Chairman of our Special Trade Commission said, “Theresa May today outlined a vision of what a post-Brexit Britain would look like. She outlined a prize that is worth pursuing which is more than simply clinging on to what we have, but which constitutes a very positive outcome for the British people. She also outlined the pathway to get from here to the prize. At the Special Trade Commission, we are excited by the vision she has outlined. Many of our recommendations on the key pillars of Brexit which need to be maintained in order to get to this prize were fully endorsed by Mrs May in her speech. We are excited to now work with the government, and other stakeholders to realize this vision.”
The priorities and positions she outlined will enable the UK to embark on the negotiation of free trade agreements with like-minded countries such as Australia and New Zealand, which our research shows have the potential to reduce distortions and stimulate global trade in ways that will benefit the entire global economy. The possibility of a trade deal with the US is also an important part of our own recommendations for a Prosperity Zone of like-minded countries which would be a high standards platform agreement. They also open up opportunities with growing economies like India and Mrs May duly noted the exciting prospect of the next biennial Commonwealth Heads of Government meeting in 2018. As the prime minister said “trade is not a zero sum game: more of it makes us all more prosperous” – as a sentiment fully endorsed by the STC.
STC chair Shanker Singham has written of the three pillars that support a successful Brexit and the achievement of these goals:
- leaving membership of the single market
- leaving the customs union
- more openness in agricultural trade (coming out of the Common Agricultural Policy and Common Fisheries Policy)
The prime minister addressed the first two of these with clarity and positivity. Britain cannot remain a member of the single market (because being bound to single market regulations cuts off the ability to negotiate services access with third countries, as these largely concern domestic regulation), and instead will look to trade with and in the single market under a comprehensive and ambitious free trade agreement.
While some will have heard “nuance” in her approach to the Customs Union, we heard a very clear statement.The UK will not be subject to the Common External Tarriff and will have it's own schedules in the WTO. No longer being bound to apply the common external tariff and being free to establish its own schedules at the World Trade Organisation are incompatible with membership of the customs union.
Mrs May has declared herself to be open minded as to the kind of customs arrangement with the EU that will be required to enable cross-border trade to be as frictionless as possible. Agreement on customs duties and procedures is a usual part of any FTA and efficient trade goes on in many such arrangements, for example between the very busy USA/Canada border, across which supply chains, including complex automotive supply chains operate. The STC will shortly be publishing a detailed analysis of customs procedures which will aim to further inform the decisions on a future agreement on customs. To the extent that it is necessary to implement interim measures on customs arrangements before an FTA is finally concluded, this is fully permissible under WTO rules. The key issue is to be out of the CET, and to send a strong signal to trading partners that we are open to trade deals as soon as possible.
Clearly implementation of the three pillars will lead to significant changes for businesses in Britain and across the EU. The STC has consistently argued that a wide ranging transitional arrangement of unlimited duration is neither necessary nor desirable to address this, and would in fact prolong the period of uncertainty causing greater disruption. The prime minister’s stated aim of a phased process of implementation to give businesses enough time to plan and prepare for the new arrangements, with such interim arrangements as may be required for particular issues is therefore welcome.
The involvement of both the Westminster Parliament and the devolved administrations of the UK will be key ensuring the transparency and accountability of the process. It is therefore heartening see mention of the Joint Ministerial Committee on EU Negotiations, that will involve ministers from the devolved administrations in the exit negotiations.
It is also sensible to place all of this in the context of continued co-operation in areas of crime terrorism and foreign affairs. The UK will make positive offers on defence and security cooperation especially with respect to helping ensure the security of the eastern edge of Europe. It will be magnanimous and do the right and moral thing with respect to European citizens validly exercising their treaty rights here, as we hope the other European member states will do for UK citizens validly exercising treaty rights in their countries. It is in the UK’s interest for Europe to be successful, and for the European Union and EEA to generate economic gains for the people who live there. We will not be a member of the EEA and so will not have a say in its rules, except through negotiation with it in our comprehensive FTA. We will be better Europeans outside the single market and customs union, and it is likely that our comprehensive FTA with the EU will be a more comprehensive agreement than any that exists in the world today. Such an agreement will be a template for good relations between trading partners.
Mr Singham concluded, “Today, Mrs May set out a challenge for UK people, businesses and the media. She outlined a grand vision of what the future could be. It is now up to all of us to do the hard work necessary to deliver it.”