Brexit: the options for trade

The EU Internal Market and External Affairs Sub-Committees of the UK House of Lords published a report on the 13 December 2016 on frameworks for UK-EU trade after Brexit. The report evaluated four main models for future UK-EU trade. It concluded there was always an inherent trade-off between liberalising trade and the exercise of sovereignty.

Background
The Government has stated that it will trigger Article 50 by the end of March 2017. This means the UK’s current terms of trade with the EU will end after the two-year period specified for the exit negotiations, unless extended unanimously.

Key findings of the report
The report evaluates the four main options for the UK’s trade relationship with the EU after this time and concludes:

+ The European Economic Area (EEA) is the least disruptive option for trade, but it is unlikely to be reformed to limit free movement or give the UK voting rights on EU legislation
+ The Government urgently needs to decide whether or not the UK will remain in a customs union with the EU. Doing so would mean no border checks for goods between the UK and EU, but would restrict the UK’s ability to sign trade deals with the rest of the world. It does not cover services
+ A Free Trade Agreement (FTA) with the EU is the most flexible option and could lead to a bespoke deal, but would be complex and take longer than two years to negotiate. Even the most advanced FTAs do not provide terms for UK-EU trade equivalent to membership of the Single Market
+ Trade under World Trade Organisation (WTO) rules would have the most dramatic effect on trade, resulting in significant tariffs for goods and increased restrictions on services. Establishing independent WTO schedules will not be straightforward

Transitional arrangement
The report recognises that the UK Government is seeking a bespoke agreement with the EU post Brexit, but concludes that tailoring existing trade models is difficult. It notes that a FTA with the EU would take longer than two years to negotiate.

The report from the EU Committee was published a day following comments from Philip Hammond, Chancellor of the Exchequer, calling for a transitional deal for Brexit saying it would be 'helpful' to allow longer than two years for the UK's EU exit.

ESO: In Focus: Brexit - The United Kingdom and the European Union http://www.europeansources.info/record/brexit-the-united-kingdom-and-the-european-union/

UK: Parliamwnt: House of Lords: EU Committee: News, 13.12.16: Brexit requires compromise between sovereignty and liberalising trade, report says http://www.parliament.uk/business/committees/committees-a-z/lords-select/eu-internal-market-subcommittee/news-parliament-2015/brexit-trade-options-report-published/

BBC News, 13.12.16: Brexit: 'Clear plan' for interim deal needed, say peers http://www.bbc.co.uk/news/uk-politics-38297595

The Guardian, 13.12.16: UK naive to expect easy ride in Brexit trade talks, says Lords report https://www.theguardian.com/politics/2016/dec/13/uk-naive-to-expect-easy-ride-in-trade-talks-says-lords-report

Politico, 13.12.16: House of Lords: EU-UK trade deal will take more than 2 years http://www.politico.eu/article/house-of-lords-eu-uk-trade-deal-will-take-more-than-two-years-brexit-negotiations-article-50/

BBC News, 12.12.16: Chancellor urges Brexit interim deal http://www.bbc.co.uk/news/business-38295358

The Guardian, 12.12.16: Philip Hammond says post-Brexit transitional deal will be needed https://www.theguardian.com/politics/2016/dec/12/philip-hammond-calls-for-post-brexit-transitional-deal

EUObserver, 13.12.16: UK finance minister wants transitional Brexit deal https://euobserver.com/uk-referendum/136245

ESO: Background information: EU Brexit boss sets October 2018 deadline for end of UK divorce talks http://www.europeansources.info/record/eu-brexit-boss-sets-october-2018-deadline-for-end-of-uk-divorce-talks/

ESO: Background information: Four principles for the UK’s Brexit trade negotiations http://www.europeansources.info/record/four-principles-for-the-uks-brexit-trade-negotiations/

ESO: Background information: UK will consider paying to access EU single market http://www.europeansources.info/record/uk-will-consider-paying-to-access-eu-single-market/

UK: Parliament: House of Lords: Committees: EU Committee: News, 27.03.17: Committees disappointed by Government response to Brexit: the options for trade report http://www.parliament.uk/business/committees/committees-a-z/lords-select/eu-internal-market-subcommittee/news-parliament-2015/committees-respond-to-gvoernemnt-response/

The Conversation, 28.06.17: After Brexit, should the UK just join the EEA? http://theconversation.com/after-brexit-should-the-uk-just-join-the-eea-79938

---