IMPORTANT: Does this KILL May's entire Brexit strategy ?
(paywall) Theresa May’s Brexit strategy hits a legal minefield
http://www.telegraph.co.uk/business/2017/10/31/theresa-mays-brexit-strategy-hits-legal-minefield/
Theresa May’s quest for a “Canada plus” deal in Brexit talks has run into serious legal obstacles and may ultimately prove impossible, risking bitter disappointment and a political crisis next year as reality hits home.
Trade lawyers and European officials warn that even if the EU wants to grant the UK a bespoke deal that preserves unfettered access for goods and services, it cannot do so without granting parallel concessions to Canada, South Korea, and other countries that have free trade agreements.
This would open up a Pandora’s Box.
“It is a minefield. Financial institutions are fully of aware of the problem but we have not yet heard anything from the Government,”
Chris Bryant, an EU expert at lawyers Brewin Leighton Paisner.
Theresa May stated in Florence last month that a deal based on the Canadian CETA arrangement would not be acceptable for Britain since it would restrict trade and amount to a step backwards.
“We can do so much better than this,” she said.
Downing Street is pursuing a “Canada plus, plus, plus” model that goes much further and aims at replicating the EU Single Market and the Customs Union without actually being in either, and without having to comply with free movement.
It has long been understood that Brussels views this as ‘cherry picking’.
What Mrs May’s advisors may have underestimated is the legal conundrum.
......
Sir Ivan Rogers, the UK’s former ambassador in Brussels, told the Treasury Select Committee last week that
the offer is likely to look like “Canada Dry” once the EU side has shaved off all the illusory pluses.
....
“I think we’ll have a row straight away in 2018 on the scope and ambit of a free trade agreement,”
....
Canada’s CETA deal with the EU contains ‘Most Favoured Nation’ clauses in Articles 8.7 and 13.4 covering investment and services.
These stipulate that if any other country is granted better terms, Canada has an automatic right to an equivalent upgrade.
South Korea has its own variant, and so do other countries or blocs in various ways.
Japan will join the list when its EU deal is signed off.
This means that better access for Britain would have far-reaching implications
and would lead to ratification problems in Europe, starting with the Walloon parliament.
< even if they had been prepared to make the UK a privileged exception - a very big if - they won't vote to give all these privileges to every country that has a current or future FTA with the EU >
Milagros Miranda Rojas, a trade lawyer at Norton Rose Fulbright, said
the EU would have to grant all these countries better terms without getting anything in return.
The UK is aiming for something that may simply be “impossible”.
Trade experts say the only way to avoid triggering these MFN clauses is if Britain’s deal with the EU meets a set of core conditions:
it must create an “internal market” with free flows of goods, services, capital, and people, and must have equivalent legislation.
This would be tantamount to the Norwegian model in the European Economic Area,
which does replicate the single market, while allowing Norway to negotiate fresh trade deals with the rest of the world.
In theory it permits some sort of emergency brake on migration and has a pre-Maastricht definition of free movement – a right to work rather than EU citizenship rights.
.....
Theresa May and Boris Johnson have both ruled it out categorically.
.....
The MFN clauses have further complications.
Canada or Korea cannot offer the UK better trade terms on post-Brexit deals than those they have already granted the EU or the US without offering the same to them too.
Professor Simon Hicks from the London School of Economics said
Britain’s ties with South Korea may become more restrictive – whatever the UK wants – for hard-nosed technical reasons.
The section on legal services in the EU-South Korea deal was basically drafted for the UK
< an example of the influence the UK used to have >
The five EU-based laws firms in Seoul are all British.
This access would become a bargaining chip in post-Brexit trade talks.
Even if Korea offered the UK the same terms that it has now, problems would still arise.
British-built cars, for example, currently have tariff-free access to Korea because they meet the 55pc threshold of components originating from the EU.
After Brexit only the British components would count, and the average UK car falls short at 41pc.
Most British vehicle exports to Korea would face an 8pc tariff until the supply-chain was radically altered.
Hae-Won Jun from the Korea National Diplomatic Academy said
the Koreans will drive a harder bargain with the UK than they did with the EU-Korea deal simply because of relative economic power.
< too obvious for our "party of business" to realise >
“The UK outside the EU will be a ‘second tier’ player, considerably weaker than the ‘big three’, the US, the EU, and China.
Global Britain does not look quite as attractive from Seoul as it might seem from London,”
she said.
Britain’s pursuit of the ‘Canada plus, plus, plus’ option assumes that the obstacles are chiefly political, and that Brussels will find some way to finesse legal headaches.
This is a recipe for a painful awakening next year.
By then businesses will have been forced to trigger contingency plans and to shift operations abroad.
“They are holding on as long as they can but will have act by Christmas or early next year.
They are answerable to their shareholders,”
said Mr Bryant, adding that plans for a transition are useless unless pinned down legally.
“Vague talk is not going to cut the mustard.”