Cascade Commentary

Brexit drama continues as May restructures cabinet following Davis and Johnson resignations

Prime Minister, Theresa May, released her government’s white paper on Thursday 12 July to kick-start the forthcoming round of negotiations with the European Union (EU) after a turbulent week following the resignations of Brexit Secretary, David Davis, and Foreign Secretary, Boris Johnson. The so-called Chequers plan aims to achieve an ongoing harmonisation in UK law to the EU regarding the prevailing rules on goods and services but falls short of agreeing to continuing to do so regarding the rules on the free movement of people.

Coinciding with a visit from US President, Donald Trump, the government’s white paper sets an aim for the UK to strike new global trade relationships, in particular for the services sector, with Chancellor Philip Hammond stating that “big opportunities for increasing trade and investment” lie ahead. Critics however have slated the proposal, with former Brexit Secretary David Davis declaring that the UK has “given too much away, too easily”. So what does the Chequers plan propose? 

May is outlining for an “association agreement” to be struck between the UK and the EU such that the UK continues to have access to the single market on tailored terms. Cross-border trade between the UK and EU would continue for goods and agricultural products with the UK committing to subscribing to the EU’s rule book to do so, but the UK would have the freedom to set its own policies and tariffs for those outside of the bloc. Tackling the large issues surrounding the financial services sector, the paper proposes that “a super-charged equivalence regime” be agreed to allow for UK and EU regulatory outcomes to be aligned.

Jacob Rees-Mogg spoke up in the aftermath of the resignation of the former Foreign Secretary, Boris Johnson, to criticise the stance taken likening it to “the greatest vassalage since King John paid homage to Phillip II at Le Goulet in 1200”. Rees-Mogg shared his disappointment at the Prime Minister’s move away from her Lancaster House speech in January 2017 that had bolstered Sterling at the time with its “bold and ambitious” plans for a trade agreement with the EU.

The EU is unlikely to welcome the proposal positively in that any agreement to comply with what has been proposed will undermine the very foundations on which EU membership is built – that being the freedom of capital, services and people. To allow the UK to “cherry-pick” its terms would set a dangerous precedent for other members with thoughts to do the same.

Negotiations will continue throughout 2018 and we will keep you updated as they progress.

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