July 6, 2018 / 8:40 AM / 4 months ago

What will ministers discuss at crunch Brexit meeting?

LONDON (Reuters) - British Prime Minister Theresa May will gather her senior ministers for talks on Friday that she hopes will settle differences in her fractious cabinet about Brexit and unblock stalled talks with the European Union.

The aim is to agree a position on how far to split from the EU after Britain leaves the bloc next year and the details of the talks are likely to be published in a so-called white paper policy document next week.

Here are some of the key issues likely to be discussed:

Customs arrangement

May will unveil a new plan for handling customs with the EU that she hopes will end months of disagreements within her Conservative Party, cabinet and parliament.

Under the new plan, Britain will remain closely aligned to Europe’s rules on manufactured goods, but have the freedom to set its own tariffs on these products once it leaves the bloc.

Technology at the border will help decide whether the incoming goods are destined for Britain or the EU.

If the EU tariffs are higher than in Britain, then British customs officials would collect the tariffs and pass them on to the bloc.

The new policy - known as the “facilitated customs arrangement” - is a blend of two previous options which divided the cabinet and have been rejected by the EU.

If the plan is accepted by ministers and the EU this should please manufacturers who have warned they may have to pull out of Britain without a customs deal because this would fracture supply chains and increase checks at the border.

Services

So far, there is little clarity about how Britain’s vast services sector, which accounts for 80 percent of its economy, will trade with the EU.

The services sector, which includes financial services, lawyers and accountants, has been pushing a largely untested approach known as “mutual recognition” that would allow cross-border trade on the condition that each side preserves regulatory standards in line with international standards.

But the European Union has rejected this proposal, meaning some government officials and executives argue that Britain should instead push to improve the EU’s current legal mechanism for access to countries outside the bloc known as “equivalence” where access is patchy and can be revoked at short notice.

Executives will be closely watching to see whether the government uses the phrase mutual recognition in the policy document next week or whether the government is resigned to a deal on services that will give more limited market access.

Immigration

The future of Britain’s policy on immigration remains one of the most sensitive subjects the government must resolve. But this is unlikely to be settled at the meeting on Friday and is seen as being able to be given more time because of a transition period which will keep existing rules until December 2020.

Britain has pushed back the formulation of its new immigration laws until after it has heard evidence from an independent study on the topic commissioned by the government. Ministers are now not expected to pass a new immigration bill until after Britain leaves the EU on March 29, 2019.

An interim report by the Migration Advisory Committee published in March said restricting migration into Britain would very likely lead to lower output and employment growth and warned that firms were not prepared for a tightening labour market. It will produce its final report in September.

European Court of Justice

Another major stumbling block is how much oversight the European Court of Justice (ECJ) will have over Britain after Brexit.

May has previously said breaking free of the ECJ’s jurisdiction meant that Britain would be able to make its own laws and British judges and courts would enforce them.

But the plan to see Britain collect tariffs on the EU’s behalf may open the door for the ECJ to play a role in arbitrating future trade disputes.

Reporting by Andrew MacAskill, Editing by William Maclean

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