As workers, captains of industry and politicians take their breaks across Europe this summer, they may be wondering what the best way is to ensure smooth and constructive ongoing business between the EU and UK. What is certain is that things will be different when the EU treaties cease to apply to the UK at the end of March 2019. What they want to know is what changes they may need to make to keep cross border activities effective and efficient.
An “implementation phase” for the UK leaving the EU was foreshadowed in UK Prime Minister Theresa May’s Lancaster House speech in January. Beware thinking though that this means an elaborate “transition” is needed for the UK to be part of institutions or arrangements that would require formal agreement of all EU-27 states and the UK, or even EU Treaty change.
Such processes should be reserved for that which may or may not be necessary for the comprehensive free trade agreement and special partnership that both sides of the negotiation have said they want in the end. Getting sidetracked into having to negotiate an institutionalised “transition” could leave the EU and UK having further to negotiate the eventual deal anew, not having addressed uncertainty for business or the key political issues of the UK’s EU referendum.
“Transition” needs primarily to deliver mutual recognition and equivalence of treatment between the EU and UK for a period, based on UK law, regulation, standards and conformity assessment being effectively the same, similar or acceptable to that in the EU on 31st March 2019. They will be equivalent in effect in most areas as long as the UK’s EU Withdrawal Bill passes because of its provisions and their implementation of the current regulatory framework for Britain in UK rather than EU law.
Notwithstanding the commercial and political desires for mutual recognition, which would enable ongoing near frictionless trade in goods between the EU and UK benefiting workers across Europe, this is something to which the UK and EU would effectively be obliged under World Trade Organisation agreements on Technical Barriers to Trade and Sanitary & Phytosanitary Measures.
The slightly hysterical recent discussion of standards in British newspapers is a reprise of one of the Referendum arguments and shouldn’t be taken too seriously. The reality of exporting is having to demonstrate acceptable compliance with other countries’ standards, and that will obviously have to be a feature of EU-UK trade, and something which other trade negotiations will have to take into account.
To support and give confidence to the mutual recognition framework, there is a need for expedited and increased investment in inspection, surveillance and customs data exchange systems. The UK should lead that process, contributing funding where necessary, with the overwhelming majority of processes taking place at points of origin and delivery rather than at the border itself.
The UK is currently implementing a modernised customs and excise system to the specifications of the EU’s customs code, and by working with national customs agencies in Europe it can enable continued pre-declaration of goods at source, confirmation at destination, inspection where necessary, and adjustable pathways for rules of origin application, tariff and VAT rates, and their cumulation. A trusted trader scheme that enables small and medium sized enterprises to pre-register and pre-declare simply and at very low cost is necessary. The cost of such schemes should be borne in the main by Government rather than business.
In addition to this, a simple and sensible framework agreement as to the eventual goals for the relationship between the EU and UK could be reached early in negotiations. It could say a comprehensive free trade agreement, with updates for EU & UK service industries incorporating the best of the EU’s Singapore and Korea Free Trade Agreements, and enhancements relating to transport, financial, insurance and creative services, will be concluded and ratified as soon as possible. It could also explicitly mention interim mutual recognition, and set out plans for co-operation in spheres other than trade.
On the basis of working towards such eventual goals, preferential zero tariff rates between the EU and UK could be kept for up to 10 years under Article 24 of the General Agreement on Tariffs and Trade, meaning no EU-UK tariffs for the time being after March 2019, and businesses having certainty on that front.
As regards movement of people, new migrants between the EU and UK may have to register, as suggested by UK ministers last week, in case they need to be subject to different long term immigration policies. However this could be done either in advance or at the border with a minimum of fuss; skill sharing and tourism are not things the UK or EU want to stop.
New initiatives from the UK in free trade, whether by formal free trade agreements or pushing for better facilitation and greater liberalisation globally, can certainly be pursued immediately after March 2019 when the EU treaties cease to apply. As I have shown above, deep ongoing customs co-operation between the EU and UK is possible outside the EU, without obviating those possibilities.
It would be wrong for the UK and EU to prolong and confuse the issue of new arrangements with woolly thinking about changes that need not be feared. With the right positive attitude from politicians on both sides of the negotiations, they can be constructive and present new opportunities for all.