Brexit deal: how do the UK and EU opening positions on the future trading relationship compare?

The UK wants to have as frictionless trade as possible, with goods only needing “one set of regulatory checks.”

This will require a “comprehensive system of mutual recognition”

The EU states that leaving the Single Market will introduce frictions to trade.

For regulatory issues, there will be a “framework for voluntary regulatory cooperation” where both sides regulator’s meet to discuss future regulatory developments.

But it reinforces that any future framework will have to reflect to “respect its regulatory and supervisory regime and standards and their application.”

The EU seems to reject the UK’s call for a system of mutual recognition. Its offer is regulatory co-operation which does not lead to market access.

The EU explicitly notes that rules of origin requirements will be introduced as a result of leaving the Customs Union.

The UK wants to go beyond existing precedents for trade in services, particularly in broadcasting and financial services, two key areas where the UK has a comparative advantage.

The Prime Minister suggested a system of ‘mutual recognition’ of standards in broadcasting. The Chancellor proposed a ‘structured regulatory dialogue’ to discuss new financial services rules proposed by both the EU and UK.

In this set-up, each party would define its own rules but they would have a way to ensure these deliver equivalent outcomes (or agree ‘reasonable consequences’ if either party chose to purse a different outcome’.

The EU suggests that trade in services can take place "under host state rules", meaning that UK firms exporting to the EU will have to comply with member states’ regulations.

It also notes that this trade will only be "to an extent consistent" with the fact that the UK will be outside the EU’s legal framework.

The EU's position implicitly rejects the Prime Minister’s proposal of mutual recognition and the Chancellor’s regulatory dialogue idea. 

As protests in March 2018 showed, fisheries is one of the most controversial areas of negotiations. The Prime Minister’s reference to the EU’s demands on fisheries suggests she may consider access to UK waters as a key bit of leverage in the deal.

The UK has proposed two options for a future customs arrangement.

Option one: the ‘customs partnership’, is untried and untested, with the UK admitting it would take at least five years to implement.

The UK has still not made clear which of its two options it prefers.

However, the emphasis on the EU’s autonomy and integrity seems to rule out the customs partnership option.

The UK acknowledges the agreement will “need reciprocal binding commitments to ensure fair and open competition.”

The EU says that the closeness of the UK means special measures need to be taken to prevent unfair competitive advantage.

These measures should cover a wide range of areas including “competition and state aid, tax, social, environment and regulatory measures and practices."

The guidelines also explicitly state that it will require the UK to adopt a mix of rules aligned with the EU’s and other international standards.

The UK and the EU appear to agree that there will need to be binding commitments on to prevent unfair competition.

However, the EU go much further in specifying all the areas this must cover. Its opening position is extremely broad and would be unprecedented in a standard free trade agreement.

It’s unlikely the UK would be willing to sign up to something that extensive.

The UK wants to stay part of certain EU agencies, particularly those that are important for regulated sectors like medicines, chemicals and aviation.

The Prime Minister recognised that this would mean abiding by their rules, including European Court of Justice (ECJ) jurisdiction, and contributing to its budgets.

The EU stresses the importance of its "decision-making autonomy". This means that the UK will not be part of the political institutions (the European Council, Commission and Parliament).

It also means that the UK cannot be involved in the decision-making processes of "Union bodies, offices and agencies".

This seems to leave the door open for the UK to at least be in the room with EU agencies, even if it has no voting rights.

It is unclear if this goes as far as the UK hoped for.

The UK wants an independent "arbitration mechanism” that is completely independent governing the future agreement, similar to other free trade agreements.

The EU says that the UK will have to propose an arbitration mechanism.

But it will have to take into account EU’s position:

• It will have to be appropriate to how deep the agreement is and it will need to provide legal certainty, so can’t just be diplomatic.
• It must respect the sole right of the ECJ to make decisions on issues of EU law.

While the UK is proposing a standard arbitration mechanism found in other free trade agreements, it also wants a much deeper relationship.

For the EU, the deeper the relationship the less acceptable this type of mechanism would be.

The EU guidelines imply that the EU will grant the UK adequacy if it maintains current standards – this suggests that the UK’s ambition of something that goes further is not acceptable.

The guidelines do not mention any role for the ICO.

The UK has said that “businesses across the EU and UK must be able to attract and employ the people they need.”

The UK wants to ensure “continuity” in transport, including air, maritime and rail services.

It also explicitly mentioned the need to protect the rights of road hauliers.

The EU wants "continued connectivity" with the UK after Brexit. It suggests this could be done through an air transport agreement, for example, if it was supplemented with agreement on aviation and security agreements.

But again, the EU stresses the importance of level playing field provisions to enable such an agreement.

The UK wants to remain part of the EU’s research and innovation framework programmes as part of a “far-reaching science and innovation pact”.

The UK wants “broad energy cooperation”. It would include protecting the single electricity market on the island of Ireland, but the UK also wants to “explore” options for continued participation in the EU internal energy market generally.

The EU guidelines do not mention energy or electricity on the island of Ireland directly.

It’s not clear whether the EU guidelines, in not mentioning the single energy market, rule out the UK’s continued participation.