How do the UK and EU opening positions on the future trading relationship compare?

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Both the UK and the EU have set out their positions ahead of negotiations on the framework for the future trading relationship.

The table below compares the two parties’ positions and assesses the difference between them. A green rating indicates where there is broad agreement. Amber shows that while there are differences, agreement may be possible. And red is used where there has been an explicit rejection of the other side’s proposal.

Area

UK position

EU guidelines

What this means

Market access Goods The UK does not want any tariffs or quotas, including on agriculture. For goods, the EU guidelines state that it will aim to cover all sectors and seek to maintain zero tariffs. It also notes that this will come with “appropriate accompanying rules of origin.” Neither side wants the introduction of tariffs or quotas.

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.

Services

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.

There is no explicit reference to trade in financial services. The EU guidelines note the importance of safeguarding financial stability in the EU.

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

 

In the EU’s view, prioritising financial stability means that there cannot an open relationship in financial services given the UK’s current red lines.

Fish The UK wants to take back control of its waters by leaving the Common Fisheries Policymeaning it can negotiate annually with neighbouring countries on access and quotas. The EU wants to maintain existing levels of access to the UK’s fishing waters as a price of the tariff-free trade deal.

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.

Customs

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.

Option two: the ‘highly streamlined customs arrangement’, would result in friction, so the Prime Minister has spoken of the specific additions aimed at mitigating the need for customs checks.

The EU wants "appropriate customs cooperation" to be included in the free trade agreement. The EU guidelines note the importance of protecting the autonomy and integrity of the EU Customs Union.

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.

It’s not clear whether the EU would be willing to grant the UK the unprecedented levels of customs co-operation it seeks in in its 'streamlined’ option

Regulatory co-operation Level playing field

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

It also acknowledges that the closeness and the level of integration between the UK and EU markets mean these “reciprocal commitments” will be important to allow businesses to compete without unfair advantages and without undercutting one another.

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.

Finally, it reinforces that the enforcement and dispute settlement mechanisms would be required specifically for level playing field provisions, which could include “Union autonomous remedies”.

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.

Institutions Agencies

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 UK also mentioned wanting to stay close to Euratom.

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.

  Dispute resolution

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

The UK is clear that the ultimate arbiter of disputes about our future partnership “cannot be the court of either party”.

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 two sides are aligned if the deal is more limited in their ambitions. But if the UK wants a deep deal it may need to propose a different type of mechanism.

Other Data The UK wants to go further than the EU’s standard ‘adequacy’ rules for data transfer with third countries to ensure greater stability, including an ongoing role for the UK Information Commissioner’s Office (ICO) in attending the EU regulators’ forum. The EU agrees that the future relationship should allow continued data flows. The guidelines propose that these flows be governed by EU rules on adequacy, meaning the UK will have to ensure that its data protection rules are "essentially equivalent" to the EU’s, but it does not offer the additional stability the UK wants.

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.

Migration

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

The UK is “open to discussing” how to facilitate these links. This suggests a willingness to negotiate a preferential migration regime for EU citizens. 

The EU want the deal to be “ambitious” on movement of people, including co-ordination of social security and recognition of professional co-operation. There is scope for negotiations on what a preferential EU migration regime could look like after Brexit.
Transport

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 and EU are agreed on the outcome. The EU is more prescriptive in how they might be achieved, and the importance of level playing field provisions will be an important area of negotiation.
Science research, education and culture

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”.

It also wants to take a similar approach to educational and cultural programmes – like Erasmus – where it would be willing to cover the costs of continued involvement.

The EU says that UK involvement in programmes around research, innovation, education and culture, should be “subject to the relevant conditions” for third countries. The UK and EU both seem to want the same outcome in these areas. The UK is prepared to pay for continued involvement, which will be a key demand from the EU.
Energy

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.

The issue of the single electricity market on the island of Ireland will need to be addressed in talks related to Ireland and North-South co-operation.

 

Update date: 
Friday, March 23, 2018