Basket Cases

BasketIt seems the UK Government has been doing a little thinking about Brexit after all. Apparently it wants to persuade the EU to consider three ‘baskets’ of goods and services in any deal.

The first basket would consist of sectors where the UK stays close to the EU; it would include chemicals and medicines regulations plus competition and state aid policy. The second basket would contain sectors, such as environment and financial services, where mutual recognition of rules applied, thereby achieving similar things in our own way. In the third basket would be areas where the UK wants a free hand; that would certainly include security and foreign policy (though of course we would expect to liaise with our ‘allies’ on these).

Level playing fieldAt present all sectors covered by the Single Market are aligned so any changes can take place without ‘cliff edges’, but Germany will still insist that the Single Market must maintain a ‘level playing field’ (geographical topology is the lexicon of choice for the Brexit debate). Germany is against this approach because it might undermine the ‘integrity’ of the EU (‘straitjacket’ would be an equally good term). The Dutch for example might like to do what they think works best for them – and why not? Obviously because Germany gains a massive advantage from the rules as they are, though it has and will flout them if necessary for its own interests (see Europe Through the Looking Glass). The Nordics, Netherlands, Italy, Luxembourg, Ireland, Cyprus and Poland have already questioned the rigid approach of Germany and France of bullying all 27 into line.

Financial servicesOf particular concern to the UK will be an agreement for financial services; it is an area where the EU seems determined to undermine us. In a recent speech in Belgium the EU’s chief negotiator, Michel Barnier, said: “The regulatory framework we have constructed as a Union of 28, including the United Kingdom, learning from the financial crisis, is extremely precise. We have developed a single rulebook and more integrated European supervision, which guarantee financial stability, protection for investors, market integrity and a level playing field. A country leaving this very precise framework and the accompanying supervision gains the ability to diverge from it but by the same token loses the benefits of the Internal Market. Its financial service providers can no longer enjoy the benefits of a passport to the Single Market nor those of a system of generalised equivalence of standards.Market integrityLater he adds: “It is therefore important that all businesses clearly analyse their exposure to the United Kingdom and are ready to adapt their logistical channels, supply chains and contractual clauses, including in the financial services sector.

GuaranteeWhat are these guarantees of stability and investor protection? For the insurance sector we have PRIIPs (Packaged Retail and Investment-related Insurance Products) which requires companies to grade products under seven different categories of risk (based on past data) and four categories of likely returns. This is bound to be even more misleading than car manufactures’ fuel consumption figures. Plus there is Markets in Financial Instruments Directive II (Mifid II) which requires the collection and storage of vast quantities of data for a possible audit trail on any transaction. Both are supposed to protect customer interests but will put up costs, reduce competition and probably drive trading to less encumbered financial centres. A leading figure behind all this was Michel Barnier in his previous role as European Commissioner for Internal Market and Services (trés Francais)

Bumpy road-1Clearly it is still going to be a bumpy road to reach any satisfactory agreement. A group of key Leave protagonists have met with Barnier to offset any impression an earlier Remain group (Adonis, Clark and Clegg) may have given him that the UK public is on the verge of changing its mind about Brexit. They gave him a basket (hamper) of British goods that included Cheddar cheese and sparkling wine – to a Frenchman! That is also interesting because the EU is reportedly concerned that “English Champagne” and “British Parma ham” could flood into the continent after a hard Brexit. Without agreement the protected status of foodstuffs would end for Britain if the country leaves the EU with no deal, which means that British companies could rename products. The protected status of British foodstuffs, such as Cornish Pasties and Cheddar Cheese, would be preserved by EU countries because they would still have the rule book. They will surely want an agreement that includes the ‘mutual recognition’ of GIs (geographical indications).Basket case-1

There are plenty of ‘basket cases’ on both sides of the Channel (and Irish Sea) involved in, or attempting to influence the Brexit negotiations. It would be good if they considered the UK’s case for the three baskets seriously. It seems like a reasonable framework for discussion.


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