Theresa May was right: no existing off-the-shelf model provides a template for future UK-EU relations

Theresa May was right: no existing off-the-shelf model provides a template for future UK-EU relations

As the UK negotiates its exit from the EU it is important that both sides work to clarify what our future long-term trade relationship might look like.   

Trade links and supply chains between the UK and the EU are much more intertwined than those we have with any other trading partner. If Brexit is to be achieved in a manner that minimises risk of economic instability then it will be important to find a new relationship which recognises this.

No “off-the-shelf” existing relationship “model” gives an ideal long-term outcome for either side, which is why I welcomed the Prime Minister’s commitment to seeking a unique “British model” in her recent Lancaster House speech.

The economic links between the UK and the EU are too diverse to simply adopt the Norway model. In return for access to the single market on certain sectors, Norway accepts complying with the EU regulations for those sectors with only a very limited say on how those regulations are formed. Maintaining a regulatory framework without the UK being able to contribute input in sectors where the UK has leading expertise such as financial services, advanced pharmaceuticals and increasing digital is bound to end up in continual arguments.

We are too big to have a relationship like Switzerland’s where each side can face losing preferential access to the others’ market (based on the “equivalence” principle) every time there is a slight divergence in regulatory strategy.

Our trading relationship with Europe is too sophisticated for it to be replaced by a cut-and-paste of the Canada-style free trade agreement as this does not give certainty or stability for key 21st century economic sectors like digital, advanced manufacturing, medical research or financial services due to the lack of “mutual recognition” and thus does not address the type of non-tariff barriers to trade that can ensue.

Falling back on WTO rules as a backstop is high risk for the UK, since it does not cover services or much of the broader commerce we in Britain sometimes take for granted with the EU. It could result in significant tariffs on many exports and imports, for example on cars and agricultural goods, and does not address the issue of non-tariff barriers. But it would also be destabilising for the rest of the EU, risking uncertainty for their own trading relationships with other parts of the world and resulting economic risks.

Staying where we are, or were we have been is also not an option. Of course there have been benefits from being at the helm of Europe’s Single Market. It has allowed British-based businesses to trade across a market of 500 million consumers, removing the need for duplicative paper work and multiple authorisations, but it is also true that sometimes its top-down, one-sized approach can stifle innovation and add costs.

Therefore an orderly, objective-based Brexit process cannot just cut and paste anyone else’s relationship with the EU onto UK/EU trade but needs to find a different way forward. Achieving this is of course complex and will require much detailed work but there are other models in other parts of the world that many be helpful to draw upon – for example, the cooperation elements of the trade relationship between Australia and New Zealand may be interesting if combined with elements of a Norwegian or Swiss approach.

During the numerous public debates I took part in during the referendum, many Leave campaigners promised that the UK would negotiate a new “British” model for our future trade with the rest of the EU going forward and would not be exposed to the risks inherent in any existing model.

It has therefore been heartening to hear some recent discussion from some of my non-UK MEP colleagues of the need to find an relationship which is very specific for the UK and takes into account the very substantial sophisticated trade links that already exist. Given the potential benefits to both counter-parties, it is well worth investing the negotiating effort in trying to deliver it.