Shanker Singham is CEO of Competere and author of Plan A+, A Better Deal and the proposed UK-EU Free Trade Agreement
One thing everyone in Parliament – and the country – can agree on is that there’s been a lot of talk about Brexit. Some of it constructive, some of it less so, but in terms of sheer quantity, a lot. But there hasn’t been as much talk about what comes next.
Some of us have tried to start a conversation about the country we want to be after we leave the European Union. I, for one, have talked about the role of free trade in creating economic growth in the global economy. But this isn’t just about the United Kingdom or the developed world. The single most effective way to lift the poor out of poverty is through international trade.
There is no denying the appetite from our trading partners around the world to strike meaningful trade agreements once we leave the EU. In Washington there is cross-party consensus for a comprehensive agreement which takes in both goods and services, something that would be a boon for our world-leading financial and professional services industries. Japan has asked us to apply for accession to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which numbers 11 countries including fast-growing economies like Vietnam and Singapore.
But as concrete as these offers are, to many they can seem intangible, like some romantic ideal we may never grasp. Ironically, a trade agreement with the very bloc we are due to leave next month has received comparatively little attention.
That’s why I, and a team of trade policy and customs experts, have today published a proposed Free Trade Agreement (FTA) with the EU. One of the mistakes we have made in our negotiations over the Withdrawal Agreement is not being clear about what we wanted. Another was not being proactive and putting text on the table. We seek to take these lessons on board as we publish today’s draft FTA.
We know the European Union wants to do a deal with us because they’ve repeatedly told us so. We also know that unlike other trade agreements which can take years and years to negotiate, this one should be concluded more quickly.
This is for three reasons. First, unlike all other trade agreements, we have the unique starting point of identical regulations and as well as zero tariffs and no quantitative restrictions.
Secondly, the proposed FTA is a sound basis for future agreement as it is based, wherever possible, on existing EU agreements with other nations. These include the Comprehensive Economic and Trade Agreement (CETA), an FTA between Canada, the EU and its member states, the Japan – EU Trade Agreement, the EU – New Zealand Veterinary Agreement, the US – EU Insurance Covered Agreement and EU commitments in the WTO, OECD and other international organisations.
Third, the FTA approach also respects the integrity of the European Single Market and Customs Union and builds on the EU’s original offer of a comprehensive FTA with the entirety of the United Kingdom.
Key elements of the FTA include: deemed equivalence and regulatory recognition including of underlying product regulation to facilitate goods and services trade; customs and trade facilitation measures to improve customs clearance for just-in-time supply chains; regulatory coherence and good regulatory practice on both sides to ensure competitive markets; competition, state aids and subsidy disciplines to ensure a level playing field between the UK and EU; and commitments to honour treaties the UK has signed on labour and environmental standards.
It worth bearing in mind that there are two approaches or ‘operating systems’ for facilitating trade between countries the ‘trade agreement approach’ which is focused on outcomes and the ‘identical regulation approach’ which is focused on process.
Under the free trade approach, the reduction of trade and regulatory barriers are consistent with WTO rules and more recent Free Trade Agreements which increasingly include regulatory recognition and deemed equivalence. The goal of this approach is to progressively lower border and behind the border barriers around the world. This approach began initially with basic tariff reductions and has developed into ever deeper and more comprehensive global liberalisation through the WTO and FTAs.
Under identical regulation approach, regulatory recognition is only granted (and trade permitted) if regulatory systems are identical. The EU Single Market (ironically originally built on mutual recognition) has become an example of this approach. The effect of the regulation on trade and competition outside of the bloc is irrelevant in this approach as the goal is to reduce barriers within the bloc. But the regulatory system inside the bloc may be pro-competitive or anti-competitive, as long as there is a single regulatory system. GDPR is an example of regulation from within the EU Single Market which causes distortions outside the EU and makes the global economy less competitive.
The trade agreement approach is not a second-best approach to the identical regulation approach of the Single Market and Customs Union. It is the approach relied on by most other WTO members and which is supported by WTO rules themselves. It can facilitate just-in-time supply chains and ensure continuity in trade between the UK and EU member states. It is focussed on barrier reduction, unlike the identical regulation approach which is agnostic about barriers.
The trade agreement approach, epitomised by this proposed FTA with the EU, minimises disruption to trade with Europe while preserving the UK’s ability to strike trade deals around the world and make changes to domestic regulation, should it wish.
It has been written with the goal of minimising disruption to businesses and consumers across Europe and the UK as the UK leaves the European Union, while building a solid foundation for future trade and prosperity. Due to the unique starting point of the countries involved having identical regulations, this Free Trade Agreement promises to be the most advanced and liberalising ever developed.
My hope is that this is the start of a renewed dialogue. A dialogue with the business community about what it needs from a Free Trade Agreement. A dialogue with the EU about the precise nature of our future trading relationship. A dialogue with the UK government about how to negotiate a good deal for the country. And a dialogue with ourselves about the kind of country we want to be.