Government must urgently put forward proposal on EU trade

A new report says that the Government must act quickly if it hopes to negotiate a deal that falls between the so-called Canada and Norway models. The window for persuading European capitals is tight, as the EU is expected to agree a position in March. Unless the UK uses this time wisely, it may find its preferred option never makes it to the table.

Published today by the Institute for Government, Trade after Brexit: Options for the UK’s relationship with the EU shows that the EU can be flexible when it needs to be. Its agreements with Ukraine and Switzerland show that partial integration into the Single Market is possible and there is room for creativity.

But the report warns that if the UK wants to encourage flexibility from the EU, it will need to put forward a proposal that shows an appreciation of their concerns. If the Government fails to make any headway soon, it could be forced back to the binary choice it wants to avoid.

The report sets out three possible approaches based on precedents:

  • An Economic Area or ‘Bespoke Norway’: the UK broadly accepts Single Market rules and EU institutions but tries to negotiate a new arrangement on freedom of movement. The UK would have a voice on regulations but not a final say. 
  • A Deep and Comprehensive Free Trade Area or ‘Reverse Ukraine’: the UK would be allowed to participate in the Single Market, but only in certain sectors where it met EU rules.
  • A Comprehensive Free Trade Agreement or ‘Canada plus’: Modelled on the EU-Canada Comprehensive Economic and Trade Agreement (CETA), this would aim for better EU market access for UK service industries and go further in removing non-tariff barriers.

The report also puts forward a new model, which recognises the unique starting point of complete regulatory convergence:

  • The ‘regulatory partnership’ model: focused on processes and institutions for ‘managing divergence’.

The report warns that, whatever the preferred option of the Government, deep Single Market access always comes with strict obligations on rules and oversight. Ultimately, the UK will not be able to duck that fundamental choice the EU offers all its trading partners.

Joe Owen, Senior Researcher at the Institute for Government, said:

“After a year of trying to have our cake and eat it, it is decision time. The Government is clear on what it does not want – but not what it does want. Without a concrete proposal, time is running out to negotiate a bespoke deal that falls between the Canada and Norway model. The Government must urgently decide where it is prepared to make trade-offs.”

Jill Rutter, Programme Director at the Institute for Government, said:

“Our report shows there are possible options between Canada and Norway. The question is whether they are negotiable. The EU has shown capacity for creativity in the past when the politics needed it. To stand any chance of success, the UK must craft a proposal that works for the 27 member states as well as for the UK, and invest time and effort into building support for it. It is critical we influence before the EU guidelines are set in stone in March.”

  1. Read the full paper Trade after Brexit: Options for the UK’s relationship with the EU
  2. For more information, please contact / 07825 021 538.
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