As an MEP with seven years experience on European Parliament trade deals, I tear my hair out at half understood claims, lurid assumptions and unbridled ignorance in much media reporting. Take for example scaremongering claims by our now former Ambassador to the EU, Sir Ivan Rogers, that a UK-EU trade deal could take 10 years. Or the claims that 38 EU parliaments need to accept our deal. Shock, horror, fear – we will be in limbo for years! These are half-truths.
In reality, there are three broad aspects to how long a trade deal takes.
First, how much either side gives it in terms of resources and political prioritisation. Second, how much change to current terms is required, and therefore how many negotiating sessions are needed. Third, how long a successful, signed deal takes to be ratified by those 38 national and regional EU Parliaments.
The UK-EU deal currently has rapt attention on both sides: the UK is keen to deliver the best possible deal and ensure maximum access to the EU Single Market. The EU wants to ensure continued access to the UK Market, the world’s fifth largest (the same size as India despite its 1.5 billion population) and the largest single export market for the other EU-27 nations.
Whilst some of the EU-27 have very little UK trade, such as Romania, we are Germany’s second largest export market, and second also for Ireland and Poland, third for Denmark, fourth for Belgium, France and the Netherlands, fifth for Spain and Italy.
So the big players – and big payers to the EU – have every incentive to want an excellent trade deal. The UK can also take advantage of Article 50 rules which will sign it using Qualified Majority Voting (QMV) within the two year horizon and not a unanimous vote, which the Wallonian regional parliament in Belgium used to threaten the entire EU-Canada CETA deal.
This is not a one way process. We are not some economic weakling seeking a special EU favour to “give” us crumbs, we are a major economic power in a strong position to negotiate a great deal. If Canada, the EU’s 12th largest trading partner, can achieve 99% tarriff-free access (non-agricultural) to the EU Single Market, then we certainly can.
But it is a mistake to assume this priority will continue in future – some Norwegians are still trying to renegotiate their “transitional” EEA Agreement 23 years after its launch. Any talk of British ‘transitional arrangements’ overlooks the fact EU attention could quickly be routed elsewhere – already important EU trade deals such as Japan, India and China are being left on the backburner.
Second, is how long negotiation takes. Most negotiators negotiate away literally thousands of tariff lines or quotas, with vested interests such as farmers and manufacturers breathing down their necks.
The key difference for the UK is we start way ahead as a “compliant” EU member. Unlike Canada, the USA, or Japan, we already have no tariffs, no quotas and full regulatory convergence on EU laws. So unless we all negotiate backwards to a basic WTO Rules deal, with French farmers happy to see 60 per cent tariffs on cheese or 12 per cent on wine, and German car manufacturers 10 per cent on cars, then we will be negotiating in a far more limited sense: such as financial services regulatory matters.
Yes the Canadian deal has taken seven years but only three of those years were actual trade negotiations; two years were wasted over EU human rights demands on Canada and two over TTIP-style Investor State Dispute Settlement. Deals with “non-compliant” South Korea and Vietnam took three years each.
The recent vacancy left by Sir Ivan presents the Government with a huge opportunity to appoint a UK Ambassador to the EU who is committed to a swift, clean Brexit, who will inject positivity, confidence and purpose into our negotiations, talking Britain’s prospects up not succumbing to Euro pessimism. This could help to speed up negotiations significantly.
Third, is the muddling up of the signing of trade deals and their final ratification. It is true that ratification under existing “mixed agreements” requires all 28 EU national parliaments and another 10 regional parliaments to agree, and this can take five years, as with South Korea. The recent European Court of Justice decision was not new – it just confirmed this current position.
However, what is not reported is once the EU Council signs and it is voted through by the European Parliament, these deals are provisionally applied before being fully ratified. The agreement is mostly in place during those five years of ratification – so deduct five from that ten.
It is true though that any UK-EU deal could be frustrated at a number of stages: the negotiations could fall apart, the EU Council might oppose a final deal (unlikely under QMV) – and the European Parliament could vote the deal down: it already has many deluded federalist representatives divorced from economic reality and MEPs did vote down the Anti Counterfeiting Trade Agreement (ACTA) a few years ago.
For this reason, I am recommending to Government the following plan of action: I believe it is safer to plan for the guaranteed option of a World Trade Organisation Rules deal, but aspire to a better and more ambitious deal – what I call a “WTOPlus” deal – that keeps zero tariffs, and consult around the Canadian CETA deal that the EU claims to be the best ever free trade agreement it has done, includes services, and gives almost 100% tariff-free access to the EU Single Market, all without a fee or free movement.
Planning for WTO Rules means we work on basis of having the same relationship with the EU as six out of ten of the EU’s largest trading partners, including China which sends €300bn of goods annually, without a formal trade agreement. We should prepare for what Business for Britain estimated at £7 billion in legal tariff compensation to a quarter of sectors, such as cars and Nissan, who would be affected. This sum can be netted off the £12 billion saved in net EU contributions annually. Civitas analysis found the EU would pay £13 billion in tariffs a year and the UK only £5 billion. Under global trade pressures average tariffs are now very low.
But it is right to use Article 50 to deliver the best WTOPlus deal we can, if we can – and Canada’s CETA is the best WTOPlus model for us: it is a free, independent mostly English-speaking and Monarchy-sharing sovereign nation, a NATO member, signed up to EU programmes such as Horizon 2020 research, and seeks a mutually advantageous EU relationship without being in the EU Single Market, Customs Union nor its emerging Political Union.
I call it “Super Canada”, one that is an excellent starting template for a bigger and better UK-EU trade deal.
When I met Canadian Trade Minister Chrystia Freeland in Ottawa recently she said that they felt with CETA they were joining not the Single Market but “the Common Market”. Wasn’t that all we wanted in the first place?
David Campbell-Bannerman MEP is a Member of the Political Advisory Board of Leave Means Leave, was co-Founder and Co-Chair of Conservatives for Britain and sits on the Trade Committee in the European Parliament
January 4th, 2017: Telegraph