Can the UK improve its Brexit deal?

Can the UK improve its Brexit deal?

After a period of inactivity, the debate over the shape of the UK’s post-Brexit trade deals has suddenly been reignited after senior government officials in the Rishi Sunak administration suggested they were looking for a closer relationship. closely with the EU.

Downing Street was quick to deny reports that the government was planning a ‘Swiss-style’ relationship developing over the next decade after a backlash from Brexiteers on the party’s right wing.

But in an interview on BBC Radio 4 Today On Monday, Robert Jenrick, the immigration minister, said the government ‘wants to improve our trading relationship’ with the EU, while respecting the ‘fundamental terms’ of the trade deal the UK has with the EU. Brussels in 2020.

How could the EU-UK Trade and Cooperation Agreement (ATT) be improved, both within the red lines of the current government, but also what might be possible if a future government adopts a different approach?

How does the TCA work?

The EU-UK Trade Agreement is a basic “Canadian-style” free trade agreement that leaves the UK outside the EU customs union and single market. It is a “zero tariff, zero quota” agreement.

This means that goods that are sufficiently “made in the UK” to qualify can enter the EU duty free. But they must prove that they qualify for this access and that they also comply with a myriad of EU rules and regulations, for example in terms of food safety rules or industrial standards. This adds costs and delays to EU-UK trade.

The ATT also ends the ‘free movement of people’, which presents challenges for some UK businesses, such as hospitality and construction, which relied on access to a flexible EU workforce. .

Finally, the agreement removes all jurisdiction for the European Court of Justice in the United Kingdom, except in Northern Ireland which has remained in the European single market for goods to avoid the return of a commercial border on the island of Ireland. .

How could the TCA be improved?

If the UK government sticks to its red lines on EU law, budget contributions and regulatory alignment, it cannot be much improved according to trade and economic experts.

Tony Danker, chief executive of the CBI, urged the government to “round the table; do the trick; unlock the TCA” at the trade body’s annual conference, but there are limits to what can be achieved within the parameters Jenrick embraces.

Resolving the long-running row over the implementation of post-Brexit trade deals for Northern Ireland would certainly improve the mood music. It could also unlock some currently blocked areas – such as the UK’s participation in the €95 billion Horizon science program – but it would not change the fundamentals of the ATT.

UK traders would still be outside the EU regulatory framework, would still have to prove that their goods are eligible for zero-duty entry into the EU single market and would still have to fill in forms proving they are compliant to EU standards.

The UK Treasury and the Office for Budget Responsibility, the budget watchdog, estimate that these frictions will inflict a 4% drop in UK GDP over the medium term. But small tweaks to the ATT would not fundamentally change that assessment, according to Anand Menon, UK lead at a changing Europe think tank.

“You can tinker all you want around the margins, it will make the relationship easier and might help with security, but in economic terms it will make very little difference,” he said.

What can the UK do to mitigate the negative impact of Brexit?

Any measure to mitigate the negative effects of the TCA would involve blurring the red lines of the current government, in particular accepting European Court of Justice control over key areas – eg regulations governing automobiles, chemicals or food standards – which the UK refused in the 2020 trade talks.

The UK Chambers of Commerce have identified five key areas they would like to see improved. They include a veterinary agreement to reduce the cost of paperwork to export animal and plant products; a global agreement to simplify VAT regimes so that they do not differ from one EU country to another; an agreement to recognize the EU CE marking on industrial and electrical products; and bilateral agreements with individual EU Member States to allow greater access to UK professional services.

The challenge, according to Anton Spisak, trade and EU specialist at the Tony Blair Institute for Global Change, is that to deliver meaningful benefits in these areas would require much higher levels of regulatory alignment than the government current can accept.

Such a move would run directly counter to the government’s stated desire to seek “Brexit benefits” by actively deviating from EU rules via the successful EU bill, which is currently in Parliament.

“Ministers could take unilateral decisions to align with EU rules where consistency of rules obviously benefits businesses. This would reduce some trade costs, but it would not mean frictionless trade unless the UK Uni cannot formalize this in a bilateral agreement with the EU – and for that, accepting the jurisdiction of the CJEU would be unavoidable,” Spisak said.

What about a “Swiss” agreement?

A Swiss deal, based on a network of 120 bilateral agreements with Brussels, is in an entirely different regulatory and policy orbit than the UK’s basic Canadian-style deal. It is also completely irrelevant in the current circumstances, as Sunak admitted to the CBI today.

As a member of the European Free Trade Association, Switzerland is selectively but deeply integrated into the EU single market and must “dynamically align” its laws with EU law in relevant areas to maintain this access. It also pours into chests on the block.

This principle of alignment was roundly rejected by former Brexit negotiator Lord David Frost and, as is clear from the reaction to media reports that the government has favored a Swiss-style trade deal over time , it still strikes a raw political nerve among Brexiters.

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