Britain should exit the European Union customs union and single market on day one of Brexit in order to be able to start negotiations with other countries during the implementation period, a leading trade policy expert told a recent meeting of economic attachés.
Speaking at an AERL breakfast briefing, Shakar Singham, who heads up the Special Trade Commission of the influential Legatum Institut, said: “It is very important for the UK to be able, after day one, to negotiate and sign deals during the implementation period.”
WTO rules permit some interim measures provided there is the anticipation of a free trade agreement with the EU, he added. These can include a zero tariff deal with the EU and, as the UK and EU are neighbours, it also allows a special customs arrangement for a fixed period.
“Time is not with us. It is important that we start discussions on what the end state between the UK and the EU actually is going to be. We need to start that discussion so we can then figure out what will be in this implementation period. You can’t have an implementation period when you don’t know what you are implementing,” he told diplomats.
Finding a way to recognise each other’s regulatory systems would be the “massive threshold issue” in the negotiations, said Singham because this has an impact on the sensitive issue of the Irish border and the Good Friday Peace Agreement as well as Britain’s ability to do trade deals with other countries.
“It is critically important for the UK’s future that we are able to have an independent trade and regulatory policy,” he stressed.
However, this would still allow for “regulatory coherence”, he explained: “As long as the regulatory goal is the same, technical differences should not defeat recognition.”
Because both sides at present have identical regulatory systems, there would be maximum regulatory recognition immediately after Brexit, said Singham. But diplomats were interested to know, if future trade negotiations required regulatory divergence from the EU, how this would be handled.
“We have to figure out mechanisms to deal with that and that is the big challenge,” said Singham, who added that flexibility should be built in the system. In addition to a dialogue between regulators, Singham called for competition and trade agencies to be brought into the discussion to assess the impact of a regulatory divergence on competition or trade flows.
However, a mechanism where any divergence is conditional on Brussels would be “a bad result,” he said, because this would curtail opportunities for Britain.
“Then you are in the world where the UK is simply trying to minimise the disruptive costs of leaving the customs union and the EEA. If you do that, then frankly, from a trade policy point of view, you should remain in the EU.”
The outcome will depend on the underlying objectives of both parties. For the UK, the goal is liberalising global trade. But the EU may have different priorities, he warned. “If the EU is driven more by the preservation of the integrity of the single market, then there is a problem.”