PRIORITIES FOR EUROPEAN UNION EXIT NEGOTIATIONS
Published on Tuesday, February 22 2017
BritishAmerican Business speaks for 500 UK and US companies on both sides of the Atlantic from our London and New York head offices. Our membership includes leading British companies and many of the largest US investors in the UK, contributing significantly to jobs, growth and innovation.
Our members are ambitious when it comes to their activities in the EU. We advocate an outcome that protects British business interests, secures US investment and investment-related jobs in the UK and promotes the UK as an attractive destination for investment going forward. The UK’s relationship with the EU must work for business. This paper lays out BAB’s key principles for its engagement with the UK government and main priorities for Britain’s exit from, and new partnership with, the European Union.
• Committed to help building a fair, competitive and global Britain Britain has a long history of being an advocate for innovation and a business-friendly economy. This is why British-American businesses do business in and with the UK. BAB is committed to help building a fair, competitive and global Britain that draws on its success as a business destination and works in partnership with the EU and other countries.
• The importance that an agreement is reached The success of British-American businesses in Britain is built on the economic integration of the UK and the EU. This integration will continue to serve as an anchor for future growth and innovation. It is key to transatlantic business that the UK Government does everything possible to ensure that an agreement with the EU is reached. Failure to reach an agreement before March 2019 will result in significant consequences for firms and the business climate.
• Business needs time to adjust In order to minimize potential disruption and allow for business to maintain cross-border services and operations, the UK government should agree on a comprehensive implementation phase with transitional arrangements at an early stage of the negotiations so that business can prepare and adjust to the new arrangements.
• New forward-looking solutions through government-business collaboration The negotiations between the UK and the EU are going to be complex. New and forward-looking solutions will be needed that serve business and build on the respective strengths of the UK and EU. Early and regular consultation with business will therefore be essential throughout the process, including on the critically important Great Repeal Bill.
1. Implementation Phase The UK’s departure from the EU is a rupture for British-American businesses even if a successful new partnership is to be achieved. Clear and practical transitional arrangements are essential to ensure that the rules of the game do not change from one day to the next.
Business need time to adapt to the UK’s new relationship with the EU, whatever shape this might take. An early commitment to an implementation phase will provide the certainty and predictability needed and mitigate negative impact on the UK economy.
If transitional arrangements are not guaranteed at an early stage foreign investment will be unduly put at risk as companies will need to implement contingency plans with longer lead times. As a historic beneficiary of Foreign Direct Investment (FDI), particularly from the US, the UK is vulnerable to companies repatriating jobs, relocating headquarters and offshoring parts of their business elsewhere. Protecting these jobs and investment must be at the heart of the government’s strategy, with transitional arrangements a key tool to do so.
2. Market Access For British-American businesses, borderless trade and investment has spurred innovation and growth. It is key to business that the UK prioritizes the freest and most frictionless trade possible in goods and services between the UK and the EU. This is particularly important as many British-American businesses have supply chains that go across borders in several EU countries.
Manufacturing companies, for example, rely on complex cross border supply chains. Any changes to tariffs and non-tariff barriers will adversely impact on the ease at which they can conduct their business operations in the UK. If this becomes unsustainable it could lead to loss of jobs and jeopardize investment. Situations such as this should be avoided by securing a market access agreement or alignment that most closely resembles the UK’s current membership of the Single Market.
The UK Government should engage in open negotiations with the aim of granting each other mutually beneficial and reciprocal market access that will not disadvantage business.
3. Regulation In many areas, the EU provides a common regulatory framework that provides the stability required to invest and allows for British-American businesses to move goods and services with as few obstacles as possible. Any future UK regulation should look to mirror, to greatest the extent possible, the existing EU framework and build in appropriate change control mechanisms, while embracing opportunities to reduce the cost of unnecessary regulation. The UK should also seek to comply with existing international regulatory frameworks.
4. Talent Mobility People, their ideas and their productivity are indispensable to any nation’s economic health and vitality. Attracting and employing skilled workers by drawing on a pool of talented professionals, whether it be home-grown, across the EU or international, is imperative in yielding a successful economy.
For the UK in particular, our history of immigration and the role played by immigrants has been closely tied to the economic success of our nation. British-American businesses rely heavily on the ability to recruit highly-skilled and scarce talent from EU countries with no administrative burdens.
To develop the employee skills, knowledge, and experience necessary to ensure the continuing viability and growth of their businesses, companies – small and large – must be able to continue to hire and/or move employees into different roles throughout their organisations with minimal formality and obstruction. Restrictions on the movement of skills and talent will impede the ability of businesses to properly manage their people and invest for growth.
We note the complexity and sensitivity the UK Government has acknowledged when it comes to taking control of UK-EU immigration. We encourage the UK government to carry out comprehensive impact assessments for affected sectors as well as options that allow for an appropriate transition process where necessary.
The UK Government should aim to preserve the most advantageous benefits of EU-UK immigration. This includes intra-company transfers, special status for high income / value employees and the ability to draw from across the EU to address skills and labor shortages in specific UK sectors, such as in civil construction across projects in key infrastructure such as transport, energy, communications, and housing.
The UK government should also provide reassurance about the status of EU citizens and their families currently working in the UK, as well as the rights of British nationals in other member states, as early as possible during the negotiations with the EU.
5. Data Flows and Digital Services The UK has a highly developed and competitive digital economy which impacts sectors across the economy from finance and retail to film and entertainment. It is essential that there are no additional restrictions on trans-border data flows, nor rules which impose data localisation restrictions in the EU or the UK. The UK must be seen as an equivalent regime for data security and data protection to ensure free data flows for all sectors. The government should seek adequacy determination from the EU for the UK. Retaining the EU General Data Protection Regulation (GDPR) due to come into force in 2018, is an important first step in this process.
While the UK negotiates to leave the EU, it should remain focused and engaged on the evolving EU Digital Single Market. Efforts should be made for continued alignment with the completion of a Digital Single Market, including all components that serve the UK-based industry such as on remedies and appeals. Whatever the UK’s future relationship with the EU these EU-wide regulations will affect British and American companies operating on the continent.
6. Trade A key attraction for British-American businesses has been the UK’s role in supporting a global trade liberalization and a rules-based system for trade. For British-American businesses, it is crucial that the UK maintains its influence and integration in the international trade arena.
The first priority for UK Government should be to build a successful economic relationship with the EU, its largest trading partner. In regards to trade with non-EU partners, the UK government should explore primarily options in which the UK would accede to, or otherwise take advantage of, existing EU trade agreements and texts.
In addition, the UK Government should engage with key trading partners – such as the United States – and relevant business communities in a dialogue to explore options for further economic integration, including sets of outcomes deliverable in the short-term.
Dialogues should focus on market access for good and services, mobility of talent, trade and investment incentive schemes and collaboration in the field of research and innovation, among others.
The new arrangements after Brexit will require imaginative and careful consultation on trade policy and negotiations with all stakeholders, including business.
7. Financial Services Financial services are fundamentally important to the UK and the EU economy; contributing significantly to jobs and growth. It is key that the UK Government preserves the two-way flow of financial services between the UK and the EU 27 currently enabled by ‘passporting’.
Financial services companies based in the UK need to be able to continue to serve businesses and customers across the EU in the same manner, or as similar as possible, as they currently do. Any new arrangement needs to ensure that UK-based firms have continued access to EU-based clients and that mechanisms for regulatory and supervisory cooperation between the UK and the EU 27 are being agreed.
The financial services sector is also a good example of why an implementation phase with transitional arrangements is crucial. This will ensure continuity and availability of critical economic functions provided by the financial services sector, minimize the potential for disruption of UK and EU capital markets, and streamline the way firms can adjust to new arrangements.
8. Science, Innovation and Standards Science, innovation and standards have a key role for British-American businesses when creating growth, making the UK a leading destination for science and innovation.
The UK Government should consider full reciprocal access to bids for Research & Development projects and related funding for all universities, research bodies and companies, including participation in dialogues that set research priorities. This includes remaining part of the European Research & Innovation funding network via an association agreement and retain access to Horizon 2020 grants consortia beyond the UK’s membership of the EU, as well as continued involvement in all key supranational standards bodies and those bodies impacting use of scare resources e.g. radio spectrum, internet governance etc.
If such close association is not achievable, equivalent funding options for UK-based organisations needs to be provided.
9. Procurement Measures should be in place that avoid any discrimination in procurement rules, including public procurement, so that there is a level playing field for the UK.
Measures should also provide investors with confidence in the UK’s new procurement regulatory regime. EU procurement legislation is well trusted and the UK should seek equivalence rather than divergence in policy approach. Under WTO Government Procurement Agreement (GPA) rules UK and EU governments would be required to treat suppliers from the other on par with domestic suppliers.
10. Aviation EU agreements are deeply embedded within the UK aviation sector. Of particular importance is retaining full access to the EU single aviation market and remain party to the EU-US Open Skies agreement.
For the aviation sector to continue operating seamlessly, other agreements that the UK should aim to be part of include the Single European Sky agreement and the European Common Aviation Area (ECAA), as well as alignment with the European Aviation Safety Agency (EASA).