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Blogs

EU-UK balance of rights and obligations: All-you-can-eat or pay-per-use?
No .eu for British business?
A US-UK Free Trade Agreement?
A single Brexit moment for business?
VAT and Brexit?
Tariffs - how to find your way?
What does ‘transition’ mean for business?
Repealing Uncertainty?
We are the 80%, why is nobody talking about us?
Citizens rights post Brexit: Could EU sole traders in Britain have their cake and eat it?
Voting on Withdrawal: take it or leave it?
What happens with my orders for goods either side of Brexit Day?
The Guidelines at a glance ...
Article 50: will anything change for business?
EU Data Protection rules after Brexit, ditch or do?
UK EU exit and small businesses

18 April 2018

EU-UK balance of rights and obligations: All-you-can-eat or pay-per-use?

This week, the UK and the EU will talk about their new relationship in official terms for the first time. David Davis allegedly said that the UK can get ‘pretty substantively close’ to a Free Trade Agreement by October, while the EU only aims at agreeing the ‘overall understanding’ of the framework for the future relationship with the UK. The truth will be somewhere in the middle, but what is sure is that a new balance of rights and obligations will need to be agreed.

Access to the EU and the UK markets is now governed by EU treaties and rules, but this is scheduled to change from 1 January 2021. Therefore, a new set of terms and conditions need to be agreed. Theresa May said in her Mansion House speech of 2 March: “We will not accept the rights of Canada and the obligations of Norway”. The EU replied: “The EU cannot grant the UK the rights of Norway with the obligations of Canada”. Both were referring to the different trade arrangements the EU has with those countries.

Rights and Obligations

Let’s have a look at list of the current rights and obligations. They guarantee ‘all-you-can-eat’ access to the EU, and the UK, for people and businesses on those territories.

Over the coming months we will see how this list of rights and obligations will be translated into a new relationship. Will the list allow ‘all-you-can-eat’ or ‘pay-per-use’ access to the EU? In other words: will a business be able to sell to the EU or the UK without paying tariffs or having to think about separate rules, or will there be costs every time a product crosses a border? When the parties agree, the terms will be set in stone in a protocol attached to the Withdrawal Agreement that both the EU and UK Parliaments will vote on at the end of this year/beginning of next year.

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16 April 2018

No .eu for British business?

In April 2006 I registered my first .eu domain name. I now have several. Little did I know that a referendum could end the joy.

The Commission published a notice on .eu domain names in the UK and it looks like I will not be able to renew these after Brexit. However, my business is active in the European market and a .eu extension puts me on the map. It lets Google know that I am targeting that region, it is a good alternative to .com (of which fewer names are available), and it ensures a substantial online presence. However, the Commission’s view of Brexit would close off that Internet space. From B-day, competitors with an establishment in the EU can snatch my .eu names, leaving me with what is left of .com or .co.uk domain names. What can be done about this?

As with many Brexit issues, examining the nitty-gritty of policy documents is necessary to understand the likely business impact. Bear with me.

The Commission notice says that EU rules on .eu domain names will no longer apply to the UK from the day it withdraws from the bloc. From then on, businesses, organisations and individuals in the UK cannot renew or buy a domain name with a .eu extension.

So-called Country Code Top Level Domain Names (extensions such as .uk, .be) are managed by ICANN and IANA, the organisations that oversee global IP address allocation, but countries and territories are free to require a local presence for the use of their extension. This is the case, for example, for .de and .ca, but also for .eu.

Losing access to .eu will be the consequence of becoming a non-EU country. However, this will impact the region’s most mature online economy, with some online retailers targeting EU countries by using .eu. Loss of access will force UK companies, organisations and individuals with .eu names to shrink their online presence. In general, it has become easier to get domain names, and not more stringent. As far as I know, similar changes to eligibility for extensions have not happened before, and I wonder what ICANN/IANA’s view is on this move. My hope is that their UK representative will raise this issue with them.

I fear that little can be done. The Government has said the UK will leave the Digital Single Market, and the EU is very protective of its extension. This is because it is not simply an address on the world wide web; .eu is also an identity. Country Code Top Level Domain Names were not a topic for discussion during the trade talks between the EU and Canada. As things stand now, there is little chance this will be on the EU-UK negotiation table, but you never know.

To preserve .eu domain names post-Brexit, a business can do the following:

You can also embrace and rebrand, and experiment with extensions such as .boutique .business .biz .buy or .buz, or maybe .guru (anyone?).

As to my own .eu domain names, some of them will be re-homed in the EU, and others will get exciting new extensions. Watch this space!

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24 February 2018

A US-UK Free Trade Agreement?

A delegation from the US Congress visited London last week. They form the cross-party British-American Parliamentary Group and discussed trade with MPs and Peers. The special US-UK relationship could be witnessed from the corridors of the House, but how likely is it that businesses can soon benefit from free trade across the pond?

Forget ‘Canada Plus’, ‘Norway’ or a ‘jobs Brexit’, EU or US is the real choice for the UK. The US and the EU are the UK’s most important trading partners. However, a deal with one might scupper a deal with the other.

On both the US and the UK sides there is appetite for closer trade links. However, as long as the UK is negotiating with the EU, it cannot negotiate with the US in earnest. As we know, negotiating trade deals with non-EU countries is tricky during the transition period, because the EU and the UK need to finalise their trade deal and it is unknown whether a customs union with a common external tariff will be agreed.

The EU has a head start with regard to the US. The UK already has the same rules as the EU, and the outlines of an EU-UK Free Trade Agreement (FTA) will be discussed from this April, with the finer details to be filled in from March next year. An EU-UK FTA could be ready towards end 2020. This means we could be looking at explorative US-UK trade talks from March 2019 and serious negotiations from 2021 the earliest.

But the key political issue, again, is regulatory alignment. Any EU agreement with the UK to stay aligned with EU rules, standards and requirements, could diminish the appetite for, and UK leverage in, US-UK negotiations. For example, the EU’s regime with regard to the free flow of data may deter the US.

In an ideal world the UK would have its own rules that are mutually recognised by its trading partners. But, in trade negotiations, alignment of rules is sometimes desirable for improving trade flows. For every business sector, the Government will need to consider the level of alignment, in order to facilitate trade. But, if the UK Government decides to move away from easy trade with the Single Market, it can be more open to oiling the wheels for US trade. We don’t know yet what the final balance will be, but this is surely on the minds of some politicians.

However, the UK has to go through the negotiation process with the EU first, before it can seriously start trade talks with the US. Therefore, a US-UK Free Trade Agreement is not yet on the cards and also depends on the new EU-UK trade relationship.

Post Script 11/4/18: As we know now the UK can now negotiate trade deals with other countries during the transition period.

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31 January 2018

A single Brexit moment for business?

Remember, businesses have been promised one moment of change, enabling them to adjust to a new legal environment only once. But when will this be? Will it happen? And when will we know? Below I will shed some light on the talks on transition.

If negotiation of an implementation or transition period is successful, Brexit day can go unnoticed. This is because the EU and the UK want a ‘status quo’ transition whereby nothing changes. Buying solar panels in the UK, or importing wine from Italy on 29 March 2019 will be exactly the same as on 30 March, 14 April or 27 November. At least that is the plan.

The EU and the UK agree for many parts on a transition period. Yet, its start on 30 March 2019 is not set in stone. This is why.

First, the parties have to agree on whether the end date of the transition period is flexible or fixed. During transition an EU-UK Free Trade Agreement will have to be negotiated. This is estimated by the Government to be finalised sometime in 2021. If the transition expires before the deal is fully ratified, businesses will be left in legal limbo. From the expiry date until the trade agreement is in effect, WTO rules will apply where they exist. After that, the new terms will be adopted. This scenario would defeat the entire purpose of creating one moment of change.

Second, a ‘status quo’ transition is not as simple as it sounds. All Single Market rules and European Court rulings will be copied and pasted to create the perfect replica of the EU Single Market. However, the EU’s 55 Free Trade Agreements with e.g Canada and Singapore, and some 750 international agreements, are not easily copied, as non-EU countries are involved. South Korea and Chile have already raised concerns. Yet, the majority of international agreements are vital for the functioning of the Single Market. The most well-known example is aviation. The European Common Aviation Area and the Open Skies agreement ensure that UK airlines can fly to, and from, any point in the EU and the US.

Finally, customs are not straightforward either as this month’s discussions on a Customs Union, a Customs Arrangement or a Customs Partnership show. One of the problems of the UK being outside the EU after March 2019 is for example the ‘rules of origin’. These rules determine the origin of a product and assign preferential trade terms to it. If, say, car parts come from the UK and the UK is outside the EU, the assembled car may no longer be said to be produced in the EU. This has implications for trade rules and tariffs.

A single change-over date for business depends on whether a Free Trade Agreement materialises in time, and if not, whether there is flexibility to extend the transition period. It also depends on whether legal experts can square the circle of copying and pasting international agreements into a transition deal, and whether the parties agree a customs arrangement that is identical to the current EU Customs Union. All this has to be solved by autumn this year.

Post Script 11/4/18: As we know now the transition period ends on 31 December 2020.

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27 November 2017

VAT and Brexit?

After Brexit the UK will be a non-EU country when it comes to VAT. What will this mean for businesses? Read on, I have picked out a few changes.

The Brexit negotiators are not yet talking trade, but the Commission has made it clear that retaining the European VAT system will not be on the cards. It means that the UK will no longer be bound by the EU VAT regime, including ECJ rulings, after it has left the EU. It will be free to set rates, if any, or even to devolve VAT to Northern Ireland, Scotland and Wales. In any case, VAT on trade of goods and services with Europe will change from 2021.

A British company buying from an EU business will no longer be able to do this VAT-free. Instead, import VAT of 20% will have to be paid to HMRC for the goods to enter the country, if this is what the Government decides. This can be a disincentive for EU companies to engage with the UK. It will simply be easier to do business with EU firms as they continue to benefit from VAT-free sales among each other. However, the EU is overhauling its VAT system so that business-to-business sales between EU countries will no longer be zero-rated. If this happens, the difference between selling to a company within the EU (zero-rate) or to a business in post-Brexit UK (import VAT) would eventually disappear.But this would be a good couple of years away.

A British company moving parts within a supply chain, e.g. a manufacturer of car parts, will lose the possibility for ‘triangulation’, a legal means to avoid registration for VAT with every border crossing of an unfinished product. Businesses with intricate supply chains, such as the pharmaceutical and the automotive industries, should aim to reduce the number of times parts and products are crossing the border.

There are also changes for businesses in the digital and e-commerce sectors. A British business will no longer be able to use the EU’s system to pay and declare VAT from their own home via the so-called ‘VATMOSS’ (VAT Mini One Stop Shop) for sales to European clients. For example, a business selling software to the European market will have to register for VAT in the EU. US digital giants often use VATMOSS via the UK to handle VAT on their pan-European sales. To continue to do so they will have to register in one of the 27 remaining EU countries.

UK e-commerce companies can no longer benefit from VAT-exemptions for online business-to-consumer sales. For example, a British firm selling clothes online to the Netherlands pays no VAT until its sales reach €100,000, the Dutch distance selling threshold. Instead, it will have to pay and register for VAT as of its first sale. Losing these VAT-exemptions in the EU will particularly impact small firms, who are often not VAT registered, sell at lower quantities and values, and could be deterred from exporting to the EU.

Brexit is unprecedented and caution is due when considering its impacts. If the Government will indeed cut its VAT ties with the EU, intended or not, there will undoubtedly be effects of unwinding the EU rules that now underpin the UK VAT Act. However, the EU VAT regime is also in flux and some of the changes might unexpectedly even out.

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24 October 2017

Tariffs - how to find your way?

Despite new dynamics in the Brexit talks, ‘no deal’ is a possibility and WTO rules could apply from March 2019. To anticipate costs, how can businesses know about tariffs for their product?

The EU countries have a common import tariff, based on WTO rules. As of 30 March 2019, the UK would have the same trading conditions as, for example, the US or Australia, unless a transition period and a customs arrangement are agreed. This is the intention of both parties, but talks and governments can collapse.

A number of online databases can help you find applicable tariffs. The EU has one called ‘TARIC’ and the WTO has several ones with different levels of detail. Both use ‘tariff lines’ based on the ‘Harmonized System’, an internationally agreed categorisation of commodities. The art is finding the right product code and its matching tariff as an indication of potential costs. For example, 0712 20, dried onions, attracts a 13% tariff.

Dealing with tariffs is business as usual for seasoned exporters but could be daunting for companies that only dispatch to the EU. To picture the UK trading with the EU without a deal, it can help to look at the European section of the export support websites from Australia, New Zealand or the US.

Guidance on tariffs on UK-EU trade doesn’t exist yet, but could be needed for planning purposes. However, the chances are businesses would never need to use it to ship across the Channel as it is expected that the EU and the UK will avoid tariffs where possible.

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21 September 2017

What does ‘transition’ mean for business?

Many people agree that after the UK leaves the EU on 29 March 2019, a transitional period to ease into a new legal regime is desirable for businesses. Assuming there is one. Risks of a ‘cliff-edge’ scenario where trade barriers can spring up overnight cannot entirely be ignored. This is why.

The UK Government will aim for a bespoke arrangement that grants the same access to the EU market as we have now, in the period between exit and an EU-UK trade deal. For this to happen, the controversial EU Withdrawal Bill (‘Repeal Bill’) needs to pass in Parliament. Also, the EU and the UK need to agree on citizens’ rights, the financial settlement, and on the movement of goods and people across the border with Northern Ireland. Finally, the transition itself has to be agreed by September 2018 for inclusion in the divorce agreement. These steps would have to be completed in less than 12 months.

Another option for a transition is to perpetuate current arrangements until a trade deal is in place. This would mean that for a limited period after exit, the UK continues to stay in the European Economic Area (EEA), a single economy comprising the EU member states plus Norway, Iceland and Liechtenstein, and hence nothing would change. Although this would be the best option for business continuity, it is unknown whether this is legally possible.

EU leaders will decide on 19 October whether transition can be discussed. Watch this space!

A longer explanation of the transition issue has been published by The Influence Group.

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27 July 2017

Repealing Uncertainty?

The Government has now published its long awaited big Brexit bill. The European Union Withdrawal Bill, also known as Repeal Bill, provides a mechanism for ‘domestication’ of EU-derived law and repeals the European Communities Act 1972 that gives effect to the EU treaties in UK law. Repealing this Act is necessary to regain the sovereignty that Britain lost when it joined the EU (although some of which may have to be relinquished to whomever is offering us a great deal). Domestication of EU-derived law is needed to gradually untangle the EU and UK legal orders.

The Repeal Bill works as follows. Imagine you are leaving your job and are tidying up unfinished business for a professional and dignified transition to another job, or another life. After years of engagement you have 2,000 business cards and one day to sort them. The best strategy is to put them in a big bag and comb through them later on.

This is what will happen when the EU acquis (the body of EU law) is being domesticated. In one stroke of a pen, or Delegated Act for that matter, EU Regulations and Directives are moved on to the UK statute book. I can hear you say ‘but EU legislation is already part of UK law, wasn’t this precisely the problem for many who voted to leave?’. Indeed, EU law is currently either directly applicable or is implemented into UK law. What the Bill does is to convert and preserve EU law. However, after we have left, MPs would be free to keep, amend, replace or remove EU originated law in the UK. What’s more, the Court of Justice of the European Union will no longer be able to issue rulings on this body of law.

Domestication of EU law prevents a regulatory cliff-edge where overnight, a significant number of laws would no longer apply upon the UK leaving the EU. The EU Withdrawal Bill ensures that laws are the same pre- and post-Brexit, and that changes will be gradual. However, its simplicity and nobleness are as tempting as deceitful.

Regulatory divergence, which occurs when two bodies of law grow apart, is eyeing us in the short and the long term. This could spell bad news for internationally operating businesses, whether from the UK or elsewhere. It will happen if the body of retained EU law on the UK statute book is not updated with their version in the EU. Laws may be the same on leaving the EU, except that if we do not keep up with changes to EU law, we will quickly have an older version. Like operating systems that are not updated regularly, this can leave the door open to complications. Problems may get worse if legal patches are not provided. Also, changes of these laws by our own Parliament could result in more divergence if domestic issues are prioritised over barrier-free access to the single market.

A business cannot blindly assume laws will all remain the same post-Brexit, and clarity on the status of each piece of law is required. Has it been converted/preserved and can divergence be expected or anticipated? When will Parliament scrutinise it and could red tape be removed or be added? Which laws will be under negotiation and will they get the domestication treatment later on? Have Parliament or Government sneaked in policy changes when converting EU law?

Then the big question is: When is B-Day? Its due date of 29 March 2019 can be pushed back by extension and/or transition periods, or may not materialise at all.

The Brexit process is characterised by political setbacks, timing issues, lack of clarity and plans, leaving business in limbo and unsure how to capitalise on future opportunities. There is no doubt a mechanism for separating laws, such as presented in today’s Bill, is needed in the Brexit process. But can it repeal uncertainty?

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29 June 2017

We are the 80%, why is nobody talking about us?

As a business that provides services, it concerns me that while the UK is an 80% services economy, has shaped the EU’s rulebook and has a trade surplus with it, there is little discussion about selling services to the EU after Brexit.

It seems simple, either a contractor wants your services or they don’t. But services are regulated, often at national and local level, and this can mean barriers to trade. The EU is tackling them through EU-wide licensing, mutual recognition, and ensuring non-discrimination of EU companies.

The forthcoming European Services e-Card is an example of what the UK may face as a third country accessing the EU market. The e-card shows that a business is compliant with regulation in its own country and should reduce administrative burden in any other EU member state. The UK pressed hard for it in Brussels.

Will the UK adopt the e-card? Will this be through a trade agreement? Would the UK recognise e-cards from EU businesses? UK companies with subsidiaries in the EU can have an e-card, but it is unknown whether they would be treated as a business headquartered in the EU. All this would be a matter for trade negotiations in the Brexit process.

This is an example of the sheer granularity of issues when thinking about access to the European services market. It shows nobody could fully answer the question of what it will look like post-Brexit, despite the importance of the services sector.

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12 May 2017

Citizens rights post Brexit: Could EU sole traders in Britain have their cake and eat it?

Last week saw two meetings on EU citizenship rights, and a CJEU ruling. The status of EU nationals in the UK and UK nationals in the EU will be the first item on the negotiating agenda next month. Deciding the fate of 4.2 million people will set the tone for the rest of the talks and form the prelude to a new EU-UK partnership.

Not only am I one of these EU nationals in the UK, but I also run a business, and so the changes are doubly important for me.

Negotiating citizens' rights on either side of the Channel will be fiendishly complicated, with the risk of many categories of people being ambiguously covered by an agreement. However, the complexity could also mean a small advantage for some. For example, EU sole traders in the UK might have the best of both worlds (relatively speaking).

Suppose that negotiations go to plan and I keep the same rights as before Brexit. This means freedom of establishment, including activities as a self-employed person (art. 49 TFEU). In that case I will be better off than British sole traders in Britain with regard to trading with the EU, and also EU companies accessing the UK market.

This is because the rights that would be retained allow me to continue to develop commercial activities in the UK, something that may no longer be available under the same terms for EU companies outside the UK. Also, my Dutch nationality includes EU citizenship allowing free movement within the EU, something that British traders will lose.

In this scenario, I can continue to provide my services freely in the UK and Europe because my rights, including self-employment, would be guaranteed under the forthcoming Withdrawal Agreement.

I am a European citizen who runs a British limited company and selling services to the EU may mean discrimination when the UK is outside the European single market. On the other hand, I am within my rights to conduct additional business as a sole trader, and here the legal status of my business coincides with myself as a person and therefore my business activities will have freedom of movement throughout the EU equal to my own.

This means there could be a competitive difference between an EU sole trader in the UK versus an EU trader in the EU and also a British trader in Britain. One of the EU red lines is that the UK cannot have a better deal outside the EU than inside it, therefore the latter two categories will only have access to the UK and EU markets respectively, given the terms that will be negotiated under the new EU-UK partnership.

As a businesswoman, legal uncertainty is always unwelcome, but it is worth noting that there are differences to the extent to which the 4.2 million citizens are victims and that a new legal reality could mean small, unexpected benefits. However, this does not improve the taste of the cake.

This article appeared in Public Affairs Networking on 12 May 2017.

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29 April 2017

Voting on Withdrawal: take it or leave it?

The EU27 have now agreed the negotiating guidelines for the talks on the UK’s withdrawal from the European Union. From June, EU UK negotiations on the divorce terms will kick off. These will then take at least 16 months. When there is an agreement, who will have a final say on it?

There will be two negotiating parties: 27 EU member states (EU27) and the UK. The EU will conduct talks on behalf of 27 member states in the form of Chief Negotiator Michel Barnier, but the EU negotiating team will regularly consult with its members on positions to take. Obviously, the UK cannot participate in deliberations about its own withdrawal according to article 50 (4) of the Lisbon Treaty: ‘(...) the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it’. So the EU27 (EU28 minus UK) decide on negotiations carried out by the EU negotiating team, that acts as one party.

When there is an agreement, the EU and the UK need to validate it. The UK Government said both Houses of Parliament will have a vote on the Brexit deal. In addition, the Government wants the UK Parliament to vote before the European Parliament does.

In the EU, validation of the Withdrawal Agreement (irrespective of a potential trade deal, that’s likely to be different) is done through 1) consent of the European Parliament and 2) agreement in the European Council (Heads of State and Government of 27 EU member states) with a qualified majority.

Now, this qualified majority is special. It means that at least 72% of the EU27 comprising at least 65% of the population of the EU27 need to agree. This is an exception to the normal qualified majority rule, which is 55% of the EU28, comprising 65% of population of the EU28. See art. 50 (4) TEU and art. 238 (3) (b) TFEU.

This rule rule makes it more difficult to get an agreement through: almost three quarters (72%) of the EU27 are needed for a qualified majority. It also makes it easier to block an agreement: at least the number of member states representing more than 35% of the EU27 population, plus one member state. This will favour big member states. In theory, France, Germany and any other member state would be able to block an agreement. If the Council doesn’t reach a qualified majority, the deal will be sent back to the negotiating table, the remaining negotiating period permitting.

Is this 'take it or leave it’ for the UK? On closer inspection of article 50, it seems to be in a weaker position than the EU, that has a veto in the European Parliament, and a relatively easy way to block the deal in Council. However, it will be political factors that determine who has the upper hand. If the EU27 demonstrate unity of purpose, they will be in a better position to present an ultimatum to the UK. If they cannot, the EU27 are less able to dictate terms. Ultimately, the UK can walk away without an agreement, although this will be seen as a lose-lose outcome.

Post Script 11/4/18: We know now that the Parliament will have a vote on any Brexit deal the Government concludes.

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26 April 2017

What happens with my orders for goods either side of Brexit Day?

No early May Bank Holiday weekend this year for leaders of 27 EU member states, as they gathered to agree guidelines for the forthcoming negotiations with the UK. The official talks haven’t started, but here is a glimpse of the future for those who do business on the European single market.

The withdrawal negotiations kick off this summer. As well as issues such as citizens’ rights, financial obligations, and Northern Ireland, its first phase is also likely to deal with uncertainties about goods placed on the market before the UK’s withdrawal from the EU (‘Brexit Day’).

Goods made available for purchase before Brexit Day would ideally be permitted to be traded on the same basis afterwards. For goods brought to market after Brexit Day, EU-UK trade terms will be anybody’s guess, and will remain so for a while.

We might have to await the second phase of negotiations, when both parties identify an ‘overall understanding’ of the future EU-UK relationship. This is where market access should come into the picture. However, it is unknown when the negotiators will go down to the nitty-gritty of customs procedures, tariffs, quotas and rules of origin, let alone product rules. The EU is adamant that a trade deal will only be finalised after Brexit Day, which, smooth negotiations permitting, is scheduled 29 March 2019.

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31 March 2017

The Guidelines at a glance ...

EU President Donald Tusk was quick to present draft guidelines for negotiations after the UK activated article 50 to leave the European Union. Here is my assessment of what they could mean for trade, if adopted by the EU27 on their summit on 29 April.

The EU is taking its time. It wants an orderly withdrawal through a phased approach. This means first negotiating a Withdrawal Agreement and then other agreements such as a trade deal. The UK, by contrast, prefers negotiations to be rolled into one and have them done by 29 March 2019. Let’s look at the EU approach.

The following will need to be agreed for the Withdrawal Agreement:

The negotiating parties have 16 months to agree on those. If there is ‘sufficient progress’ with them, the parties may also decide to make a start with negotiations on:

The Brexit negotiations are unprecedented. For example, there are 54 trade agreements, but there is no country that has a deal with the EU that has:

Also, the EU’s red lines are:

The above is what an ‘orderly and phased approach’ means. On the one hand, it is good for businesses to get gradually used to life outside the EU and reduce uncertainty. They can also still enjoy full access to the world’s biggest market on their doorstep, at least for the next couple of years.

On the other hand, if the UK is bound by EU rules, during transition, it would not be able to strike deals with other countries until it has fully left the EU, which may take years.

However, the world is moving fast. The UK is going it alone and needs to be part of the international dealing room sooner rather than later. Also, it is estimated that the majority of growth will originate outside the EU. Finally, the shaping of trade rules is moving from multi-country deals to bilateral deals, which is in the UK’s favour. If it has to wait until everything with the EU is agreed, it may miss out on the the current reshuffling and newly forming trade alliances.

Both positions of (1) a phased approach and (2) concurrent negotiations are fully understandable, and speed will have to be balanced against orderly withdrawal and legal certainty.

Post Script 1, 11/4/18: The guidelines of 29 April 2017 still form the basis for the negotiations. They were complemented by two sets of guidelines on 15 December 2017 and 23 March 2018 respectively.

Post Script 2, 11/4/18: As we know now the UK can now negotiate trade deals with other countries during the transition period.

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27 March 2017

Article 50: will anything change for business?

This week will see two major steps in the Brexit proces. The UK is withdrawing from the EU under ‘article 50’, and the Government will publish a White Paper on the 'Great Repeal Bill'.

Future UK-EU trade could mean tariffs, rules of origin, and changes to the recognition of licences, employing staff, opening branches, and travel. However, regulation is the biggest business issue.

The Government will inherit EU regulation onto its statute book through the ‘Great Repeal Bill’, but will also scrutinise each piece of law. This could lead to uncertainty.

The ‘Great Repeal Bill’ will offer certainty for business in the short term, as EU and UK laws will be the same. However, UK ‘EU’ law may change under a next government, and the EU will update its laws as and when necessary, so rulebooks could start to diverge. Also, the UK will adopt case law of the European Court of Justice. But will it follow future rulings? Will I need to know different versions of the rules, depending on my customer?

Now it has received the UK’s notification to leave, the EU will decide on the negotiations. Talks will last until October 2018 for the UK to leave in March 2019. Ideally, the deal comprises a transition period, and withdrawal and trade terms. However, trading under WTO rules remains a possibility.

Going forward, questions for businesses are:

‘Art. 50’ is happening. Will anything change for business? Not immediately. But plan ahead! Anticipate changing trading conditions and chart uncertainties.

Post Script 11/4/18: ‘The Great Repeal Bill’ has been renamed ‘EU Withdrawal Bill’ when the new Government took office last summer.

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24 February 2017

EU Data Protection rules after Brexit, ditch or do?

The General Data Protection Regulation (GDPR) will hit the UK’s shores in May 2018 to replace the current legislation. But what happens when the UK leaves the European Union (EU) a year later in 2019?

As long as the UK is a member, it has to abide by all EU legislation. So European companies, UK companies and, indeed, all companies operating in the EU, will have to comply with data protection rules, encompassing:

After the UK has left the EU, the Government’s forthcoming ‘Great Repeal Bill’ will put all EU legislation on the UK statute book to ensure businesses don’t face a cliff-edge of legal uncertainty the day the UK leaves. The idea is that the UK Parliament would scrutinise each EU law and decide which ones would be retained, amended or dropped.

However, this could mean creeping non-tariff barriers as EU and UK rules increasingly diverge through updates and court cases. Also, legal rights in cross-border trade can no longer be enforced directly by companies via a UK court, as the UK will leave the EU arbitration system.

As long as EU data protection rules are not ditched by the British Parliament, or die in EU-UK negotiations, please take heed of the upcoming GDPR, at least until 2019, and likely beyond.

This article was also published in Trade and Investment Update, British-American Business.

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27 January 2017

UK EU exit and small businesses

The Federation of Small Businesses (FSB) published a preview of its report on what small businesses want from Brexit with regard to markets, jobs and skills, EU funding and regulation. Nearly 1,800 small firms participated in the FSB survey on future trade with EU and non-EU markets (FSB, 2016). This is what they found:

While the EU single market is the largest market for small exporters, FSB also believes that there will be new global trading opportunities for small firms after the UK leaves the EU. However, FSB stresses that small firms would need support in accessing those markets.

New trade relations need time to become established. Therefore, it is vital there is a transitional arrangement with the EU as long as there is no EU UK trade deal and the UK has not concluded deals with the rest of the world. In this way UK exporters may continue to benefit from the preferential rates the EU has negotiated with 55 non-EU countries, and from unfettered access to the single market.

It is difficult to predict whether, and how, a transitional deal will materialise. Therefore, it is important to understand potential changes to overseas trading conditions when the UK exits the EU.

Choosing export destinations

One way that trading conditions could change if the UK leaves the single market and/or the customs union is the introduction of (non-)tariff barriers. For example, businesses could be faced with new licensing requirements, taxes, standards, labelling requirements and testing procedures.

FSB asked its exporters to what extent such barriers determine which countries they export to. This is what they found:

Finally, FSB looked at what exporters and importers think about how the UK's from the EU will impact on future trade (69% of small exporters are also importers). This what they found:

The forthcoming report will focus on the ease, cost and importance of doing business with EU and other countries. TradePeers is looking forward to the final report, as there is little known so far about the effect of the UK’s EU exit on smaller firms and their access to markets.

Preview of FSB’s Brexit Research Series

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