TUC and CBI — Brexit tests, priorities and the Good Friday Agreement.

The Trade Union Congress (TUC) “brings together more than 5.6 million working people” within “50 member unions”. Meanwhile, the Confederation of British Industry (CBI) “speaks on behalf of 190,000 businesses of all sizes and sectors” who “employ nearly 7 million people, about one third of the private sector-employed workforce”. In this essay, I’ll be looking at their views on Brexit and what outcomes they want.

On 30 November 2017 the TUC published “Putting Brexit to the test” where it used five tests (see above) by which to judge the various Brexit options. As you can see, the TUC thought the UK should “seriously consider membership” of the European Economic Area (EEA) . Meanwhile, the CBI have established “Key business principles for the UK-EU negotiation” to judge the Brexit process. Even at first glance, both approaches can be seen to have raised similar concerns and, I would ague, have come to similar conclusions as to the best Brexit outcome. This is with one proviso — the TUC state a clear preference for the EEA Brexit option but the CBI does not. Both the Conservative Government and the Labour opposition oppose considering being in the EEA and the Single Market and Customs Union (at the moment).

Let’s compare and contrast the TUC and the CBI’s views on Brexit tests and priorities -

1. Frictionless trade. The TUC wish to protect jobs “through frictionless trade in goods and services” while the CBI wants a “barrier-free relationship with our largest, closest and most important trading partner”. The latter being the EU, of course, and the article linked to here shows what could happen if tariffs were to be applied (eg approximately 36% for dairy products). Both the TUC and the CBI are effectively in agreement here.
2. Workers’ rights and regulation. When it comes to a post-Brexit UK, the TUC want a “level playing field for workers’ rights” and a “dispute resolution and supervision for labour, consumer and environmental standards”. Meanwhile the CBI seeks a “clear plan for regulation that gives certainty in the short-term, and in the long-term balances influence, access and opportunity”. In its view the “single set of rules that is fundamental to the EU single market makes the process of doing business across borders significantly easier” and that the “advantages of preferential trade with the EU could be put at risk if the UK deliberately causes divergence between its regulations and standards”. In the CBI’s view it “is critical that — in a range of areas — the EU agrees the UK’s regulatory system meets its requirements and allows UK-EU trade to continue on a preferential basis”. Here again the TUC and the CBI are both aware that regulatory divergence (including workers’ rights) between a post-Brexit UK and the EU puts jobs, profits and wages at risk. In this case, there is common ground between the TUC and the CBI in wanting to retain regulatory alignment between the UK and the EU. The difference between them is that the TUC is more straightforward about wishing to stay in both the Single Market and Customs Union.
3. The Good Friday Agreement (GFA). The TUC place the GFA as one of its tests and sees staying in the Single Market and Customs Union as the best way to protect it. Unsurprisingly, the Irish Congress of Trade Unions (ICTU) (which includes the ICTU Northern Ireland Committee) have the same view. As their Assistant General Secretary, Owen Reidy, said (15 Aug 2017) “a North-South or an East-West border would be unacceptable on the island of Ireland.” He continued, “Clearly any type of border east/west within the UK is unacceptable and creates problems for unionism. Equally any hard border north/south is also unacceptable as it creates problems for nationalism. Therefore, the Irish government must use its strategic influence on this matter to ensure that the EU and the UK seek neither option,” On 7 Dec 17, CBI Northern Ireland (CBI NI) issued a press release where its Director, Angela McGowan, said something very similar, “Business needs a clear statement of intent from both the UK and European Union that the end goal is the seamless, frictionless trade both east/west and north/south that Northern Ireland needs to prosper. Choosing between one or the other is not an option.” Earlier the release had said this was necessary “to uphold the principles of the Good Friday Agreement and safeguard peace and prosperity.” The use of almost identical language shows the degree of common ground here between the ICTU and the CBI NI except, again, the former are more forthright about believing the UK should stay in the Single Market and Customs Union.

One area that the TUC and the CBI have jointly spoken out on is the status of EU and UK citizens both here and in mainland Europe. Soon after the EU Referendum (23 June 16), Frances O’Grady(General Secretary TUC) and Caroline Fairbairn (Director General CBI), made statements on the status of EU citizens. On 28 June 16 Ms O’Grady said (backing the CBI’s call for certainty on migrant workers) “EU citizens in the UK need cast-iron assurances that they can continue to live, work and study here. David Cameron saying they will face ‘no immediate changes’ simply isn’t good enough.” Then, on 28 Sept 2017 they made a joint statement saying that, “After 15 months of human poker, the uncertainty facing 4 million European and UK citizens has become intolerable…A clear guarantee of the right to remain for citizens in both the UK and EU27 is needed within weeks.” Unfortunately, according to this article and this, the situation is not yet resolved.

This month, both leaders have made statements about Brexit. Frances O’Grady wrote (The Times 16 Jan 18) “Only the single market guarantees British workers’ hard-won rights” arguing the case for staying in the Single Market. Meanwhile, a press release for a Caroline Fairbairn speech (Uni of Warwick 22 Jan 18) was put on the CBI site (21 Jan 18): “Evidence not ideology: Why a customs union is best for Britain” where she was quoted as saying that “time is running out and businesses urgently need decisions to protect UK jobs and growth”.

Going by what has been written by the CBI and various industries regarding Brexit negotiations, time certainly is running out.

On 7 Nov 17, Paul Drechsler (CBI President) wrote “No more Brexit soap opera: Time to unite to achieve best deal” which published a CBI survey (2nd — 16th Oct 17) on Brexit. In answer to the question “When do you need greater certainty regarding Brexit to stop the implementation of ‘no deal’ contingency plans?” it was 10% for whom this deadline for already passed, 24% by end of Jan 2018 and 26% by end of March 2018.

CBI Business Voice (CBI member magazine) have started a series on business views on Brexit. The first (20 Dec 17) featured the automotive industry. A director of Honda in the UK (who oversee “2 million component movements each day and only [keep]a couple of hours’ worth of parts on the production line”) said “it would take 18 months to set up the necessary procedures and warehouses if Britain left the customs union, but even those measures wouldn’t fully protect the business from even minor delays on imports”. The article also pointed out the problems of “rules of origin” tariffs — “if a car manufacturer wanted to build a car solely from UK parts, it would only officially manage 40 per cent — and many manufacturers believe the real figure is closer to 25 per cent” whereas “under ‘rules of origin’, current free trade agreements stipulate that local content must reach 60 per cent” which would mean “exports would likely fall automatically under the higher tariffs [of up to 10%] prescribed by the World Trade Organisation” after we leave the EU. The most recent issue (17 Jan 18) dealt with Small and Medium Enterprises (SMEs) where one Northern Irish company (who have plans to move to the Republic of Ireland in the event of a bad Brexit)stated “ it [had] lost a key piece of business with an existing French client [and] Brexit was explicitly cited by the client as determining factor”.

A survey was also carried out by Manufacturing Northern Ireland (who include Harland & Wolff and Bombadier) on (13 Dec 17) entitled “Brexit Progress?” Here, “90% of firms responding were local, family owned SME’s employing less than 250 people… [with]almost three quarters of manufacturers saying that Brexit will be negative to their business regardless of the deal”. It was stated that “more than a third, 38%, are planning on shifting production outside of the UK or by developing their own facilities, making a purchase of creating new partnerships inside the EU” which was concerning to the authors as a “quarter of jobs in Northern Ireland are directly or indirectly provided by our manufacturing firms”. There was also nervousness about changes in tariffs and the Customs Union as “half of businesses were most concerned about the cost of tariffs on imports and exports with 39% worried about non-tariff barriers such as customs costs and delays or being blocked out of markets due to regulatory restrictions”.

Certainly, as time gets closer to “Brexit Day” (29 March 2019), companies are getting more and more nervous especially about leaving the Single Market and Customs Union. Richard Ballantyre (Chief Executive British Ports Association) said on 21 Dec 17, “The impacts of leaving the Customs Union and Single Market could be substantial. The prospect of customs and bureaucratic environmental health checks at the border could potentially create congestion and delays, particularly for HGVs at Roll-on Roll-off ferry ports. This could add costs for traders, manufacturers and consumers.”

So, what happens next?

The initial reaction from UK Govt representatives to what Caroline Fairbairn had to say (“Evidence not ideology: Why a customs union is best for Britain”) was not positive.

Stewart Jackson (“Special Advisor and Chief of Staff” to David Davis) linked to an article by David C. Bannerman MEP dismissing the idea of a Customs Union with the EU. Boris Johnson (Foreign Secretary) did the same in his two tweets.

However, for both Mr Jackson and Mr Johnson , there is still the tricky problem of the EU UK Phase 1 agreement (8 Dec 17) where there is a UK Govt guarantee of no hard border on the island of Ireland.

As can be seen, it is the UK Govt’s responsibility to come up with a solution. Otherwise, the UK “will maintain full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support the North-South cooperation, the all-island economy and the protection of the 1998 [Good Friday] Agreement”.

As to how the UK Govt propose to “guarantee …avoiding a hard border“ ”while leaving the Single Market and Customs Union, well, we will have to wait and see. Optimistically, the Conservative Party were confident enough to tweet this.

Following the Phase 1 agreement on 15 Dec 17 Michel Barnier (the EU’s Chief Brexit Negotiator) showed a slide to EU heads of state outlining the UK’s red lines and where this might logically lead to — namely a Free Trade Deal along the lines of Canada or South Korea*. Jon Worth made an addition showing how this raised the question of the hard border.

In the end, perhaps, this is the circle which cannot be squared and the red lines will have to be reconsidered. No doubt, this will be a major focus of discussions in Phase 2 of the negotiations.

Finishing, I’ll repeat what Owen Reidy (ICTU) and Angela McGowan (CBI NI) respectively said— “Clearly any type of border east/west within the UK is unacceptable and creates problems for unionism. Equally any hard border north/south is also unacceptable as it creates problems for nationalism.” and “Business needs a clear statement of intent from both the UK and European Union that the end goal is the seamless, frictionless trade both east/west and north/south that Northern Ireland needs to prosper. Choosing between one or the other is not an option.”

As the CBI NI press release said, this would be necessary “to uphold the principles of the Good Friday Agreement and safeguard peace and prosperity.”

Let’s hope so.

*Under Remarks, there is a comment that “This is only for presentational and information purposes. It is naturally without prejudice to discussions on the framework of the future relationship.”