With today’s historic triggering of Article 50 of the Treaty on European Union, Theresa May fires the proverbial starter’s pistol on the most complicated diplomatic undertaking in British history for quite some time.
Unravelling 40 years of political and economic union was always going to be a complicated affair, and having eschewed the option of pursuing an EFTA/EEA position, remaining in the single market at least in the short term, Theresa May has opted for the most complicated method of withdrawal.
There are a myriad of areas that will need to be discussed over the coming 24 months. A bespoke trading arrangement is perhaps the most desirable goal, but whether or not that can be achieved within the two year negotiating period allowed for within Article 50 remains to be seen.
Tariffs are just one tiny part that need to be addressed, and arguably are the less important issue when it comes to our future trading relationship with the continent. Nor can we play tit-for-tat with the EU should talks break down.
Advocates of falling back to a WTO position appear guilty of not understanding what that means. Under WTO rules the EU would have no option but to impose tariffs on the UK given it’s position as a Regional Trade Agreement. The UK however, under the Most Favoured Nation status it would revert to under WTO rules, could not impose tariffs on EU goods without imposing the same tariffs on the same goods from everyone else. This, it should go without saying, would be incredibly damaging.
But agreeing tariff free trade is merely the overture, the real issue is mutual recognition of standards, and conformity assessment. This will be where the UK’s negotiating team will really have their work cut out.
Taking the EU/South Korea Free Trade Agreement as an example, there are no fewer than 303 different headings, covering a plethora of areas from tariffs, dispute settlement, anti-dumping and countervailing duties, sanitary and phytosanitary measures, animal welfare and on and on and on.
International trade has become an incredibly complex and intricate phenomenon, and agreeing tariff elimination is merely the first step. Our trade with the EU is as seamless as it is because of the harmonisation of regulations and customs procedures. The key point of the single market is the elimination of border checks, and the common rules are monitored by relevant national authorities. Those authorities comply with a mutual recognition of standards which mean that goods can be shipped across the region with only the occasional checking of documentation.
In order for UK exports to continue to have access to the EU, we will need to conclude comprehensive agreements so that regulatory agencies and testing houses are still recognised, and that goods do not require independent testing. Failure to do so and any consignment shipped to the EU will not have valid paperwork and thus will be subject to delays for detainment and testing, costing up to £2000 per container.
This is why ‘no deal is better than a bad deal’, though a welcome outward display of confidence going into the negotiations, is in truth wildly inaccurate. One hopes that David Davis and his team are aware of this.
There will also be the matter of the UK’s obligations when it comes to contributions to the EU budget. The EU believes the UK’s liabilities could total up to €60bn, covering the UK’s share of what is known as reste a liquider – essentially money the EU has already spent, but with the bill still to settle – as well as the UK’s share of pensions benefits and infrastructure spending to which we have already committed and are arguably legally obligated to honour.
We will of course be able to offset that bill with our share of EU assets, as well as the return of our contributions to the EU’s Investment Bank, but the ‘divorce bill’ alone will not be an insignificant part of negotiations.
There is also the matter of our continued participation in various EU programmes that we may wish to remain party to, such as Erasmus or Horizon 2020, as well as initiatives such as the Single European Sky.
Trade is undoubtedly the number one priority, and inarguably the most complex, but May and her team have their work cut out between now and March 29, 2019. Trade deals alone can usually take upwards of five years, particularly where the EU is concerned. But David Davis has much more to discuss with Michel Barnier than just (just!) tariff barriers, mutual recognition agreements, conformity assessment, and customs procedures.
It’s going to be a long and difficult road ahead. There is a mechanism within Article 50 for extending the negotiation period, albeit requiring the unanimous approval of the remaining 27 member states. We may yet find that we need to make use of it, though much of that will depend on what May means exactly by a ‘phased implementation’ of any deal.
Brexit was always going to be a process, not an event. Forty years of political and economic integration cannot be undone overnight, or even over two years. May has opted for a leap out of the EU via a bespoke deal rather than considered steps via an EEA/EFTA option. It’s undoubtedly the more complicated route towards independence, but crucially, today, we are taking it.