BritishAmerican Business CEO Statement on the Draft Withdrawal Agreement and Political Declaration

By Duncan Edwards, CEO, BritishAmerican Business

November 19th, 2018


The draft withdrawal agreement published last week and the cause of so much drama in the UK, is a direct descendant of the ‘Chequers’ White Paper published back in July.  At the time we gave our qualified support to ‘Chequers’ but caveated that we thought there was a high probability of the proposal being rejected by either the EU, the UK Parliament or both.

Having now read the Draft Agreement over the weekend, my opinion remains the same.  On the positive side, the Draft provides the basis for stability for businesses, especially manufacturing businesses, for the 21-month transition period and, if passed, avoids the ‘cliff edge’ that business fears.  Our sense, by the way, is that if there is ‘no deal’ it is more likely to be a ‘managed no deal’ than a ‘cliff edge’ but nonetheless, an agreed transition is much preferred.

However, for those that believe Brexit is about the return of political sovereignty to the UK this agreement will be very problematic.  In truth, it does not read like an agreement between two sovereign entities at all.  More importantly, it says nothing about the future relationship between the UK and the EU after the transition period.  The accompanying 7-page Political Declaration, the vision for the future relationship, is encouraging; it talks about the shared ambition to have a free trade zone with zero tariff and non-tariff barriers between the UK and the EU, but the empirics will not give great confidence that this framework will be negotiable into an agreement by Dec 2020. We look forward to seeing an expanded version of this document at the end of the week.

If no agreement is reached, the UK will be required to remain in a customs union with the EU unless a Joint Committee of EU and UK representatives agree that it can be released.  It is this that has many MPs so unhappy.  Of course, a future UK government could always choose to breach an agreement if it felt it needed to, but there would be consequences.

What this will all mean for the future UK-US relationship is unclear.  We have maintained that, while there are always things that can be improved, the current economic environment between the US and the UK is good; we would like to see further liberalization, tariff reduction, regulatory alignment and mutual recognition of standards and professional qualifications but if problematic market access questions threaten to derail what is already working, it could be a backward step.  Perversely, tying the UK to EU standards in goods and agrifood might take a lot of the more challenging questions that the US would likely raise, off the table, removing problems that the UK would find politically impossible to address.

As we have said before, the withdrawal and future relationship negotiations are fiendishly difficult for the UK government and this looks like a valiant attempt to ensure that March 29 is not an unknown for business; it doesn’t end uncertainty, but it gives breathing room.  On balance therefore, BAB would like this agreement to pass but we have grave doubts whether it will.