A Framework For Future Co-Operation

Appealing as the thought of a “clean break” may be, 44 years of political, economic and social integration will not be undone at the stroke of a pen. The more people who accept that straightforward presupposition, the sooner the debate on EU exit can move beyond the complexities of the withdrawal agreement—and any transitional arrangements related thereto—to focus on Britain’s objectives for its relationship with the EU, and the wider world, after exit.

A successful Article 50 negotiation will conclude with the UK and EU agreeing an alternative framework for future co-operation. Given time constraints and other complicating factors, seeking to rejoin EFTA, so as to participate in the Single Market via the EEA agreement, offers the “least worst” route out. It stands to reason that whatever is concluded during the course of those first two-years will not and cannot be allowed to be the final word on the matter.

To date, the legacy debate has focused almost exclusively on the kind of trading arrangements the UK should aim to agree with the EU after exit.

To that end, there are three main options. The unilateral approach—falling back on WTO rules and tariff baselines—the bilateral approach—negotiating a comprehensive free trade agreement (FTA)—and the multilateral approach—seeking to retain Single Market membership.

However, even in that limited context, it is wrong to view these options in isolation. Leaving the EU is not year-zero for UK trade policy and international relations, it is part of a continuum, which has antecedents in the past, and consequences for the future. Just as the exit negotiations will not begin with a blank slate, each of these alternative objectives imply associations, which will set a precedent for Britain’s independent trade policy.

The unilateral approach could engender the kind of “pull up the drawbridge”, “stop the world I want to get off” scenario that is frequently used to taunt Brexiteers. The bilateral approach would presage a by-the-numbers attempt to replicate the sorts of agreements that have led to the paralysis of the global trading system, and carries with it enormous risks as concerns the Article 50 negotiations.

Free of the EU, the UK has the opportunity to pursue a different route all together. Embracing a multilateral approach would enable Britain to “take a lead in kickstarting a programme of regulatory convergence to rebuild the global trading system”.

Modern free trade agreements are not only about regulatory harmonisation or alignment, the most sophisticated agreements also provide a dynamic means to resolve disputes and to keep those systems aligned. This is easier to achieve working on a multilateral (many-to-many), rather than a bilateral basis (one-to-one), with independent states opting in to sectoral or even product level agreements in accordance with their interests, without a supranational authority imposing a one-size-fits-all approach on often very different economies and cultures.

For instance, the idea that the UK would have more freedom to negotiate on services outside of the EEA appears to presume that the UK could make one set of agreements with one country and another set of agreements with another country. Those agreements would then have to take account of other agreements already in force and all of those agreements would need to be managed to resolve disputes and maintain mutual recognition of conformity.

There is no regulatory year-zero. The UK is stepping out into the global trading system and we will be confronted with the reality which has heretofore been hidden from us by our EU membership.

The way out of this complexity spiral is to pursue a multilateral approach and to add our weight and expertise to the institutions which are taking the power to make technical standards away from the supranational EU. An independent UK with an independent right of initiative and of opt out could break from the pattern of negotiating bilateral deals and strive instead to shape and develop the multilateral trading system, working alongside similarly-minded partners, such as Australia, Canada and New Zealand, playing ‘honest broker’ to the USA and EU.

I hope it is clear why leaving the Single Market without alternative arrangements in place would negatively impact Britain’s ability to pursue such an ambitious agenda. Electing to erect a mass of new technical barriers to trade would be an inauspicious start for a nation which wishes to expand trade facilitation by taking global standards and regulations, and influencing them at the top, so as to negate the necessity for bilateral deals and the technical conflicts they present.

The fact that we start from a position of tariff-free trade and regulatory harmonisation is not the advantage that some presume when you factor in the obvious corollary that the UK does not presently have an independent regulatory system. UK systems are EU systems. The problem we face is not one of bringing two different systems into alignment, but one of building new systems from a standing start. It is not as simple as carving out EU systems and slapping on a Union flag. The entire point of developing independent systems is to adopt processes which align with our own needs and interests. That will take some time.

Moreover, even if that were feasible, there is still the problem of arbitration and dispute resolution, which would need to be agreed. Not to mention the fact that decoupling UK administration is (far) from only about trade, and to date the political and media class have spent more than six months since the referendum discussing little else. The EEA ticks most of the necessary boxes with respect to trade and future co-operation. It also avoids opening up lots of complex areas for dispute, thereby reducing the risk of the Article 50 process getting diverted, derailed or dragging on too long.