We will leave the EU without a long-term trade deal in placeby Simon Tilford / October 26, 2016 / Leave a comment
Once Theresa May triggers Article 50 of the Treaty of the European Union, the UK will have two years to negotiate its exit from the EU. But it will take much longer than this to broker a trade deal between Britain and the EU to replace Single Market membership. As a result, there will be several years between Britain leaving the EU and a free trade agreement, or a Swiss-type bundle of sectoral agreements, coming into effect. For example, the EU-Canada trade agreement took seven years to negotiate and could take many more years to ratify in national parliaments—if the Belgian region of Wallonia has not completely torpedoed the deal this week by refusing to ratify it. And the obstacles in the path of a Swiss-type deal are, if anything, even bigger.
This gap could be covered by an interim deal. The alternative would be for Britain to leave the EU without any deal in place, and trade with the EU under WTO rules. Notwithstanding the bravado of some UK ministers, who argue that such an outcome would not be so bad, the British government wants to avoid this outcome. After all, it would mean tariffs on UK goods exports as well as of a loss of access to the EU services markets.
What would an interim deal look like? It would closely resemble membership of the European Economic Area (EEA). Members of the EEA are basically like non-voting members of the EU: they are in the EU single market but cannot vote on EU rules, must comply with free movement of labour and pay into the EU budget.
How would this interim period come to an end? Britain’s status could either evolve during this interim period, with the country’s Single Market rights being rescinded, to be replaced with sectoral agreements, along similar lines to the ones agreed between the EU and Switzerland. Alternatively, and probably more likely, the UK would move in one step from the interim status to a free trade agreement, along the lines of the EU-Canada trade deal.
How difficult will it be to negotiate an interim deal? It is possible, but far from straightforward. Because the interim status would be more favourable…