The EU has been running a cynical campaign to portray British incompetence at the negotiating table. The media has been only too keen to report Brussels’ version of events, a heavily distorted perspective reinforced by the very real impasse over the EU’s shocking demands for billions and billions of pounds. With a speech delivered in Florence in September, the Prime Minister attempted to break the deadlock with a pledge to deliver at least £20bn as a gesture of goodwill and to cover the costs of an equally controversial transition period set to run up to 2021 at the earliest, five years after the referendum.
The Prime Minister and Brexit Secretary David Davis are desperately trying to get negotiations towards a trade deal underway as soon as possible, which the EU has stubbornly insisted can only occur once “sufficient progress” has been made on the three key divorce issues: the border between Northern Ireland and the South, the rights of EU nationals living in the UK and the dreaded financial settlement.
In her more recent pronouncements and position papers, the Prime Minister has remained largely faithful to her intention to forge a “comprehensive” trade deal with the EU, rather than remaining in the single market or the EU Customs Union. But the transition period advocated strongly by Chancellor Philip Hammond threatens to keep the United Kingdom in both structures interminably.
This seemingly insignificant component of the EU treaties attracted little attention during the referendum campaign, but it will be central to the process of withdrawing from the European Union in the coming months and years. Article 50 defines the pathway for any Member State to exit from the European Union. Following the Prime Minister’s notification of withdrawal to the European Council on 29 March, the clock has started on the two-year negotiating period, which will define both the terms of Britain’s exit as well as its future relationship with the European Union. Leave.EU will be reporting on Article 50 developments on a constant basis. Make sure to tune in, we’ll be unravelling it all.
Click here to learn more about the Brexit process, how we leave and when.
A BREAKDOWN OF THE OPTIONS
Listed below are the different options available. In principle, the country is headed for option 1, a bespoke trade deal, but Theresa May has not ruled out incorporating elements of option 2, the Customs Union. The pro-EU political establishment will be motivated to make a last ditch attempt at keeping Britain inside the Single Market under option 3 (the EEA) or a variation of it (see option 4) in spite of the huge democratic sacrifices that entails.
David Davis, a key figure in Britain’s fight to be freed from the EU, has been tasked with securing Theresa May’s Brexit vision at the negotiating table. His job – Secretary of State for Leaving the EU – is a new cabinet position. As a headstrong and experienced Eurosceptic Davis is well-placed to strike a hard bargain. However, even before the negotiation has begun, the former Europe minister has made some alarming noises. He is open to paying for better access to the single market and foresees open migration with EU citizens of all skill levels in the aftermath of Britain’s exit from the bloc.
1. THE UK NEGOTIATES A FREE TRADE AGREEMENT (FTA) WITH THE EU
The most relaxed of the formal options available to the UK is a typical free trade deal. Britain would retain full or partial access to the Single Market, meaning tariffs on the vast majority of goods would continue to be exempted. But there would be no requirement for the UK to adopt regulations from Brussels, nor would Free Movement be a pre-requisite.
2. THE UK REMAINS PART OF THE CUSTOMS UNION
The Customs Union in many ways mirrors the the EEA. Just as all EU countries are in the EEA, they are also members of the CU. Non-EU countries in the Customs Union are usually hoping to one day become fully-fledged EU Member States, whereas the likes of EEA Norway have decided not to join the EU but have sought a higher level of EU market access. Non-EU countries in the customs union include Turkey, free movement is not a pre-requisite as it is with the EEA. The EU will want to retain access to the UK labour market so the EU may seek to take the CU option off the table.
Besides, the CU carries a major drawback. Members must adopt the EU’s common tariffs (aka import duties). In other words, members of the CU cannot unilaterally raise or lower tariffs on any imports other than agricultural goods, and as a result, they cannot enter into trade agreements without the EU doing so first. EEA countries can. If Iceland was a member of the CU instead of the EEA it would not have been able to sign a trade deal with China.
3. THE UK REMAINS A MEMBER OF THE EEA
Under this option, Britain would still remain within the European Economic Area (EEA), which comprises of all the EU Member States plus three other countries, Norway, Iceland, and Lichtenstein. The EEA is essentially, the EU’s Internal Market, minus agriculture and fisheries. A ‘Norway-Style’ relationship therefore means the European Court of Justice will no longer be Britain’s supreme court, EU VAT requirements will no longer apply, agriculture and fisheries policies will be back under the government’s control, as will its ability to independently negotiate trade deals. A condition of remaining in the single market however is to adopt Free Movement, pay budget contributions to the EU, albeit at a significantly reduced level, and adhere to the EU’s single market regulations.
4. THE UK NEGOTIATES ITS OWN EEA TYPE DEAL
Switzerland, chose to arrange its own EEA-type deal with the EU. It has tariff-free access to the single market, but whereas Norway and the other EEA countries have chosen to weld most of their industries to the EU’s single market, Switzerland has opted to be more selective. The alpine country has still had to adhere to free movement of labour, but it has on occasion decided to restrict access to its labour market for non-Swiss nationals.
5. THE UK TRADES WITH THE EU THROUGH WORLD TRADE ORGANISATION (WTO) RULES
Should negotiations break down with the European Union for whatever reason, the UK would fall back onto World Trade Organisation (WTO) rules in its commercial relationship with the EU. The core principle of WTO membership is to treat all other members equally and the EU will not be able to impose arbitrary and prohibitive duties on imports from the UK.
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