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Brexit: Proposals for the future UK-EU relationship

Published Friday, January 25, 2019

Moves are afoot in the House of Commons to get more Parliamentary time to debate various options for the future UK-EU relationship in the hope that an agreed UK position may help to break the impasse following the Commons' rejection of the UK-EU Withdrawal Agreement. But what are the options being proposed for the future UK-EU relationship?

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The Withdrawal Agreement and Next Steps

Following the rejection on 15 January 2019 by the House of Commons of the agreement on arrangements for the UK’s withdrawal from the EU agreed by the UK and the EU in November 2018, the EU’s chief Brexit negotiator Michel Barnier indicated that if the UK chose “to change its red lines, and to be more ambitious and go beyond a simple free trade deal in our future relationship, then the EU would be ready to immediately support this evolution and respond favourably”.

Amendments in the House of Commons to the Government’s motion on how to proceed with the Brexit process, to be debated on the 29 January, have sought to give Parliament time to debate various options on how to move forward. A report by the Commons Committee on Exiting the EU, published on 16 January 2019, proposes that a series of indicative votes be held in Parliament on options for the way forward.  

Norway or Canada?

In the Brexit negotiations to date, the EU’s offer on the future UK-EU relationship has been presented as a binary choice between a conventional free trade agreement, similar to that recently negotiated between the EU and Canada (CETA), or a Norway-style relationship with the EU whereby the UK remains a part of the EU Single Market (possibly as a member of the European Economic Area (EEA) bringing together the EU, Norway, Iceland and Lichtenstein).

Neither of these options on their own would prevent the emergence of a hard border on the island of Ireland (a priority for both the UK and the EU), as they involve the UK no longer being part of a Customs Union with the EU and the border between Northern Ireland and Ireland therefore becoming part of the UK-EU customs border.

The Canada-style option would also mean checks on goods crossing the border between Northern Ireland and Ireland to ensure compliance with EU regulations. The EU proposed that this could be resolved by separate arrangements for Northern Ireland, whereby it remains in a common regulatory area for goods and customs with the rest of the EU. This was deemed unacceptable by both the Government and the Democratic Unionist Party.  

Norway Plus?

The EU has also indicated that it would consider a Norway-plus option, whereby the UK joins the EEA and also forms a new customs union with the EU, thereby eliminating the need for both regulatory and customs checks on the Northern Ireland-Ireland border. This option is supported by a cross-party group of MPs and has also been backed by the Scottish and Welsh First Ministers.

The Norway-style EEA option on its own crosses a number of the ‘red lines’ set out by the Government, including continuing application of EU Single Market rules, free movement of people and substantial financial contributions.  The Norway-plus option crosses another red line as a Customs Union with the EU would prevent the Government from pursuing its objective of an independent trade policy for the UK.  

A UK-EU Customs Union?

The Labour party has stated its support for a “new comprehensive UK-EU customs union”. But it says that this would require the UK to have “a say” in future EU deals rather than being a passive recipient of decisions elsewhere. The EU already has a separate customs union with Turkey, but Turkey does not have a say in the EU’s trade deals and is obliged to follow the EU’s agreed trade terms for imports from other countries without any guarantee that these countries will reciprocate. The EU has indicated it would be willing to consider an EU-UK customs union, but trade experts have suggested the EU would be unlikely to give the UK a say in its trade negotiations. 

The Labour party has also advocated a “strong Single Market” relationship. The only non-EEA country that participates in the Single Market is Switzerland. It has a bespoke deal based on over a hundred agreements with the EU, covering commitments to follow Single Market rules including the free movement of people. The EU is negotiating with Switzerland to establish more institutional control over this relationship and is unlikely to want to replicate it with another country.

or No Deal?

If a withdrawal agreement does not come into force by 29 March 2019, the UK will leave the EU without an agreement on that day, unless Article 50 is either revoked or extended. A no deal Brexit is predicted to result in significant disruption, at least in the short term, and have a negative economic impact in the long term. But it is also viewed as providing for a clean break from the EU.

The Government’s long-term economic analysis of EU exit released in November 2018 showed that compared to the level of projected GDP if the UK stayed in the EU, GDP would be around 1.4% lower in 15 years’ if the UK joined the EEA, 4.9% lower under a conventional trade agreement, and 7.6% lower in a no-deal scenario. These projections are all based on there being no UK-EU customs union, replication of EU international trade agreements with third countries that the UK is currently party to and the successful negotiation of trade agreements with the USA, China and other leading economies.





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