Brexit: The UK and the European Union
In June 2016, the British people voted to leave the European Union. For New Zealand, nothing will change for the time being. The Government is paying close attention to the withdrawal process as it unfolds.
The UK held a referendum on 23 June 2016 asking voters “should the UK remain a member of the EU, or leave the EU?” Almost 52% of the electorate voted to Leave, while 48% voted to Remain.
The UK Government released a Brexit White Paper outlining a number of priorities the UK Government will be focusing on. They include securing new trade agreements with the EU and other partners, dealing with immigration issues, and continuing intra-European security cooperation. The White Paper can be accessed here (external link).
The UK invoked Article 50 of the Treaty on European Union on 29 March, triggering the start of the process to negotiate its withdrawal.
The Treaty allows for negotiations to take up to two years so the UK is scheduled to leave the EU by the end of March 2019.
In Europe, the EU27 (the other Member States of the European Union) have agreed on guidelines (external link) for the Brexit negotiation. The guidelines indicate that the first phase of UK-EU27 negotiations must address the UK’s exit from the Union. The second phase will aim to reach an understanding on the framework for the future (UK-EU27) relationship.
It will only be once this second phase of negotiations makes progress that we will know more about the future UK-EU27 relationship.
Prime Minister Theresa May called for a general election on 8 June. It is not clear whether the early election will affect the Brexit process and timeframe for negotiations.
What happens now?
For the time being, nothing will change. The UK remains a member of the EU until the withdrawal process is concluded. No state has left the EU before, and the detail of exactly how the process will work is itself part of the Brexit negotiation.
Current trade and other arrangements will continue while negotiations take place between the UK and EU to reach an agreement on the UK’s exit from the Union.
What will the UK’s new relationship with the EU look like?
The UK Government has indicated that it wants a customised future relationship with the EU (i.e. one that no other country currently has). The Government has also indicated that it would like to conclude a comprehensive FTA, but not remain a member of Europe’s single market for goods or a full member of the European Customs Union.
The EU27’s guidelines indicate their support for an agreement on trade, noting also that it may only be finalised and concluded once the UK is no longer an EU Member State.
All the arrangements governing relations between the UK and EU are likely to be agreed as a single package. So outcomes in specific policy areas will not be confirmed until the whole shape of the future UK-EU relationship has been determined.
What is the New Zealand Government doing?
We have engaged at all levels with decision-makers in the UK and the EU and are paying close attention to how the Brexit process unfolds, to ensure New Zealand’s interests are maintained and advanced.
This includes working to ensure as little disruption as possible to a range of existing arrangements and agreements with the EU that may be impacted by Brexit.
New Zealand has strong relationships with the EU and UK and these will continue. The New Zealand Prime Minister, ministers and government officials will continue to work closely with the EU and the UK to protect and enhance our relationships with both the UK and EU as the UK moves to exit the Union.
The timing of any discussions on our long-term interests will be affected by a number of factors, including the progress made in the UK-EU negotiations.
What will happen to trade between New Zealand and the UK? What about New Zealand trade with the rest of the EU?
New Zealand will want to conclude a bilateral Free Trade Agreement as soon as the UK is in a position to do so (i.e. once it is no longer a member of the EU). We have established a bilateral trade policy dialogue to understand each other’s policy settings and enable us to move swiftly towards FTA negotiations when the UK is able. Ongoing follow-up to this dialogue process will take place over the coming months.
In the meantime there will be no change to our current trading arrangements. The UK remains a member of the EU and the same rules will continue to apply to our trade with the UK and EU. These include the range of areas incorporated in the EU’s commitments under the World Trade Organisation, which cover the UK. Tariff rate quotas providing access for important New Zealand exports, such as certain meat and dairy products, form part of these WTO commitments.
Any developments that might affect these bound WTO commitments would need to be the subject of consultation with New Zealand. We welcome the indications the UK has provided to date that third parties should not be worse off as a result of Brexit, and its commitment to full consultation. These points, together with the importance of fully respecting existing WTO commitments, are key principles that we see as important in underpinning the approach taken to resolution of any trade issues arising from Brexit.
What about New Zealand trade with the rest of the EU? What will happen to the EU-NZ free trade agreement?
New Zealand will continue to maintain and build on the quality and value of our economic relationships with both the EU and the UK.
We will continue to work towards the opening of free trade agreement (FTA) negotiations with the EU during 2017. The process agreed to by Prime Minister John Key and EU Presidents Jean-Claude Juncker and Donald Tusk in October 2015 is well on track.
Earlier this year we concluded scoping discussions with the EU, and have now moved into the next phase where New Zealand and the EU both develop mandates ahead of launching negotiations as soon as possible this year. This remains a top New Zealand priority.
What does this mean for my business?
In the immediate future there will be no change to the rules covering our trade with the UK and EU. The Government sought views from New Zealand exporters and investors on how they envisage Brexit might impact their business interests in the UK and the EU in late 2016. An overview of key points raised is available here.
There will be further opportunities for engagement as the negotiations between the UK and EU progress, and the implications of Brexit for New Zealand become clearer over time.
What will happen to our broader relationship with the UK?
The UK will remain a close, fundamental partner for New Zealand.
On issues such as defence, security and immigration – apart from the EU-New Zealand Partnership Agreement on Relations and Cooperation – the bilateral relationship between New Zealand and the UK is not linked in any formal way with the UK’s EU membership.
These issues are either bilateral or are governed by arrangements separate from the EU. The Government is keeping a close eye on agreements or arrangements that provide a framework to the UK-NZ relationship and will seek to protect and promote these if it seems likely they will be affected by the UK’s exit from the EU.