Insight
Inching our way towards Jersey by Sam Lowe 11 July 2018
The EU will probably reject Theresa May’s Chequers compromise. Rather than confronting the EU on its fundamental principles, the UK should build upon the foundations of a customs union. Last week at Chequers, the British prime minister’s country house, the UK cabinet signed off a statement outlining its aspiration for the post-Brexit trading relationship with the EU. The UK and EU are still no closer to reaching agreement on the outstanding withdrawal issues, including the Irish backstop. But the Chequers statement gives useful insight into the prime minister’s preferred final landing point. Indeed, continued close alignment with the EU on goods has been signalled as the preferred direction of travel since Theresa May’s Mansion House speech in March. In effect, the UK is asking to remain in the EU’s single market for goods, while maintaining the right to diverge on regulation in future (accepting there will be consequences for continued market access). May is also essentially asking to remain in a customs union for the short to medium term while the systems are created to allow the UK to run a dual tariff regime at the border, theoretically letting the UK reap the benefits of customs union membership alongside an autonomous trade policy. In turn, the UK intends to be entirely free to diverge on services regulation, accepting that its rejection of freedom of movement means services sold from the UK to the EU-27 will face new barriers. Such an approach is similar to the Jersey option, explored by CER earlier this year, albeit with some notable differences: in particular, the UK’s ambiguous approach to continued harmonisation, its ambitious ‘facilitated customs arrangement’ and its thinking on governance structures will raise eyebrows across the continent. Yet, even if we assume that the ambiguities recede as the negotiations progress, and that the UK will eventually commit to continued full harmonisation to the EU’s rulebook on goods and a customs union, with EU-approved mechanisms for oversight and enforcement, the EU would probably still reject the proposal. The EU is fundamentally opposed to the splitting of the four freedoms – free movement of labour, capital, goods and services – and has become increasingly intransigent in the face of challenges to the CER INSIGHT: Inching our way towards Jersey 11 July 2018
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