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Policy Proposals  Europe Preliminary View on Brexit

10 August, 2016

Following the decision of the British people to withdraw from the EU, the lack of transparency and certainty in the business environment has become increasingly apparent. In order to minimize the negative effects on Japanese business activities, it is imperative to maintain stability in the financial and exchange markets through international cooperation among the G7 countries and others.

Thereafter, both the UK and the EU are called upon, first, to raise the predictability of the withdrawal process, the first such case within the EU. We at Keidanren trust the UK and the EU to swiftly clarify the exit procedures on the basis of Article 50 of the Lisbon Treaty (including domestic procedures in the UK before the withdrawal notification). Second, it is necessary that market integrity between the UK and the EU be maintained to the highest degree possible, including the so-called four freedoms of movement. Once the UK formally notifies the EU of its intention to leave, we hope both the UK and the EU will give full consideration to the points listed below during the negotiations over the withdrawal agreement and the new framework of the UK-EU relationship to avoid major difficulties in the activities of Japanese companies operating in Europe. Furthermore, if changes are to be made to various systems and institutions, accurate information on those changes should be provided, including their timing, in a prompt and proper manner.

To prevent a negative spiral of anti-globalism and protectionism that could accelerate throughout the world, it is critically important that the EU, as the biggest single market in the world, remain open to the outside, even after the UK leaves the union, and that tangible progress be made in further liberalizing trade and investment through mega-FTAs and other measures. Thus it is essential that the ongoing negotiations on the Japan-EU EPA/FTA reach an agreement in principle within this year.

[ 10 key points to consider ]

  • Keeping UK-EU trade tariff free and securing simple customs procedures (including highly convenient rules of origin)
  • Securing regulatory coherence between the UK and the EU
     - Continued application of EU regulations and institutions, and technical regulations and standards as currently applied to the UK
     - Ensuring regulatory coherence in the regulations and institutions that the UK and the EU introduce or revise, and harmonizing and mutually recognizing the technical regulations and standards
  • Continued exemption of taxes on the movement of capital (distributed profits, interest and royalty payments) between group companies in the UK and the EU
  • Continued freedom of movement in services (shared services such as in accounting and personnel) between group companies in the UK and the EU
  • Continued non-taxation measures on cross-border reorganizations between group companies in the UK and the EU
  • Continued application of the single passport system to financial services in the UK and the EU
  • Securing the free flow of data between the UK and the EU
  • Continued non-requirement of work visas in the UK and the EU
  • Continued location of the EU organizations (especially the European Medicines Agency) currently in the UK
  • Continued EU support for ongoing projects in the UK

Regional Affairs