1/ The EU could deny the UK a special deal on services because it would be legally bound to give the same to Canada, South Korea, Singapore, the Caribbean islands and Japan. Read the story for the hard news. Read this thread for some policy analysis.
thetimes.co.uk/article/6c813a…
thetimes.co.uk/article/6c813a…
2/ The UK wants a deal on services. However, the EU’s deals with Canada, Singapore, the Caribbean trade bloc, Japan and South Korea include “most favoured nation” clauses in their chapters on trade in services.
3/ These say that the signatories cannot treat other countries more favourably than they treat each other.
4/ Each such clause is subject to a set of exemptions, worded slightly differently in the different deals. The UK will try to engage one of these exemptions, allowing the EU to give Brits special access without extending it to others.
5/ Exemption 1 - MFN clause doesn't apply if the UK-EU deal creates an internal market between the partners. Given that UK is leaving the EU's internal market, unlikely this one will kick in.
6/ Exemption 2 - MFN clause doesn't apply if the deal grants the right of establishment to each party's businesses. Ie, the UK would be saying that EU businesses maintain their rights to set up shop here.
7/ This could work but there are hiccups: (a) most EU FTAs don't include this, (b) this would restrict the UK's ability to control its own migration policy, as with businesses come people, and (c) some lawyers don't think this exemption exists independently of the others.
8/ Exemption 3- MFN clause doesn't apply if the deal includes "approximation of legislation", defined as common rules or one party aligning its rules to the other's. This is the likely battleground.
9/ What does "approximation of legislation" mean? In the words of @samuelmarclowe, ultimately "it means what the EU wants it to mean".
10/ Also depends on what Canada etc say it means. Chris Bryant, a partner at BLP and CETA expert: “If there’s some kind of loose provision around agreeing to try and harmonise the rules, but w/o any binding commitments to do so, then we’d potentially have an issue with Canada.”
11/ Read the story in @thetimes to find out what the Canadian government has to say about the matter
thetimes.co.uk/article/6c813a…
thetimes.co.uk/article/6c813a…
12/ But why, I hear you ask, does the EU need to worry about engaging an exemption anyway? Couldn't it just let MFN do its thing and open up the EU's services market to Canada, Korea, Singapore, the Caribbean and Japan without much fuss?
13/ There are a few reasons to think: no. First, this would amount to a unilateral concession to those countries on the Commission's part. Nobody likes giving something for nothing.
14/ Second, we're not really just talking about past partners. If the EU extended concessions on services to all those countries, realistically all future partners would expect the same treatment as a minimum.
15/ Third, some of these countries are far away, and this matters. Eg senior official Magnus Rentzhog (@lmagnusr) notes that, according to Swedish law, at least half of board members of firms established in Sweden must live in the EU.
16/ Suppose Sweden relaxed that rule for the UK, and so had to do the same for Korea and the Caribbean. Sweden would be reluctant, because it wants access to these people in cases of malpractice and the Caribbean is a long way away.
17/ In sum: will this be *the thing* that scuppers a deal on services? I don't think so. I expect that, if there is political will for a deal on services, we will find a fudge to engage the 'approximation of legislation' exemption.
18/ But @DEXEUGOV really needs to have a fudge ready, because I expect the Commission to lean on MFN clauses as one of the reasons to restrict the ambition of a trade agreement. ENDS
thetimes.co.uk/article/6c813a…
thetimes.co.uk/article/6c813a…
