The EU’s problem with May’s plan for Brexit by Charles Grant
Theresa May’s scheme for the future UK-EU relationship has been attacked by both pro- and anti-EU Conservatives, which makes its passage through Parliament problematic. Yet the prime minister has proved resilient over the past two years and if any plan for Brexit can scrape through Parliament, it is likely to look something like hers. Whatever the views of British MPs, the scheme cannot work without the support of EU leaders. And their initial reaction, though polite, is negative. May’s white paper on Brexit would keep the UK de facto in the single market for goods and agricultural , as a rule-taker, and in something with the characteristics of a customs union. This would remove the need for border controls postBrexit, thus protecting manufacturing supply chains and resolving the issue of the intra-Irish border. Service companies would have to cope with poorer access to EU markets, but May thinks the UK financial services industry is too big and important to be a rule-taker. May is probably right that her plan is the least-bad model for the UK economy that might work politically.
Image: © European Union, 2018
But the EU dislikes the idea of the British being in the single market for goods alone. It believes the four freedoms are indivisible: the UK cannot be in the market for goods without accepting free movement of people (as well as services and capital). It frets that if the bloc makes an exception for the UK, others – inside or outside the EU – will ask for special treatment, thereby undermining the institutional strength of the Union.
The European Commission emphasises that these days it is hard to disentangle goods and services, given that the latter contribute so much to the value of the former (consider the design, financing, marketing and servicing of a jet engine). And if the UK were free to undercut EU standards on services (say by regulating in such a way that business received cheaper credit) it could distort the level playing field for goods. This is not the strongest of arguments, given that the EU does not regulate many of the services involved in making goods. But it reflects the EU’s great fear that the UK may undermine the level playing field by lowering standards on social, environmental, consumer and competition policies. The UK has promised not to do so but that is not good enough for the EU, which notes that the UK has not pledged to adopt any new standards that may emerge in these areas. The EU worries that the UK is asking for something close to the Swiss model: Switzerland