Brexit Trade and Investment News – October

Brexit and a Dutch Masterpiece

 In the National Gallery in London, there is a magnificent but modestly-sized painting of the Westerkerk in Amsterdam ( probably dating from 1640)  by one of the less well-known Dutch –  Baroque painters, Jan van der Heyden. The Westerkerk is set partly in the background (but very centrally), near other buildings and fronted and slightly obscured by trees with a canal in the foreground. The detail is so clear and life-like that better known painters of the Dutch school, such as Johannes Vermer, would surely have been proud of it.

The Gallery’s caption, placed to the side of the painting, explains that the painter was a respected inventor and engineer as well as painter and that his particular technique was to completely paint in the facades of buildings that were later to be somewhat obscured by the greenery.

The National Gallery, as one of the World’s leading galleries, has done so much to promote Dutch and other European art and many would fervently hope that Brexit will not stand in the way of continued cultural collaboration between the UK and the EU.

It would be such a pity if it did!

Brexit and the Horizon Europe and Copernicus Programmes

 On 7th September 2023, the UK Government and the EU Commission issued a Joint Statement confirming that that they had reached an “agreement in principle” on the association of the UK to the Horizon Europe science research programme and the Copernicus  European Earth Observation programme under the terms of the UK-EU Trade and Cooperation Agreement 2020.

A separate press release issued by the UK Government on the same date confirmed that from that day ( 7th September 2023) UK researchers would be able to apply for grants and bid to take part in projects under the Horizon Europe programme  ( a programme said to be worth up to £85 billion) , “with certainty that the UK will be participating as a fully associated member for the remaining life of the programme to 2027”. It is understood that the award of grants to UK researchers and UK  project participation would be available  from 1st January 2024.

The UK Government press release also indicated that on a similar basis the UK would associate to Copernicus – which would provide “the UK’s earth observation sector with access to unique data valuable to helping with early flood and fire warnings , for example – and with the ability to bid for contracts, which they haven’t been able to access for three years”. The Joint Statement additionally makes clear that the UK will have access to EU Space Surveillance and Tracking services.

The financial terms of the new deal are not spelt out in detail in the above-mentioned announcements but the Joint Statement does say that “in line with the terms of the Trade and Cooperation Agreement, the European Commission and UK Government have also agreed appropriate terms regarding the UK’s financial contribution to the Multiannual Financial Framework 2021-2027 reflecting the fact that UK researchers did not participate in Horizon Europe or Copernicus from their beginning in 2021”.

Of interest to lawyers, the final paragraph in the Joint Statement states that “following today’s announcement, the European Commission and the UK Government will work together with the aim of promptly adopting the necessary legal instruments. These legal instruments need to be adopted by the Specialised Committee on Participation in Union Programmes subject to prior approval by the Council of the European Union.”.

As a separate but related point, the UK Government press release adds that “in line with the preferences of the UK fusion sector, the UK has decided to pursue a domestic fusion energy strategy instead of associating to EU’s Euratom programme. This will involve close international collaboration, including with European partners, and a new , cutting-edge alternative programme, backed up by £650m to 2027. It will ensure UK taxpayer funding is spent in the UK’s best interests.”.

In an article published in City AM on 8th September 2023, Michelle Donelan MP, the UK Government’s Secretary of State for Science, Innovation and Technology, gave examples of UK science projects which have benefited in the past and are likely to benefit in the future from the UK’s association to Horizon Europe – a Southampton-based project where scientists are using a Horizon grant to repurpose the Artificial Intelligence (AI) algorithms normally used to track exploding stars to monitor the growth of moles on the skin, to enable earlier detection of skin cancer; research being undertaken at Imperial College to develop a vaccine for HIV; and research being undertaken at various UK universities to harness the potential of graphene to transform hydrogen fuel cells.

Reportedly, whilst the precise details are unclear,  it is expected that the UK will pay almost €2.6 billion per year for participation in both the Horizon Europe and the Copernicus programmes from 1st January 2024 but there are adjustment mechanisms for correcting the balance of payments if the UK receives 8% or more in grants than it contributes to the Horizon Europe programme and there is also a procedure for some clawback if it pays too much into that programme.

A “Peter Brookes” cartoon in The Times on 8th September 2023, showing a white van labelled “Horizon Europe”, with a smiling Rishi Sunak clinging on underneath, escaping hastily from “Brexit Prison”  perhaps sums up well a rare good news event amidst some of the post-Brexit doom and gloom.

Interesting times!


Brexit and Associate Membership of the EU

 On 20th September 2023, The Times reported that France and Germany have tabled a plan for an “inner circle” of countries willing to sign up to radical integration in a blueprint featuring a new outer tier of EU associate membership for “even the UK”.

According to The Times, under the plans there would be four layers of EU- related involvement:-

  • The Inner Circle – Countries in the innermost circle ( which would include France and Germany) would have EU membership and would  give up their national vetoes over Brussels budget contributions, taxation, defence, security and foreign policy;
  • The European Union (EU) – All current and future EU member states would be bound by the same political objectives as in the current Lisbon Treaty;
  • Associate membership – This might be offered to the UK  ( and also to other non-EU member states such as Switzerland and Norway)  and would be centred around the single market, not bound by “ever closer union”, and would not count as EU membership as such; and
  • The European Policy Centre – This loose grouping ( of which the UK is already a member) requires no EU integration but focuses on geopolitical convergence , supported by bilateral agreements with the EU.

According to the Franco-German plan, “Associate members would not be bound to “ever closer union” “, reportedly meaning that countries that did not want to join the EU could choose a permanent frictionless trade relationship with the EU rather than future integration and “the core area of participation would be the single market”.

The UK Labour Party has reportedly rejected the plan on the basis that it has no intentions for the UK to apply to legally re-connect to the EU ( even by way of associate membership)   even  but who knows where the Franco-German initiative may lead in due course!

At least the different parties seem to be thinking creatively about how they can best work together.


Brexit and Canada

 Following Brexit, the UK and Canada signed a Trade Continuity Agreement which took effect on 1st April 2021, essentially rolling over many of the provisions of the Canada- EU Trade Agreement (CETA) in so far as they applied to the UK while the UK was a member of the EU.

Both countries are also parties to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The UK and Canada are in addition in the course of negotiating an updated free trade agreement, given the importance to both countries of their trading relationship.

In this context, it is perhaps worth considering the latest UK Department for Business & Trade (DBT) factsheet on UK – Canada trade and investment, released on 21st September 2023. This factsheet showed that total trade in goods and services ( exports plus imports) between the UK and Canada was £24.6 billion in the four quarters to the end of Q1 ( Quarter 1) 2023, an increase of 14.8% or £3.2 billion in current prices from the four quarters to the end of Q1 2022.Of this £24.6 billion:

  • Total UK exports to Canada amounted to £15.1 billion in the four quarters to the end of Q1 2023 ( an increase of 20.7 % or £2.6 billion in current prices, compared to the four quarters to the end of Q1 2022); and
  • Total UK imports from Canada amounted to £9.6 billion in the four quarters to the end of Q1 2023 ( an increase of 6.5% or £588 million in current prices, compared to the four quarters to the end of Q1 2022).

According to the DBT factsheet, Canada was the UK’s 17th largest trading partner in the four quarters to the end of Q1 2023, accounting for 1.4% of total UK trade.

The factsheet also showed that, in 2021, the outward stock of foreign direct investment (FDI) from the UK in Canada was £40.6 billion accounting for 2.3% of the total UK outward FDI stock and that, in the same year, the inward stock of FDI in the UK from Canada was £42.4 billion accounting for 2.1% of the total UK inward FDI stock.

The UK – Canada trade and investment relationship continues to show a lot of growth potential and is one to watch in the post-Brexit era.

Disclaimer: Nothing in the Legal Insights section and this blog is intended to provide legal or other professional advice and, if readers are interested, they should consider taking separate legal or other professional advice accordingly.