Uncategorized

What Are Our Trading Options Post Brexit?

What sort of trade deal can we realistically secure?

Daniel Spreckley

Naked Politics Blogger 

It has been a big couple of weeks for Britain. The value of the pound dropped at record speed, stocks  plummeted in value, Prime Minister David Cameron announced his resignation, Labour leader Jeremy Corbyn faces an overwhelming vote of no confidence and our economy is in decline. Still, to be optimistic we could argue a backlash was inevitable – though needless to say, so far, the prospect of life outside the EU appears bleak.

Of course, we are still very much in the process of discovering what the reality of Britain’s exit from the European Union will be. For all of the predictions, speculation and questionable integrity, ultimately, we don’t know.

So what happens next? Much depends on the arrangements Britain makes with the EU and its scorned members over the next couple of years. Understandably, the more access we hope to retain the greater the influence Brussels will have. And though this may come as a shock to some, we cannot expect to be dealt a hand if we have not bought in. Yes, we are a major economy and an attractive market to many of our European counterparts. Likewise, it is true that countries are unlikely to cease trading with the UK because of our decision. Still, we must be prudent. While we have voted to go it alone, turning our back on what is still by far Britain’s largest export market for goods and services (more than 40%) will only aggravate existing volatility. My concern now is that if we want in, we will be fronting the big blind for a worse deal.

During the referendum much focus fell on the Norwegian, Swiss and World Trade Organization (WTO) models. However, given the principle factors behind the UK’s decision to back exiting the EU, besides giving the middle finger to a Conservative leadership of course, we may struggle to achieve such a model that unites UK ambition and EU requirements with the expectations of British voters.

Firstly: Norway. While retaining autonomy over its key markets, fisheries and agriculture, Norway still contributes to the EU budget, accepts all four freedoms of the Single Market and is subject to great swathes of EU regulation including financial, social, employment and environmental directives. If this was to be the model on which the UK bases its negotiations, calls for the redirection of EU fees, greater control of its borders and a return to the overruling power of British decision making may go unanswered.

The Swiss-model promises little more. While more selective, Switzerland is in the same boat as Norway. A distinction worth making however is the free movement of services – or lack thereof. Constituting close to 80% of our economy, the service sector is an interest the UK will be looking to protect. For Britain, gaining access to the European Economic Area (EEA) under a similar arrangement would mean that whilst accepting the outcome of the referendum, we would be contradicting the motivations that drove that decision. It would likely include on-going payments to the EU budget and the acceptance of Free Market principles; crucially, the free movement of people. Not to mention the application of rules and legislation pertaining to the Single Market with no effective say in their implementation.

What’s more, pursuing such a system of bilateral agreements will only extend uncertainty, to the detriment of UK business and outsider investment. All in all, the British Government may find its options restricted by the prevailing attitude of British voters and the brick wall it may face given the EU’s tiring attitude towards its agreement with Switzerland – affirmed by the Swiss referendum on immigration in 2014. It suggests that achieving such a piecemeal arrangement will be difficult, hanging onto British access to the Single Market might mean a concession to some of the principle motivations voters had to vote leave.

Of course, EU-centred arrangements are not the only option. Adopting a system similar to that of the World Trade Organisation (WTO) could help unite new trade agreements with public attitudes on border control and self-regulation, signalling a true break in our trading relationship with the EU as we understand it now. We would not be part of the EEA but trade with nations, both EU and non-EU, along the lines of the WTOs most favoured nation principle. Under this system, the UK would not pay fees to the EU or be subject to its regulations; leaving Britain free to cast its net where its pleases. However, standard external tariffs on UK exports may rankle with businesses with strong trade ties to the EU. In addition to this, even outside of the EEA, meeting EU trading standards would likely be a requirement to trade for the UK within the Single Market.

How popular, and indeed suitable, any of these options might be is yet to be seen, and the conditions under which Britain enters negotiations differs vastly to that of Switzerland and Norway, not to mention the significant influence that principle factors behind Britain’s decision to back leaving the EU will have on our Government’s ability to negotiate a deal. Ultimately, it is unlikely the EU would accept UK entry to the EEA if it were not to embrace Free Market principles, significantly the free movement of people. Equally, it is not likely the British government would accept an agreement pertaining to any significant EU control over its domestic law without representation nor say in its application. Still, we now have the option to explore new trading opportunities. We may even be successful in our negotiation of a new UK-style agreement with the EU. But amongst all of the uncertainty, what is sure is that it will be neither quick, nor easy.

Advertisements

Leave a Reply