3 May 2016

After Brexit we will negotiate a winning “British option” free trade deal with the EU

By David Campbell Bannerman

The UK government recently published two Command Papers as part of the Referendum Act assessing the options outside the EU and the leaving process. They were hardly balanced and some call them “dodgy dossiers”. While at pains to point out the “probability” of great difficulties, the extraordinarily long length of time it would all take, and all the painful downsides it could conjure up, these papers failed to mention the £20 billion gross savings from EU membership fees (£12 billion net), nor the red tape savings from slashing EU laws, nor the benefits of the UK being able to negotiate its own more tailored trade deals outside the EU, which it can’t do now as we are part of the EU’s Commercial policy and the EU does our deals for us.

Nor does this analysis allow for the fact Article 50 of the EU’s Lisbon Treaty – its Constitution – demands the EU “shall” negotiate a “withdrawal agreement” with a departing member state: meaning, as with other trade deals, doing a combined political agreement and trade deal between the UK and EU. Canada, Australia, Japan, India do not have EU constitutional support for their deals, but a departing UK would have.

Boris Johnson has rightly pointed to the Canadian Free Trade Agreement CETA (Comprehensive Economic & Trade Agreement) as the basis for a good model for a post Brexit UK-EU trade deal. I have recently been to Ottawa with the European Parliament’s International Trade Committee to discuss the finalisation of this new deal, which is due to be passed by the end of the year.

Canada will have access to the EU Single Market and 99% of non-agricultural tariffs will be removed, including 92% of agricultural tariffs – the most protectionist area for the EU – and quotas lifted substantially, even on bison. In services, there is a chapter on financial services in the deal, and mutual recognition of service professionals – Canadian doctors, architects, lawyers will be allowed to practice in the EU without any further qualifications. This CETA deal is billed by the EU as the most comprehensive trade deal it has ever done.

But Canada will not pay any market access fee (Norway doesn’t pay any either, just programme fees and voluntary aid despite what is wrongly claimed), no EU membership fees like our £20 billion a year, not have to enact the legal “acquis” of 700,000 pages (a Nelson’s Column height of paper), or sign up to freedom of movement of EU citizens. Canada will retain its disciplined visa scheme, continue to recruit skilled people to fill skills gaps from all around the world not just on its Continent, and enjoy being part of NAFTA (the North American Free Trade Agreement) without any freedom of movement from the USA or Mexico. It will stay as a member of Nato, be a key figure in the Commonwealth and Anglosphere, will continue to help its scientists through Horizon 2020 research grants, paying a fee to be in that programme as Norway and Switzerland (with its CERN collider) do, and carry on running Canada in the interests of its own people in a democratic way.

We can have all of this, but we can do better. Canada is the EU’s 12th largest trading partner. But the UK is the first. We are the largest single market for the rest of the EU-27 nations, with a massive goods deficit with the EU of £89 billion a year, and with £31 billion being with one country: Germany. We are Germany’s, Ireland’s and Poland’s second largest trading partner, Denmark’s third largest, France, Belgium and the Netherland’s fourth largest. We employ over a million Germans.

So we are in a very strong bargaining position: without a trade deal with the UK, and if obstacles like tariffs get in the way, the EU and the Eurozone economy would be badly hit, piling despair on top of agony of the Euro’s disastrous straitjacket.

I believe that Britain will negotiate a special deal with the EU – a unique trade deal I call the “British option”. The British option technically is a WTOPlus deal: meaning there is a guaranteed WTO “Most Favoured Nation” (MFN) deal as a base, with a negotiated top up free trade agreement on top – the “Plus”.

The WTO deal is exactly the same as the EU has now with the USA, Canada, India, China, Japan and Australia. These deals are set down by the global trade rules body, the World Trade Organisation (WTO), and are enforceable through the WTO’s own “court” procedures if the EU acts illegally. But it is in all our interests to negotiate a preferential trade deal on top.

CETA is a WTOPlus agreement – it puts the Plus on top of the existing EU-Canada WTO deal. To give an example: under WTO Most Favoured Nation rules now, tariffs on agricultural goods are removed for 72% of categories, which is pretty high. But CETA will increase that to 92% of agricultural tariff lines.

The Japanese Ambassador to the EU told me they want a WTOPlus deal. The Australians and New Zealanders both are moving to WTOPlus deals with the EU as of this year, and the unpopular TTIP (Transatlantic Trade and Investment Partnership) is a WTOPlus deal cutting tariffs on jeans from 12% to zero and US cars from 10% to zero.

The Plus could take many forms of model or association – it could be based on the EEA or Switzerland, an EEA Lite, but the detail and agreement on what is the best form of association will follow the Referendum and a Brexit result. For now all we want to establish is that we want a WTOPlus deal that is better and more ambitious than the guaranteed WTO deal we would still get as a default position. Ever the worse case scenario is better than EU membership.

As for the length of time such a deal will take, yet again we face “Project Fear”. Yes Canada has taken seven years, but two years have been wasted with associated problems with TTIP over Investor State Dispute Settlement (ISDS), and two years shamefully because the EU tried to dictate human rights to Canada, which very nearly caused the whole deal to collapse.

So three years in practice for Canada, while the Australians are confident theirs can be done in two years. The last agreement – Vietnam – took just 2 years 8 months. But the big difference with the UK is that we are already “compliant” – i.e. we already meet the EU’s trading conditions and tariff and quota reductions now – as we are in the EU, unlike Vietnam or the USA. So a WTOPlus trade deal would just replicate what we have now. We are not in the long, painful business of negotiating away 150% tariffs on luxury goods on whisky to India for example.

Similarly, those 50 plus Free Trade Agreements negotiated by the EU on our behalf could be “run on” with exactly the same terms if the trading countries concerned agree to it – so South Korea might just say “let’s keep it as it is” as we still want to sell you cars and buy your luxury goods. And if we were to rejoin EFTA we could become signatories to those trade deals such as China, which the EU does not have.

As for the process of withdrawal there will be no “chaos” as has been claimed nor sudden exit. We will not Brexit on 24th June, there is no sudden departure. We will remain in the EU until we have negotiated a suitable “British option”, and leave at that point, or if that is not possible within a reasonable timeframe we will leave and adopt a WTO deal.

The UK would still influence significant legislation, but in a different way. At regular intervals a new EU-UK Joint Committee would meet, just as the EU-Swiss Joint Committee and its 18 technical committees meet now to discuss matters related to trade, regulation and foreign affairs. Switzerland is the EU’s fourth largest trading partner, Britain is the biggest. We will continue to have significant influence.

In short, friendly trading and political relations would continue but with an independent UK and the EU enjoying a better and stronger new relationship based on trade. Rather like what we wanted in the first place.

David Campbell Bannerman MEP is Co-Chairman of Conservatives for Britain, and a member of the European Parliament¹s International Trade Committee.