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Image of Alan Winters4 December 2019

L. Alan Winters CB is Professor of Economics and Director of the Observatory.

The Prime Minister seems to think that an ‘oven-ready’ Brexit deal is the best that we can choose from the menu of policy alternatives. It sounds neither appetising nor nourishing, but if it really were quick and easy, maybe it would be worth it.

But it’s not quick or easy: ‘oven-ready’ is just not true.

It is true that a Withdrawal Agreement exists and could be put to Parliament in December, but even that is not ready-to-go and passing the Withdrawal Agreement is not the same as Brexit. A couple of examples of how the Withdrawal Agreement is part-baked:

  • The financial settlement (the price tag) is not specified.
  • The Conservative manifesto promises Northern Ireland ‘unfettered access’ to the market in Great Britain. Launching it, two Cabinet Ministers said ‘There will never be any fees or tariffs on goods flowing between Northern Ireland and Great Britain and vice versa … .’ In fact, the Withdrawal Agreement clearly states that many goods flowing between Great Britain and Northern Ireland will face tariffs (at EU levels!) and the Brexit Secretary conceded in Parliament that there would be forms to fill for any goods flowing the other way.

Passing the Withdrawal Agreement and exiting on 31st January 2020, is just the start of a complex negotiation between the UK and the EU, which will be painful, long-lived and probably chaotic.

First, consider the parties.

For the EU, the negotiations will take place under Articles 207 and 218 of the Treaty on the Functioning of the EU, which govern negotiations with countries outside the EU, and which have a far more demanding process for approval than the Withdrawal Agreement. The member-states have to agree to any deal unanimously and if the deal spreads into areas which are still governed by the States themselves (some services and investment), each will have to go through a ratification process that may involve their national and regional parliaments. The EU’s agreement with Canada, which took seven years to negotiate, was held up for nearly a year because the Wallonian Parliament declined to agree.

On the UK side, there has been no effort to spell out the implications of the Free Trade Agreement (FTA) that Mr Johnson wants, let alone the one he will get. For example, Michael Gove claimed on 26th November that because there was effectively no EU Single Market in services, UK services firms will suffer no adverse effects from Brexit with an FTA. Wrong! OECD has shown that EU barriers to service imports from third countries are, on average, four times higher than those between members. Canada failed to get much in services from the EU after seven years negotiating; the same will apply to us.

Second, consider the commitment to get it all done by December 2020. Any deadline puts pressure on both parties, but particularly the one with more at stake (the UK). The default at the end of 2020 is not the status quo but a ‘no deal’ Brexit, so the cliff-edge that plagued the March and October 2019 deadlines will be repeated.

Third, the content: we may agree to keep zero tariffs on all goods, but there will still be border formalities. In order to claim tariff exemptions, UK exporters will have to prove that their goods are substantially made in the UK. Most commentators reckon that together these frictions add perhaps 4% or 5% to the cost of exports. We may be able to negotiate better conditions than average, but not by December.

Worse than tariffs will be regulations.

First, UK exporters will have to prove that their goods meet EU standards. It doesn’t matter that the UK says they do, they have to prove it. Where standards are critical, either the UK government will have to enforce EU regulations throughout the UK (which a Johnson government won’t) or exporters will have to obtain certification from an EU-approved inspection agency. If that task is to be done in the UK, it needs to be negotiated.

If the EU is to give up its tariff protection, it will want to know that UK firms are not obtaining ‘unfair’ competitive advantages through lax labour or environmental rules or through subsidies or violations of competition law. (These are the so-called level-playing field conditions.) The current government clearly hates such constraints, but the EU will not commit to free trade without some such commitments – result impasse. Mr Johnson’s casual suggestion on 29th November that the UK relax EU rules on state-aid to companies will make this doubly difficult.

Finally, there are issues strictly lying outside an FTA, but which will inevitably be bound up with it. For example, whether airlines based in the UK can fly between EU cities and whether EU fishermen get access to UK waters in return for the UK selling its fish in the EU.

You can’t help feeling that it is us, the British public, that is oven-ready, who are going to get ‘done’.

We will have a torrid 2020 deciding what we want of an FTA and a worse time getting even a part of it. Much will remain undone by December 2020, and so the subsequent years will be spent trying to patch up the holes, one-by-one from a position of weakness. The UK will spend five years trying to restore commercial relations with the EU and still end up with something a lot less satisfactory for traders than we have at present.

This blog was first published by Remain United.

Disclaimer:
The opinions expressed in this blog are those of the author alone and do not necessarily represent the opinions of the University of Sussex or UK Trade Policy Observatory.

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December 4th, 2019

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5 November 2019

Border posts could be required at Gretna Green and the Severn Bridge in response to widening regional standards in food safety that could open up after Brexit, our new Briefing Paper warns.

Our analysis warns of the potential for very different regulatory approaches between the UK Government and devolved authorities towards controversial food practices including chlorinated chicken, GM crops and pesticides.

The existence of such discrepancies would likely have a significant and detrimental impact on the UK’s ability to strike trade deals, analysis by Dr Emily Lydgate, Chloe Anthony and Prof Erik Millstone has warned. (more…)

November 5th, 2019

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Alasdair Smith, author17 October 2019

Alasdair Smith ian Emeritus Professor of Economics at the University of Sussex and is a member of the UK Trade Policy Observatory.

Most of us may not yet have found the time to read and absorb the text of the new Brexit withdrawal agreement, but we can read the texts which “a Number 10 source”, whom we non-journalists are allowed to call Dominic Cummings, has sent to journalists. These texts deserve critical scrutiny. (more…)

October 17th, 2019

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Image of Alan Winters3 April 2019

Dr Michael Gasiorek is a Senior Lecturer in Economics at the University of Sussex and a fellow of the UK Trade Policy Observatory. L. Alan Winters CB is Professor of Economics and Director of the Observatory.

Understandably the politics surrounding the UK’s exit from the EU are dominating current discussions. But the economics of the options still matter, and it is not always evident how well the core economic issues are understood.

In the light of the Government’s ‘approach’ to Labour to find a consensus and in the light of the indicative votes, the aim of this blog is to clearly outline the economic issues and summarise the likely consequences associated with two of the current (indicative) options. (more…)

April 3rd, 2019

Posted In: UK - Non EU, UK- EU

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4 February 2019

The Government’s presumption it can negotiate a special deal to prevent UK-based banks being frozen out from lucrative business within the EU after Brexit is highly likely to be proven wrong in time, according to our latest study: ‘Equivalence, mutual recognition in financial services and the UK negotiating position’.  

The Briefing Paper by Dr Andy Tarrant, Dr Peter Holmes and Prof Dan Kelemen warns that the EU is almost certain to reject any approach to a future trade deal that seeks to retain UK-based banks access to EU markets while giving the UK the ability to vary its regulation away from that applied by the EU. (more…)

February 4th, 2019

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Photo of Emily Lydgate21 November 2018

Dr Emily Lydgate is a lecturer in Law at the University of Sussex and a fellow of the UK Trade Policy Observatory.

Even if the draft Withdrawal Agreement is ultimately rejected, it provides more clarity on what the European Union (EU) and the United Kingdom (UK) want in future relationship negotiations. Notably, it has prompted the EU to develop its call for a ‘level playing field’ in the areas of environmental and labour standards, State Aid and competition policy into a set of binding commitments now agreed by the UK Government. This blog examines the requirements for environmental standards and regulation. The EU has already indicated that it will seek ‘Level Playing Field’ commitments in any agreement, including a ‘Canada-style’ deal. These environmental commitments will likely comprise a minimum standard that the EU will require in any negotiated future relationship. (more…)

November 21st, 2018

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17 October 2018

Dr Michael Gasiorek is a Senior Lecturer in Economics at the University of Sussex and a fellow of the UK Trade Policy Observatory.

UK-EU negotiations are in a mess. There appears to be a genuine impasse, where the stumbling block is the issue of no border in Ireland. The EU has indicated it is for the UK to make a better offer, while the UK is arguing that the EU needs to be more reasonable.  Both are right, if they want to avoid ‘no deal’. (more…)

October 17th, 2018

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Photo of Emily Lydgate27 July 2018

Dr Emily Lydgate is a lecturer in Law at the University of Sussex and a fellow of the UK Trade Policy Observatory.

The July UK White Paper on the future relationship with the EU calls for a ‘common rule-book’ for goods. This has sometimes been shorthanded as a proposal for a Single Market for goods (in contrast to services, which departs more dramatically from the status quo).[1]

But the scope of regulation the UK proposes should fall within this ‘common rulebook’ is narrower than what would be covered in a Single Market for goods – as the EEA Agreement demonstrates. It’s narrower even than that covered by the EU-Ukraine DCFTA Agreement.

So what does the common rule-book cover – and how might this match up with the EU’s regulatory ‘ask’ of the UK? (more…)

July 27th, 2018

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12 July 2018

Rorden Wilkinson is Professor of Global Political Economy and Deputy Pro-Vice-Chancellor at the University of Sussex and a Fellow of the UK Trade Policy Observatory. Charlotte Humma is Research Communications Manager at the Business School and Business Manager at the Observatory.

Standards and technical regulations are likely to be the most significant—and potentially contentious—obstacles to a UK-US trade deal according to leading trade experts.

Published today our latest briefing paper states that the UK faces a challenge in whether it stays with EU regulation, moves towards the US approach or tries a pick-and-mix approach of its own. (more…)

July 12th, 2018

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2 March 2018

Dr Michael Gasiorek is Senior Lecturer in Economics at the University of Sussex and Director and  Managing Director of InterAnalysis respectively. He is a Fellow of the UKTPO.

There is much talk about the UK not being able to “cherry-pick” and “have its cake and eat it” with regards to post-Brexit trade policy with the EU. There are a couple of issues here. First, all EU agreements are different and hence by definition bespoke. Cherries are picked by both sides. This will also be true of a future UK-EU agreement. The question, therefore, really is to do with the extent to which the EU will grant the UK a bespoke deal in serious and substantive ways. The second issue is that it is far from clear that the UK government currently knows what all the ingredients are and what the recipe is for the cake it is hoping to share with the EU. (more…)

March 2nd, 2018

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