Committee For Exiting The European Union Hears From International Relations Experts

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Today, Professor Richard Whitman, Head of School, Professor Politics and International Relations, University of Kent; Fredrik Erixon, Director, European Centre for International Political Economy; and Dr Stephen Woolcock, Associate Professor in International Relations, London School of Economics, all appeared before the Committee for Exiting the European Union.

I took the opportunity to question them on the Comprehensive Economic Trade Agreement between Canada and the European Union. You can read my questions below.

Stephen Kinnock: Thank you very much, and good morning, gentlemen.  It seems that the nub of this issue is the phrase that the Secretary of State has used, which is “CETA-plus-plus-plus”.  I guess what everybody is trying to understand is what those pluses are.  It seems safe to assume that it means you have CETA as a baseline, and you then try to build services into it, because that is the big piece that is missing.  Of course, 80% of the British economy is in the services sector.

I want to drill down a bit into those services areas.  Some of those big services that are missing from CETA are air transport; broadcasting; professional services; there are issues around data protection, which affect all of them; telecoms; mutual recognition of professionals.  Take one of those areas: air transport.  Currently, UK airlines are free to operate routes both between and within other EU member states, but under the EU-Canadian air services agreement Canadian airlines are only allowed to operate routes in Europe if they start or end at a Canadian airport.

Can you give a sense of what it would take, if we have had CETA as a baseline, to negotiate air transport services as one of the pluses?  How likely is it that the UK could strike a deal for air transport services that gives us the same access as we currently have, if we have CETA as the baseline?

Professor Whitman: That is a negotiation issue.  Sorry, this is not a satisfactory answer, but you can only see it in the context of the rest of the agreement.  In other words, if that were a UK priority, it may get it, but it may have to accept less in other areas in order to get it.  It is ultimately a broader negotiating issue, in which there will be linkages between the different topics. 

I can say a bit more on professional services and some of the others.  On professional services, CETA establishes a procedure for negotiating mutual recognition of professional qualifications in all the professions, but it establishes a procedure only.  The CETA-plus would be using those procedures in order to negotiate a series of mutual recognition agreements.

Stephen Kinnock: For each sector, sector by sector.

Dr Woolcock: Yes, for each sector, and that would be driven by the sectors.  The professional bodies would have to agree to negotiate.  The machinery in CETA provides the channels through which that can then lead to a fully fledged mutual recognition agreement for those professions.  CETA-plus is not about an agreement that can be negotiated and is black and white; it is about how you use the procedures in the agreements.

Stephen Kinnock: I want to try to connect each of these services sectors to the negotiation and ratification process. The European Union is looking to have a split approach, where you have sole competence and then mixed agreement.  The mixed part would be subject to Article 218 of the treaty and to ratification in 35 national and regional Parliaments.  Is it correct that each of those services areas would be the pieces of this puzzle that would have to be ratified by 35 national and regional Parliaments?

Dr Woolcock: That relates to transport, because transport is not exclusive EU competence.  Most of the other cross-border services—financial services and the rest—are exclusive EU competence, but transport is not.  That sets transport a bit apart, as well as energy.  Provided a UK-EU agreement was within the limits of exclusive competence, you would not have the same difficulty ratifying the mixed agreement.

Stephen Kinnock: You said transport would be mixed, so that would require 35-Parliament ratification. What about broadcasting?

Dr Woolcock: It is also mixed.

Stephen Kinnock: What about professional services?

Dr Woolcock: I do not think that is mixed, in terms of cross-border provision of services, but I would need to check.

Stephen Kinnock: What about the data protection elements? Are those mixed, or do you think they are sole competence?

Fredrik Erixon: If you mean data protection regulation, that is exclusive competence.

Stephen Kinnock: That is exclusive competence. What about telecoms?

Dr Woolcock: They are exclusive competence.

Stephen Kinnock: Looking across these, some would not require full national ratification, and some would. Connecting that to the issue of timing, we assume that the EU withdrawal agreement will contain a chapter on the future relationship.  That will probably have a fairly high‑level scoping and principles of what the future relationship will look like; it will not have much detail.  We will be starting from not much detail as soon as we leave the EU in March 2019, and then we have a maximum of two years.  You have said that air transport, broadcasting and one or two others would require national ratification.  Is it feasible or credible to think that you could negotiate the terms in each of those services areas and these plus-plus-pluses, and get them ratified by 35 national and regional Parliaments before the end of the transition period?

Professor Whitman: Colleagues may disagree but I cannot think of any example where that kind of timescale has operated.

Stephen Kinnock: I wanted to touch on the issue of rules of origin. The EU takes a pretty strict position on rules of origin to ensure that foreign components in different goods and products are carefully regulated.  I wanted to ask particularly about the automotive sector.  Under the Canada-EU deal, the first 100,000 vehicles exported from Canada to the EU can get preferential access to the EU, as long as their foreign content is less than 70% of the value.  Is the negotiation around rules of origin also something that would go into a package that has to be ratified across all the Parliaments, or would the rules of origin component be exclusive competence?

Dr Woolcock: That is exclusive competence.  That is a rather special case because of the linkages between Canada and the US in the automotive sector.  The 70% non-Canadian origin was specifically provided for that case.  Normally, the value of content in the rest of the CETA agreement is 45% to 50%, insofar as value of content is used.

Stephen Kinnock: I do not know if you have done any sort of impact assessment—I hesitate to use the term, because it has become quite controversial—but it would be useful to have your sense of impacts on some of the industries we have talked about, such as air transport, with airlines such as easyJet and Ryanair, if we move to a Canada model, or for our automotive sector, which employs thousands and thousands of people across the UK. I am not asking for a scientific answer to this, but it would be useful to get your considered view on the impact on these sectors, if it were to be a CETA-type deal, particularly considering what we have just said about rules of origin and market access.

Fredrik Erixon: You ask a very good but very difficult question, of course.  It is difficult because the type of impact assessments that we can do are either to look at the legal differences between single market membership and the legal conditions under a free trade agreement, or economic assessments using models and economic instruments to figure out what this will imply for trade that exists today or the type of scenario we see for trade going into the future, with different legal differences.

Most of these models are created in order to assess tariffs and traditional bread and butter-type trade barriers that exist.  When you go into stuff like transport services, air services and professional services, it becomes extraordinarily difficult to figure out, in real terms, the difference between a binding that you have in a free trade agreement and what exists under single market membership.

We need to go down sector by sector, and sometimes even company by company, to figure out their reality and what the different scenarios entail for them.  Those who have done that for different sectors—for instance, on issues on rules of origin— say that that will be a problem for automotive production in the UK that has Japanese parts, because it is the non-European investors in the UK in the automotive sector that tend to have a significant import from non-EU countries in order to assemble and produce products here.  That we know, and we know that the Japanese Government have been pretty direct in conversations with the UK Government about the problem that they foresee under different scenarios.

On air transport, you specifically referred to the difference between being in CETA and being in the single market, as to whether you, as a UK operator, can fly between non-UK European destinations.  Do you have to start or land in the UK in order to fly between European countries?  In practical terms, if I understand it, it comes down to the ownership of some UK-based operators and the extent to which they have European ownership that exceeds thresholds under the EU-wide agreement that exists.  There has been lots of writing and commentary from these companies on how they plan to deal with these issues if there is no agreement between the UK and the EU that goes beyond CETA and comes much closer to what exists today.  While that would present problems, my understanding is that they have an idea of how to deal with those problems in order to avoid serious dislocation or disruption of the type of arrangements that they have today.