Report of Association Leadership Academy session led by Richard Steel of Interel –“Juncker’s Last Chance to Deliver”
12th December 2017
Richard Steel presented on three main topics covering Brexit, the future of the EU and the rivalling roadmaps, and the upcoming European parliamentary elections. True to form, Richard was knowledgeable, insightful and entertaining.
From the viewpoint of Messrs Tusk and Lamy, there are no winners in Brexit. The discussion should centre on damage control and minimising risks, “it is not about a negotiation”. This last encompasses the key difference in approach between the UK and its (soon-to-be) former partners. Richard pointed out that Brexit is not top of everyone’s agenda; it is hardly mentioned in the European Press and there are other pressing priorities for the EU to deal with such as reform of the Eurozone, the future budget and major trade deals with Japan and Mercosur.
However, there is currently no agreement on Brexit and this situation has deeply affected British business interests. Richard cited a CIPS (Chartered Institute of Purchase and Supply) report to the effect that two thirds of EU businesses will move some of their UK based supply chain after Brexit. Indeed, 25% of large British firms have spent over £100 000 preparing their supply chains for Brexit and supply chain managers are losing faith that the UK will be able to maintain “free and frictionless trade” with the EU after Brexit.
This lack of certainty has in fact meant that the real transition period has already started. Barnier has encouraged business to analyse with clarity their exposure to the UK and to be ready to adapt their logistics, supply chains and contractual clauses. City firms have stated that they plan to move 10.500 jobs out of the UK on “day one” of Brexit with Dublin and Frankfurt the most likely to benefit from the UK’s departure from the EU.
Associations have reacted together in October 2017 to issue a joint statement on the transitional agreement. Led by AmCham and signed by British and US led interests with offices in Brussels, these organisations called for a clear and predictable transitional arrangement to be agreed as soon as possible and which would allow for ongoing UK participation in the Customs Union and the Single Market. Business Europe made similar demands and the French Medef (employers’ confederation) have told members to prepare for a hard Brexit.
All parties agree that a transitional arrangement needs to be agreed quickly but the conditions for the UK are likely to be tough. As the EU envisions the transition, Britain will lose all of its decision-making authority, will be obligated to continue paying into the EU budget and must follow all EU rules and regulations and even any new policies adopted without its input. The UK will also be prevented from negotiating new trade deals with other countries and would have to act in accordance with EU foreign policy.
Richard then shed light on the UK’s current position on Brexit. Indeed, the UK has not been particularly specific. It has been setting out some red lines, but what it has been saying so far still entails internal contradictions and does not seem entirely realistic. He referred to the Irish border as an example. Richard mentioned Michael Gove’s statement to the effect that if UK voters don’t like the deal, then the government would be able to amend it. However, any final trade deal will not be known until after the UK has left and the exit deal will have to have been signed and translated into law by then. The joint report negotiated between the UK and the EU, which is the basis for the Brexit divorce deal, is not legally binding, because it is not yet the Article 50 withdrawal agreement. That report took 18 months to agree for a 15-page document. Richard asked how long might it take to negotiate a full trade deal with the UK when the deal with Canada took 7 years and that with Japan 4 years? Barnier has offered a “CETA +” format with an emphasis on goods rather than services but this seems to have already been set aside by May.
After its departure, whatever form that might take, Richard then asked who would replace the UK as the EU’s business champion? He pointed out that the UK was always seen as most the business-friendly Member State, pushing free and open trade, with less regulation. Which country will take their place – Sweden, the Netherlands? Will the EU be drawn into a more protectionist attitude? The unity of the remaining 27 will be sorely tested when real trade talks begin.
Future of the EU:
Looking to the future, Richard pointed to the rift between the Visegrad 4 and the 6 founding members that became apparent in the Bratislava process to map out the EU27’s future direction. The need to heal East/West tensions was clearly recognised in Juncker’s State of the Union speech. He then moved on to describe Juncker’s five scenarios on the future of Europe. They were all designed to be positive and followed up by a number of reflection papers. The scenarios varied between doing less together but more effectively, to “carrying on as before”. Richard mentioned the unused potential of the Lisbon Treaty which could allow for example, for combining the Commission Presidency with that of the Council without requiring a treaty change.
Juncker’s own roadmap goes beyond 2019 to 2025. He is concerned about his legacy and does not want to be remembered as the President “who lost the UK” but who chartered a new path forward for the EU. He suggests that the EU would be easier to understand if there is one captain sailing the ship as President of both the Commission and the Council. His programme includes defence cooperation, more trade and a reform of EMU. Decision making would be more streamlined in order to act more nimbly in certain areas and lines would be drawn around sectors of national competence.
Macron also has a roadmap set out in his Sorbonne speech which contains up to 80% of Juncker’s programme according to a document drawn up by the European Political Strategy Centre entitled Two visions, One Direction. Each of these visions offers a two-stage approach up to 2019 and beyond to 2024. These visions include building on the Franco -German axis, a move which might alienate the smaller Member States. Macron also includes concrete proposals such as the creation of an EU Intelligence agency, a Eurozone budget and a carbon tax at EU borders.
EU Council President Donald Tusk’s has also produced a roadmap called the Leaders’ Agenda which covers the 2 years leading up to the EP elections. It focuses on unity but allows those Member States who want to move more rapidly in certain areas to be able to do so. Tusk wishes to stop the practice of reaching agreement in Brussels then “rubbishing” it when safely back home.
Finally, Richard turned to the build-up to the 2019 EP elections. Upcoming decisions of EU leaders include what to do with the 73 seats of the UK MEPS and the future of the Spitzenkandidat process to choose the next Commission president. Richard predicted that the new elections would bring in more anti-establishment parties and that the EPP/ALDE alliance was in peril.
about the speaker
Richard Steel is a Senior Associate at Interel and heads up its Parliament Intelligence Unit.
Richard has 30 years’ experience of working in and around the European Parliament, informing and advising clients on the latest developments, and providing early warning on what lies ahead. He has worked for a large number of international corporations and trade associations, mainly in the fields of energy, environment, food, and health. He gives regular talks on the new powers and personalities in Parliament. He has attended over 200 plenary sessions in Strasbourg and writes a monthly “Postcard from Strasbourg”, giving a light-hearted account of the weeks’ proceedings.
Richard is happy to call himself Scottish, British, and European while those three options remain open to him!