22 July 2016

On the same day that the Prime Minister Theresa May met the German Chancellor Angela Merkel, the Institute for Government held the third in our series of Brexit events looking at the future UK-EU relationship. Robyn Munro looks at what we learned.

IMG_9903 for blog Everyone is speculating about what the UK’s future relationship with the EU might look like and how the negotiations will work. We pulled together an expert panel to explore audience questions about the possible outcomes in a ‘Question Time’ format: Michel Petite, former Director General of Legal Services at the EU Commission; Sir Andrew Cahn, former Chief Executive of UKTI; Mark Sedwill, Permanent Secretary at the Home Office; Agata Gostyńska, Research Fellow at the Centre for European Reform; and Hannah White, Programme Director at the IfG. What could a future relationship with the EU look like? 

  • Free trade vs access to the internal market

Michel Petite pointed out that public debate tends to conflate free trade and access to the EU internal market, but that there are ‘huge differences’ between the two. Free trade with the EU – the removal of tariffs, quotas and non-tariff barriers – can be secured through a free trade agreement. Access to the EU internal market – allowing free and automatic circulation of goods and services across the EU – involves greater obligations, which may not be acceptable to the British public or pro-Brexit politicians. The UK would be required to sign-up to current and, crucially, future EU rules and regulations governing the internal market, and accept rulings of the European Court of Justice in relation to these. Petite concluded that ‘unless you commit to implementing future EU law, and a court to that effect, I don’t see how full access to the internal market can be dealt with’.

  • Free movement of workers

Mark Sedwill argued that the referendum result had established a requirement for limits to freedom of movement of EU citizens into the UK. But whether other EU member states will be willing to compromise on this wasn’t clear. Agata Gostyńska felt that the chance of the EU ‘giving up on’ free movement of labour was ‘remote’. However, Michel Petite pointed to the concessions David Cameron secured on limiting migrant access to in-work benefits, suggesting that there could be some ‘flexibility’ on the benefits granted to EU workers if not on the principle of free movement itself. So what will the new UK-EU relationship look like? Andrew Cahn suggested that the Norway and Switzerland models were ‘off the table’, because they require acceptance of free movement and significant contributions to the EU budget, neither of which would be politically acceptable to the UK public. Michel Petite described the most likely option as ‘free trade plus’ – a new, bespoke arrangement involving free trade without access to the internal market (with its associated requirements), that would also allow for UK-EU co-operation in key areas of common interest such as security and international aid. He noted, though, that some EU countries might be reluctant to allow the UK to ‘pick and mix’ the most advantageous aspects of EU membership, without associated obligations. How will the negotiations work in practice? 

  • Settling the divorce before the new relationship?

While negotiations on the UK’s withdrawal from the EU will be separate to those on the future UK-EU relationship, it is important that they are joined up to ensure a smooth transition. Agata Gostyńska argued that it would be in the interests of both the UK and EU to ensure continuity and avoid a ‘legal and economic vacuum’ between withdrawal and the start of a new relationship. Mark Sedwill agreed that when entering withdrawal negotiations, the UK Government will need to know what it wants a future relationship to look like: ‘we’re going to have to have a pretty clear view of exactly where we want to get to afterwards’.

  • Dealing with the rest of the world

David Davis, Secretary of State for Exiting the EU, has suggested that the UK should start to negotiate free trade deals with the rest of the world while negotiating its exit from the EU. Michel Petite explained that legally the UK could not negotiate or sign such deals while still an EU member, although politically, the EU Commission ‘might think twice’ before sanctioning the UK for beginning such negotiations. Mark Sedwill agreed that ‘with some ingenuity and good will’ it should be possible to run third party trade negotiations in parallel with Brexit discussions, although they could not be formally signed until the UK had left. But Andrew Cahn noted that before beginning such negotiations, the UK would need to join the World Trade Organization (WTO). This would require negotiations with the other 162 WTO members, based on decisions from the UK about its own domestic policies in areas such as agriculture. The sequencing of these negotiations – leaving the EU, joining the WTO, and securing future trade deals – remained unclear, but would have a significant impact on how negotiations developed.

  • Potential stumbling blocks

Political issues at home and abroad, could affect the course and outcome of the negotiations. Germany, France and the Netherlands all have elections in 2017. As Agata Gostyńska pointed out, political leaders may be unwilling to concede a ‘soft’ Brexit for fear of encouraging Euroscepticism at home. Hannah White argued that reaching an agreement that will appeal to Scotland, Wales and Northern Ireland could present an internal challenge for the UK. How can the government engage the public?  As Hannah White explained, the Government had accepted the referendum result as a mandate to leave the EU – but might seek a mandate for the actual exit deal, perhaps through a second referendum or general election. Mark Sedwill argued it was dangerous to second-guess the Government’s position that ‘Brexit means Brexit’. It would be for the Government to decide how to engage different interest groups – including via institutions such as Parliament.

Further information

Watch 'Brexit: negotiating the UK's future relationship with the EU' in full. The IfG will continue to host thought-provoking events on the consequences of Brexit in September.