The UK should seek a highly integrated relationship with the EU in goods, but should obtain the flexibility to diverge in services, new report argues.
The UK should respect the EU’s legal autonomy and recognise that giving up a little sovereignty could deliver good economic benefits, the report ‘Striking a Balance: A blueprint for the future UK-EU economic partnership’ by Open Europe suggests.
The model, which Open Europe set out for the UK and EU’s future economic relationship and which offers a pragmatic way through the Brexit deadlock, lies reportedly between the so-called Canada and Norway arrangements framing the UK political debate.
The think tank’s proposal is that the UK should seek to remain close to the EU in terms of goods regulations, because after all, as a member the UK was a key supporter of the single market, which replaced the European Common Market, in the late 1980s.
The report says that in return for the UK keeping broad alignment with the EU’s rules, it would be reasonable for goods to continue to be freely traded with Europe, and it suggests that the UK should commit to maintaining the existing ‘acquis’ of rules over goods regulation and will need a process to determine how to apply future regulation, which must not be simply automatic.
“Switzerland’s experience of alignment with EU goods rules illustrates that this does not necessarily mean full harmonistion with detailed EU rules in all goods sectors, only those that are already highly regulated.”
Reportedly, there is scope for flexibility for many products and, as a “third country”, the UK would be open to decide not to apply a new EU regulation, but this could prompt retaliation from the EU and might have an effect on market access.
The report says, that seeking a deeper deal would likely mean accepting wide-ranging level playing field rules. Open Europe believes that the UK must be able to regulate its wider economy, and that so-called level playing field requirements must be minimised as they would limit the government’s ability to regulate areas including employment, taxation and the environment.
It would not be sustainable for the EU to have control over such policy areas after Brexit. Giving up some control – or sovereignty – over goods regulation, is a price worth paying for strong market access. Manufacturers in highly regulated industries often follow EU rules anyway, in some cases even in the US.
But seeking to replicate the patchy single market in services, the report said, would require the UK to give away too much control over its economy, for too little gain.
Open Europe’s proposed bespoke UK-EU model
Open Europe suggests that the UK and EU should agree an extensive Free Trade Agreement which takes as its starting point zero-tariff and zero-quota trade across all goods lines, with maximal customs cooperation (Open Europe’s suggested model in ‘Nothing to Declare’ is roughly equivalent to the government’s maximum facilitation option; as an alternative the government is considering creating a Customs Partnership with the EU).
The UK-EU agreement should be part of an overall partnership or association agreement the report says – which creates a framework for managing UK-EU relations with chapters covering fields from trade to security.
The UK and EU should not pursue a complex network of separate bilateral agreements of the sort which Switzerland and the EU have formed. However, the relationship will need to be flexible and will inevitably need to be able to evolve over time.
According to the report, the UK should not seek to remain part of the European Economic Area (EEA) Agreement, which would provide ongoing membership of the single market, nor should the UK seek to form a new customs union with the EU.
The report suggests that the UK and EU should agree to “managed alignment” over goods standards and regulations in return for the UK’s Swiss-style participation in the single market for goods. A broad-spectrum enhanced mutual recognition agreement would mean most goods manufactured by one party would be considered pre-authorised for sale across others.
“In highly-regulated sectors the UK may need to agree to continue to follow EU regulations. This process would not be automatic and it would be open to the UK parliament to diverge from the EU’s regulatory framework, but if this divergence could not be resolved via negotiation or legal means, market access to the EU could be affected.”
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