Towards a Free Trade Agreement – the UK's initial negotiating stance

A two-part analysis of the EU and UK negotiating mandates from our Vice President, Arne Mielken.

Introduction

On 31 January 2020, the United Kingdom withdrew from the European Union. On 3 February 2020, the European Commission has issued a recommendation to the Council to open negotiations on a new partnership with the United Kingdom.

On the same day, the UK government has made a formal statement to the House of Parliament on the future of UK/EU relations and a future, independent "Global Britain". The Foreign Secretary gave a speech in Parliament, and the PM made a speech in Greenwich as regards the new UK trade policy.

Arne’s second article summarises the UK vision. You can read the EU vision here.

Part 2: The UK Vision

UK PM, 3 February 2020: "The question for the rest of 2020 is whether the UK and the EU can agree a deeper trading relationship on the lines of the free trade agreement the EU has with Canada, or whether the relationship will be based simply on the Withdrawal Agreement deal agreed in October 2019, including the Protocol on Ireland / Northern Ireland. In either event, the UK will be leaving the single market and the customs union at the end of this year and stakeholders should prepare for that reality".

Transition Period will not be extended

The Foreign Secretary told MPs that the transition period, during which the UK remains in both the EU customs union and single market, will not be extended.

What will happen in 2020

There is complete certainty that, at the end of 2020, the process of transition to a new relationship will be complete and that the UK will have recovered in full its economic and political independence. The Government remains committed in all circumstances to securing all those benefits for the whole of the UK and to strengthening our Union.

Equal Partners based on free trade

The Foreign Secretary, Dominic Raab, said:

"We will have a new relationship with the EU, as sovereign equals, based on free trade. [...] These will be backed up by governance and dispute settlement arrangements appropriate to a free trade agreement, with no alignment and no role for the European Court of Justice, respectful of our democratic prerogatives.”

UK Prime Minister:

• The Government wishes to see a future relationship based on friendly cooperation between sovereign equals for the benefit of all our peoples.
• The Government will work hard to achieve a balanced agreement that is in the interests of both sides, reflecting the wide range of shared interests.
• Any agreement must respect the sovereignty of both parties and the autonomy of our legal orders.
• It cannot, therefore, include any regulatory alignment, any jurisdiction for the CJEU over the UK’s laws, or any supranational control in any area, including the UK’s borders and immigration policy.

About the future UK "Global Britain" Policy

The Foreign Secretary told the House that the 'Global Britain' proposal had three pillars:

1. Britain as an ally in Europe
2. Britain as a "champion" of free trade
3. Britain as a "force for good" in the world

What form should the FTA take?

He continued:

"This points to a suite of agreements of which the main elements would be a comprehensive free trade agreement covering substantially all trade, an agreement on fisheries, and an agreement to cooperate in the area of internal security, together with a few more technical agreements covering areas such as aviation or civil nuclear cooperation.

“These should all have governance and dispute settlement arrangements appropriate to a relationship of sovereign equals".

No tariffs

He continues:

“From Brussels to China to Washington tariffs are being waved around like cudgels even in debates on foreign policy where frankly they have no place – and there is an ever-growing proliferation of non-tariff barriers and the resulting tensions are letting the air out of the tyres of the world economy.”

Commonwealth

“We will reach out to the rest of the Commonwealth, which now has some of the fastest-growing economies in the world.”

Africa

Speaking of the recent Investment in Africa Summit:

“It was fantastic at the recent Africa summit to see how many wanted to turn that great family of nations into a free trade zone, even if we have to begin with clumps and groups, and we will take these ideas forward at Kigali in June.”

Towards the Comprehensive and Progressive Agreement for Trans-Pacific Partnership

“We will engage with Japan and the other Trans-Pacific agreement countries, with old friends and partners - Australia, New Zealand, Canada.”

USA

“We will get going with our friends in America. The US already buys one-fifth of everything we export.”

He explained on services, “if you want to sell insurance across America, you still have to deal with 50 separate regulators.”

He also said:

•  It was time to cut their punitive tariffs on Scotch whisky
• The NHS is not on the table in the negotiations

On undercutting standards

He said:

"We will not engage in some cut-throat race to the bottom. We are not leaving the EU to undermine European standards; we will not engage in any kind of dumping whether commercial, or social, or environmental.

The UK will maintain the highest standards in these areas – better, in many respects, than those of the EU – without the compulsion of a treaty."

Level playing field

The Foreign Secretary said:

"There is no need for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar any more than the EU should be obliged to accept UK rules."

The UK chooses Canada over Australia?

The Foreign Secretary also stated that the Government would seek a free trade agreement similar to the one recently agreed between the EU and Canada, or continue to trade with the EU in a manner similar to Australia.

He said, “If we cannot [agree], we will carry on trading with the EU in the same way as Australia and many other countries around the world—as a free country, collaborating where we can, and setting our own rules that work for us."

The PM also said:

"The question is whether we agree with a trading relationship with the EU comparable to Canada’s – or more like Australia’s. [...] But in the very unlikely event that we fail, then our trade will have to be based on our existing Withdrawal Agreement with the EU. We have made our choice: we want a comprehensive free trade agreement, similar to Canada’s.”

UK Crown Dependencies & Overseas territories

In its negotiations with the EU, the Government will be acting on behalf of the UK Crown Dependencies and Overseas Territories: the whole UK family.

EFTA States

The UK proposes to agree similar arrangements with the EFTA states.

Other areas & future cooperation

Future cooperation in other areas does not need to be managed through an international Treaty, still less through shared institutions.

The UK will restore full sovereign control over its borders and immigration, competition and subsidy rules, procurement and data protection.

The UK will in future develop separate and independent policies in areas such as (but not limited to):

• The points-based immigration system
• Competition and subsidy policy
• The environment
• Social policy
• Procurement
• Data protection

Cooperation on foreign affairs and related issues is, of course, likely to be substantial, but does not in itself require a joint institutional framework.

Free Trade Agreement

A free trade agreement between the UK and EU should reflect, and develop where necessary, existing international best practice as set out, inter alia, in FTAs already agreed by the EU.

It should cover the following areas:

National Treatment and Market Access for Goods

There should be no tariffs, fees, charges or quantitative restrictions between the UK and the EU. There should be a protocol setting out appropriate and modern rules of origin in order to facilitate trade between the parties to the greatest extent possible.

Trade Remedies

The agreement should enable the UK to protect its industry from harm caused by unexpected surges in imports of goods or by unfair trading practices while making the appropriate commitments to transparency, due process, and the proportionate use of trade remedies.

Technical Barriers to Trade

There should be provisions to address regulatory barriers to trade in goods, providing for cooperation on technical regulation, standards, conformity assessment procedures, and market surveillance, building on the WTO Technical Barriers to Trade Agreement. Annexes to the agreement could include provisions facilitating trade in specific sectors, such as organic products, motor vehicles, chemicals and pharmaceuticals, as well as mutual recognition agreements focusing on conformity assessment, with full coverage of the relevant sectors.

Sanitary and Phytosanitary Measures

The UK will maintain its own autonomous sanitary and phytosanitary (SPS) regime to protect human, animal and plant life and health and the environment, reflecting its existing high standards. In certain areas it may be possible to agree on equivalence provisions to reduce practical barriers to trade at the border.

Customs and Trade Facilitation

Facilitative customs arrangements, covering all trade in goods, should be put in place in order to smooth trade between the UK and the EU. These should ensure that both customs authorities are able to protect their regulatory, security and financial interests.

Cross-Border Trade in Services and Investment

Significant provisions on trade in services are an essential component of a comprehensive FTA. Accordingly, the Agreement should include measures to minimise barriers to the cross-border supply of services and investment, based on each side’s commitments in existing FTAs. In areas of key interest, such as professional and business services, there may be scoped to go beyond these commitments.

There should be measures to support digital trade, building on the most recent precedents.

Temporary Entry for Business Purposes (Mode 4)

As is normal in a Free Trade Agreement, the agreement should include significant reciprocal commitments on the temporary entry and stay of individuals, so that both EU and UK nationals can undertake short-term business trips to supply services. This is, of course, without prejudice to the future points-based immigration system.

Regulatory Framework

There should be measures that reduce unnecessary barriers to trade in services, streamlining practical processes and providing for appropriate regulatory cooperation.

Mutual Recognition of Professional Qualifications

The Agreement should provide a pathway for the mutual recognition of UK and EU qualifications, underpinned by regulatory cooperation, so that qualification requirements do not become an unnecessary barrier to trade.

Conclusion

The EU has presented a standard; legal negotiating mandate clearly focused on maintaining a level playing field and keeping the order of the Single Market and the Customs Union. Without commitments to a level playing field, there is no deal.

The UK has not rejected that per se. For the Prime Minister, what is most important appears to be a partnership amongst equals (we assume before, there was no equality). He will set his own rules; however in many cases, they do go further than current EU rules, so a level playing field would be archived and even more.

In fact, the UK has “gold-plated” (i.e. overachieved) many regulations by the EU, and the Prime Minister made it clear that the UK does not intend to undercut EU standards, even though the laws may not be the same. 

There is a lot of commonality in the trade provisions for goods so this may be agreed fast, but given the wide range of other issues, this may be trickier and may be postponed to later in 2021. However, a basic agreement on goods should be possible before the end of the year.

Sources

PM Written Statement: https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2020-02-03/HCWS86/

Speech By Foreign Secretary: https://hansard.parliament.uk/Commons/2020-02-03/debates/2002039000001/GlobalBritain

Speech by Boris Johnson in Greenwich: https://www.gov.uk/government/speeches/pm-speech-in-greenwich-3-february-2020