The point of Brexit is to diverge and that will necessitate lengthy negotiationsby David Henig / November 19, 2019 / Leave a comment
The Conservatives’ election message is clear: in the event of their winning a majority on 12th December, we’ll be out of the EU by 31st January, and will have a new Free Trade Agreement by the end of the planned transition on 31st December 2020. Eleven months will be enough, because we start from complete alignment. Greg Hands, a Tory MP since 2005, tweeted that “As former trade minister, the UK-EU trade deal won’t be like any other in history—both parties will be discussing not what barriers to reduce, but whether to put any up.”
The prime minister has insisted there will be no extension of the transition, just as there was to be no extension of the Brexit date of 31stOctober. This for a trade deal that is unprecedented, where unprecedented normally takes longer. The EU will conclude a full Free Trade Agreement in less than a year, building on the precedent of the EU-Canada CETA deal which was provisionally applied in September 2017, talks having started in 2009.
Even at first sight this all seems unlikely: that an EU which we’ve been constantly told is protectionist and out to punish the UK for leaving, is the same organisation that will be able to complete an agreement with the UK in several years less than its last deal. It doesn’t help that incoming EU Trade Commissioner Phil Hogan has said this will be possible, though such initial optimism is not unusual when starting a trade deal. But there really is no reason why two countries negotiating a trade deal from a position of alignment will reach a conclusion any more quickly than two starting with a huge number of barriers.
An obvious place to start in explaining why current alignment is not necessarily a help is the different base for trade now and in the future. A founding principle of the EU was free movement of goods, services, capital and people for all member states. Though the meaning of these has been refined over time, any restrictions can in theory be challenged in the European Court of Justice.
By contrast, the starting point for trade with the EU for non-members is the World Trade Organisation principle of equal treatment between all, if there is no preferential arrangement in place. A UK-EU deal will create such a preferential arrangement, but the baseline for this is very different to that enjoyed by EU members.
We should then consider that the UK is presumed not to want to retain alignment with EU rules and tariffs. That after all is the reason for leaving the single market and customs union in the first place. It would thus be strange for the UK to commit in a treaty to keeping existing regulations in all areas. At the point at which talks start early next year it is not clear whether the UK government will know which rules it seeks to change and which not. This could take some time to establish, unlike in a trade agreement starting from WTO rules where it may already be obvious up front which rules a country is prepared to accept in exchange for greater trade access.
The EU, as our negotiating partner, will have its own questions over the extent to which it should commit to maintain current close trading relations with the UK. Many EU regulations exist to assure less trade-friendly member states of the fairness of free trade across the bloc. For a UK trade deal, these same member states would want equal guarantees that the UK would not provide unfair competition if given tariff-free access to the EU market. This could mean the UK maintaining EU rules in certain areas.
This means that at the start of talks next year neither the EU nor UK will know which rules they want aligned, and which not. It will take time in internal discussions to establish clear negotiating positions, ideally ones which have been tested for parliamentary support.
Once the EU and UK have positions the negotiation can commence, but that could be a protracted affair if there is little commonality. For example if the UK wanted to maintain tariff-free trade and was only prepared to align with EU rules in the car sector, while the EU was only willing to maintain tariff-free trade if the UK signed up to generous provisions on movement of people and acceptance of the full EU rule set on agriculture and food safety, someone would have to give ground. The internal negotiation about giving ground usually takes longer than the external negotiation with the other party.
In reality there are also countless other aspects that would make up a deal, many difficult such as fishing, financial services, labour and environmental regulations, the rules of origin to qualify for zero tariffs and the level of services access, which is typically very low for EU trade agreements compared to the single market. In a traditional trade agreement there is often a stage ahead of negotiations where both parties scope the likely areas of the agreement, which we haven’t had beyond the fairly vague aspirations in the political declaration. Countries would compare their standard approaches to trade deals, which the UK of course doesn’t yet have. Businesses are also usually aware of the barriers to trade they want to remove, rather than being asked hypothetically about those that might be put in place.
It is often hard to explain to those not versed in trade agreements why they take so long to negotiate. The sheer range of issues to be discussed, the importance of working extensively with domestic interests, the need to make concessions, and achieving a balance of outcomes are all good reasons. None of those are changed by starting from full alignment. In fact they may all be more complicated than if we started from no alignment whatsoever.
If EU and UK negotiators produce a surprise and complete a deal in 11 months we should probably also be worried. For the only major deal negotiated to that timescale, between Australia and the US, was disowned by the negotiators of the former, and is widely considered to have failed to meet objectives. Fixing our trade relations for many years to come deserves longer than a few months of consideration, and is likely to require that extra time.