Theresa May’s speech led to a rapid reaction from the EU’s negotiator Michel Barnier. On Twitter, he said that May’s ‘clarity’ on leaving the EU’s single market and customs union, and her recognition of the trade-offs involved, would inform next week’s draft EU guidelines on a future free trade agreement with the UK.
So is this ‘Norway minus’, ‘Canada plus plus plus’ or, as May put it today, the ‘broadest and deepest possible partnership’ more so than any other free trade agreement that exists around the world? Or is it, as Barnier put it, a free trade deal pure and simple?
Contradictions abound in May’s wish list
May’s speech was full of contradictions. The UK will leave the customs union. And it will leave the single market and so have less access to the EU’s market than now, May admits. But then she goes on, more than once, to emphasise the importance of protecting integrated, cross-border supply chains – and the importance of avoiding a hard border for Northern Ireland.
The answer to both supply chains and Northern Ireland is to have as frictionless a border as possible, despite being outside the customs union and single market. It’s a wish list more than a credible plan.
May had nothing new to say on customs – she reiterated ideas put forward last summer on a complex, untested approach to ‘mirroring’ EU tariffs for those goods arriving in the UK but headed for the EU. Alternatively, ‘streamlined’ customs cooperation would somehow ensure no physical infrastructure on the Irish border. And, of course, there would be no border in the Irish Sea.
This was a ‘cake and eat it’ speech in many ways – tying together the very different views in May’s cabinet. She promised to ask for associate membership of key EU regulatory agencies for medicines, chemicals and aviation. She wants too a relationship with Euratom. On agriculture, May says UK standards on animal welfare and the environment will be at least as high as the EU’s. On fish, she will negotiate reciprocal access to waters.
For goods, May wants to keep UK regulations the same as the EU’s and she doesn’t. So the EU and UK should agree, she says, a comprehensive system of mutual recognition of regulations (unlikely) and the UK regulations will aim at the same goals as EU ones, even if not identical. But then she proposes some (unspecified) mechanism for ensuring that if there is any divergence in UK and EU regulations, there will be impacts on market access. And her desired associate membership of various agencies will not allow much if any wriggle room for different regulations anyway.
May is trying to please both sides of her cabinet – regulations will stay the same, mostly, but they could diverge. But, outside of the customs union and single market, that will not allow cross-border supply chains to operate as they do now. It does not solve the Irish border conundrum. Customs and regulatory checks will still be necessary.
On services, barely covered in most modern free trade agreements, May aims particularly high. She suggests, without detail, a new broadcasting deal with the EU. Philip Hammond, she says, will set out new proposals on financial services access next week – but it won’t be passporting. She wants to explore options for the UK to be part of the EU’s internal energy market but – strangely – not part of its digital services market, but she does want full access for transport and road hauliers. It sounds like staying in the EU would be much much simpler.
Instead, this is cherry-picking big time – despite May’s explicit denial of this in her speech. The UK, under May’s approach, would retain levels of services access to the EU market that are quite unprecedented in other free trade deals. And that could mean the EU would have to make similar access available to other countries it has free trade deals with, like Canada and South Korea.
And the attempt to be close in regulatory terms, but not under the European Court of Justice and not copying every law as Norway does, will not solve the problems of large cross-border companies.
‘Norway minus minus’ or the Heath Robinson Brexit model
May’s approach is an attempt to get the best of both worlds. It’s perhaps best seen as a ‘Norway minus minus’. She wants to have almost full access to the EU’s single market but without free movement of people (though with an open discussion on how to facilitate people working and studying in the UK and EU). The UK would follow, fully or partially, almost all EU regulations in most sectors while asserting the right not to – and while not, mostly, being under the ECJ – facilitating cross-border supply chains (May thinks). The UK would get unprecedented services access to the EU, but not ask for it in all sectors. And it would (fairly magically) create almost frictionless borders while not being in the customs union.
Some argue this looks like an association agreement – something akin to the one Ukraine has. But of course the Ukraine-EU association agreement is predicated on regulatory convergence – and does not lead to frictionless border trade (Ukraine is not in the customs union). And Ukraine, like Norway, does not get a say in those future EU regulations.
May’s approach allows her to say that ‘Global Britain’ can head out to agree its own trade deals. But if the UK is following EU regulations (mostly) and has customs cooperation agreements, this is going to limit the UK substantially in other trade deals. Crucially, May’s approach does not solve the problem of the Irish border – and she reiterated (unsurprisingly) that there could be no border in the Irish Sea.
This is a Heath Robinsonian attempt to square the circle of the UK leaving the EU, leaving the single market and customs union, but not really leaving it so much that it has major economic effects. It won’t wash. The EU has come up with a range of association and trade agreements. But a special, cherry-picking, ‘cake and it eat it’, Heath Robinson version is not on offer.