Insight
Five reasons why even a basic EU-UK trade deal is better than nothing by Sam Lowe, 18 August 2020
A deal would avoid tariffs, unlock supplementary benefits, allow for EU and UK customs co-operation, ensure the Northern Ireland protocol is implemented sustainably and provide a platform on which to build a deeper relationship in the future. For businesses there is little difference between preparing to exit the transition period with an EU-UK free trade agreement in place and preparing to exit without one. As I highlighted in November 2019, the EU-UK free trade agreement envisioned by Prime Minister Boris Johnson still requires businesses to adapt to new customs procedures, regulatory requirements and restrictions on the provision of cross-border services. This has, belatedly, been acknowledged by the UK government, with the recent publication of its border operating model, which spells out all the things companies trading between the EU and UK will need to do, whether there is a trade deal or not. The EU, for its part, has always been upfront about the practical consequences of the UK exiting the single market and customs union. Furthermore, the macroeconomic impact of exiting the transition period with a free trade agreement is not very different from exiting without. But there are still good reasons for Johnson and the European leaders to spend political capital on concluding a trade deal. Exiting the transition period at the end of the year with an EU-UK free trade agreement in place is still preferable to failing to reach an agreement. A free trade agreement would: prevent tariffs being levied on goods trade between the EU and UK; increase the chances of the EU unilaterally treating the UK’s financial services and data regimes as equivalent to its own; increase the scope for EU and UK customs authorities to co-operate to mitigate the day-one impact of exiting the transition period, and potentially introduce a further implementation period; create an environment conducive to the successful implementation of the Northern Ireland protocol; and provide a platform on which to build a more substantial EU-UK relationship in the future. 1. Duty-free and quota-free trade An EU-UK free trade agreement will still result in new non-tariff, regulatory, barriers to trade. But the fact that it could remove all tariffs and quotas (so long as the products meet rules of origin requirements) CER INSIGHT: Five reasons why even a basic EU-UK trade deal is better than nothing 18 August 2020
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