoted me out of context to indicate that I believed a deal was achievable before the end of 2020.The truth is of course much less straightforward. The truth is we have no accurate way to predict how long it will take to negotiate a deal with the UK because there is no precedent. We are entering completely uncharted waters.
But there are certainly many positive aspects to take into account. We are absolutely not starting from scratch. We should be able to square off many areas of alignment relatively quickly, due to the high level of convergence already in place.
There is the option to extend the transition period further, and I can assure you that the European Commission will be ready to negotiate with speed and precision. We have not been idle in our preparations, and we are not entering this negotiation from a zero start. The most productive thing the UK government could do at this point is to focus on content, not timing: stop speculating about timelines and focus on the nuts and bolts of a trade agreement with the EU.
We are still in the dark as to what type of FTA the UK will ultimately want. So the urgent priority for the next government must be to outline its preferences, and then carefully define its offensive and defensive interests for each stage of negotiations.
As with any trade deal, this is going to involve compromises and trade-offs, and the next government should consult widely with all stakeholders in business, civil society, politics and administration to help define negotiating priorities.
An open and frank discussion about the pros and cons of every option will ensure clarity on the part of the UK negotiators, but equally it will help to build public confidence, allay fears and ensure the government delivers a final deal that is accepted by the majority. There is little point negotiating a deal without knowing whether it will gain domestic approval.
In the event of a Conservative government getting Boris Johnson’ deal through parliament, we are satisfied that the new agreement will secure the EU’s key priority of no hard border on the island of Ireland. Northern Ireland will remain in the UK customs territory and, at the same time, benefit from access to the Single Market without tariffs, quotas, checks or controls.
EU state aid and VAT rules will continue to apply in Northern Ireland, under the control of the European Court of Justice. All this is to be warmly welcomed. But there is a lot of work to be done before we can finalise an ambitious free trade agreement with the UK. Preserving the integrity of the single market remains our top priority. We have made it very clear that, because of our geographical proximity and our economic interdependence with the United Kingdom, any new trading arrangement will require firm and fair rules.
Prime Minister Johnson said he wanted a "best in class free trade agreement". From our side, as Michel Barnier has correctly pointed out, “best in class” means a trade agreement that is not just about economic and financial gains, with zero tariffs and zero quotas, but an agreement which is in the interest of our people, their environment, respect for their rights and for their quality of life.
We will therefore require solid guarantees of a level playing field in relation to state aid, labour and environmental protections, and taxation arrangements. The level of ambition of any future free trade agreement is entirely dependent on adequate protection of the EU single market, as we have made abundantly clear time and time again.
And as I have also said on many occasions before, any deal we strike with the UK will be far inferior to being a member of the EU. It is regrettable that, even at this late stage, many members of the UK parliament and media still have not woken up to this fact. Unfortunately, the learning curve remains very wide.
I have to emphasise that the UK negotiation, if indeed there is one in the end, is only one European trade priority among many. Other issues are even more pressing, and coming down the tracks much faster.
The reality is that we are living in a very precarious moment in relation to the current global order, which has served so many countries so well, including this one.
Trade priorities – WTO
The US and China are currently at loggerheads, with no de-escalation in sight. The WTO is no longer fit for purpose in today’s highly integrated and technology-driven global economy. So the EU has to not only robustly defend the rules-based multilateral order. We also need to find new accommodations with key partners like China and the US, while supporting them to find new accommodations with each other. And we urgently need to reform the WTO to make it relevant and operational again.
This reform needs to happen at a fairly fundamental level across the WTO’s three functions: its role as a producer of trade rules, its role as a monitor of countries’ trade policies and practices, as well as its dispute resolution function.
Tweaks at the margin will not save the WTO. In order to shore up the rules-based system, we need a global referee that enables members once more to negotiate new rules between them, and allows for a new and better balance of rights and obligations between countries, taking into account the economic emergence of many developing countries. I am convinced we can develop a positive transatlantic agenda on making the WTO fit for purpose.
Trade priorities – Free Trade Agreements
Of course we will also continue to be very ambitious in our EU trade agenda. With every agreement negotiated, the EU and our partners stand together to shape globalisation, defend open trade and agree on a rulebook that is fair and works for everyone. President von der Leyen said it best, when she observed that “multilateralism is in our DNA” in Europe.
And I fully agree. A free, fair and rules-based trading system leads to economic gains, but that is only the start of it. It also provides us with a platform to positively influence global standards across a wide range of areas. For example, in my previous portfolio of agriculture and rural development, it was abundantly clear to me that our trade agreements benefit not only the agri-food economy, but also increase the food sanitary and phytosanitary standards of our global partners. This means everyone wins: business, consumers, and the planet.
Increasingly, we will see a strong emphasis on sustainability and climate criteria built into trade negotiations. And a particular priority will be to make sure that our small and medium sized business reap more of the benefits of our trade agreements. Over 80 per cent of EU businesses involved in international trade are SMEs, and trade and investment barriers present particular challenges for them.
We must stand up against protectionism where it occurs. We must promote reciprocal trading conditions and fair competition by levelling the playing field both internally and externally. For example, instruments such as the International Procurement Initiative (IPI), aim to create reciprocity enabling EU businesses to succeed in government procurement markets abroad.
We must also tackle unfair competition, for instance by addressing more forcefully foreign subsidies which affect EU companies and by making full use of existing tools, for example trade defence. This also means strengthening our own toolbox, including rules that allow us to react to illegal discriminatory trade measures by third countries.
We also have to do much more on the communication front to improve public opinion about our trade agenda. As Commissioner I will be calling on politicians, civil society, and business leaders to do their part. We need to do much more to inform the public about the benefits of international trade. We need to make a strong case that, yes, trade can benefit our citizens’ quality of life, create jobs, support labour and environmental rights, and provide policy leverage for other public goods and standards.
Too often, people perceive trade as something abstract, rather than a force for good that supports 1 in 7 jobs. Our studies show that every €1 billion in exports supports 14,000 high quality European jobs. If we look at this country, global trade has been hugely beneficial for Ireland, but I am not convinced our people are fully aware of this fact.
Our pharma, medical devices and med-tech sectors are thriving, underpinned by global supply chains. Our exporting agri-food sector is an economic powerhouse. It kept the home fires burning during the darkest days of the recession.
Many of our agri-food sectors benefit hugely from our new trade deals, such as those signed with Canada, Japan and Mexico. But the amount of positive outreach generated by these deals is dwarfed by the negative reaction to the Mercosur agreement, which is still years away from coming into force. If you shout about the bad, in my view you should also make an effort to shout about the good.
Trade is a European competence. In other words, all MS including Ireland band together under the Commission standard to negotiate trade deals around the world. This gives us huge negotiating strength. So small countries like Ireland can gain easier access to markets that might otherwise be out of reach. Just last month I was in China where I officially signed the new agreement between the EU and China on GI products.
This will protect some of our most iconic European food and drink brands, including Irish whiskey and Irish cream liqueur, on the immensely valuable Chinese market. It is the first ever agri-trade deal between the EU and China. But just as importantly, it represents a small beginning that will ultimately result in an EU-China Investment Agreement by the end of 2020.
This in my view is one of the real bonuses of EU membership. Trade deals take huge amounts of time and resources to conclude, and EU membership gives our MS global clout that they could never enjoy on their own.
Future of Europe – Priorities for the next European Commission
So we are entering a new decade with a new European Commission. In my view, the key challenge for the EU is the same as it always was – to add value to our citizens’ lives in a way that national policies alone cannot achieve. And to communicate that added value in a way that reaches and engages our citizens.
Earlier this week I presented outgoing President Jean-Claude Juncker with a framed photograph of his historic address to the Oireachtas in 2018. President Juncker was truly a great friend to Ireland, but not disproportionately to any other MS. His commitment was to the unity and success of Europe as a whole, and at this particular moment in European history, Ireland required a full demonstration of EU solidarity.
I am certain that this approach will continue under President von de Leyen. There are many aspects of the Juncker College way of working that should in my view be retained. We should continue to focus on being “big on the big things”.
In other words, we should continue to build the single market and digital single market, to continue consolidation of the Euro, to continue large-scale investment, to accelerate the roll-out of urban and rural broadband, to continue leading globally on multilateral trade, to develop more equitable and manageable migration and security structures and so on.
There are some things we need to do differently, however: we need to ramp up our climate action and build in legally binding agreements from our global partners to do the same, for example in our trade agreements. Our citizens expect us to deliver on the climate agenda, and we must do so. I believe President von der Leyen’s Green New Deal can be the engine for this change.
In conclusion, ladies and gentlemen, we are entering the 2020s with many dangers on the horizon, but I fully believe that the European Union with Ireland at its heart has the strength and influence to remain a force for good both at home and abroad.
When it comes to my own portfolio, trade policy is certainly one of the most dynamic areas of EU action, and we will need to hit the ground running. This is a critical moment for multilateralism and for the fragile global trading system.
Europe needs to be the global champion of fair, sustainable and rules-based trade. This is how we can continue to deliver results and show the European Union at its best.
- Publication date
- 6 December 2019
- Directorate-General for Trade
- Trade topics
- Trade policy