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Theresa May has announced that Article 50 will have been triggered by March 2017. The consequences of this act remain a secret for now. The statements made by the Government suggest that the UK is aiming at “hard” Brexit.
However, the Government has also mentioned looking for a different model to those already existing: a bespoke UK agreement.
Unfortunately, Britain representatives encounter obstacles in negotiating a bespoke model. First, the EU claims that membership of the single market should require complying with “four freedoms” of movement: of services, goods, capital and people. Secondly, it announces the single market a unique construct in international trade. Markets abide by regulation, and if single market is used by many countries then it has to comply with a single set of agreed rules.
Such rules enable the EU and the European Economic Area to operate integrally.
What is important for a service exporter like the UK is the freedom to set up companies and supply services in any EU country, though there are limited non-tariff barriers. Over time the EU updates regulations and directives to diminish non-tariff barriers to trade between EU member states. But EEA member states benefit anyway as the EU-EEA deal is automatically updated in response to new EU legislation and regulation. To put it simply, the EU-EEA agreement is dynamic.
At a glance | The David Davis Brexit plan
- British jobs for British employees, post Brexit
- Return blue British passports, due to the “symbolism”
- Britain to fully complete the exit from the European Union by December 2018
- UK should cut a deal with the EU based on a “liberalised” existing trade agreement with Canada, liquidate all customs duties and not let uncontrolled immigration into the UK
- Britain should be looking for new free trade agreements with “the biggest prospective markets as fast as possible”
- The UK should “accelerate” the agreement of the controversial Trans-Atlantic Trade and Investment Partnership deal with the US
- Britain should give priority to trading deals with the rest of the world with the focus being mainly set on China, Australia, Brazil, India, South Korea, Japan, Mexico and South Africa
- Britain should end its dependence on the grants bestowed by Brussels well before the UK finally severs its ties with the EU and instead pay grants directly to farmers and fishermen.
Any bespoke bilateral free trade agreement, as opposed to the EU-EEA agreement, is concluded on a set of treaties. In other words, is static, and this is the factor putting the EU-Swiss model under strain.
Everybody is clueless about the type of a bespoke model the Government is straining after, and whether this goal is at all achievable. There seem to be significant differences of view within the Conservative Party and even within the Cabinet.
The CBI and other business groups are pressuring the Government to make an agreement on free access to the single market. They have expressed their anxiety concerning the damage which a ‘hard Brexit’ might inflict upon both the UK importers and exporters and the whole UK industry. One more challenging task to complete for Britain before exiting from the EU is resetting its independent place at the World Trade Organisation.
The best option for the UK now would be getting across to the EU that the current agreements between the EEA and the European Free Trade Association are a stepping stone for the UK, and that is where the process of leaving the EU should end. However, if the Government is looking to take Brexit beyond membership of the EEA, this could be a temporary position on the way to a more bespoke agreement.
The advantage of such a tactic is that it provides a “truce” position for the UK and EU-27 beyond the expiration of Article 50, which would be the least detrimental to UK-EU trade. It would also enable the UK to preserve its energies for negotiation because current EU-third country FTAs could be accessed during this interim step.
The disadvantage here is that the Conservative Party might not buy it. Also, it require approval from the four EFTA countries, and the EU will not necessarily agree on a strategy designed to redress the balance of power in the Brexit negotiations.
Any bespoke deal for the UK will mean concessions and budgetary contributions, but an interim “truce” position is worth having anyway.