02 September 2016

Andrew Tyrie: Giving meaning to Brexit

In a paper, published by Open Europe, Andrew Tyrie MP, Chairman of the Treasury Select Committee, outlines some of the choices available to the Government to give meaning to Brexit and the principles underpinning how it should proceed.

On the UK’s new relationship with the EU

The Government should set aside the idea of relying solely on the UK’s rights as a WTO member as its preferred outcome. The WTO is not an attractive blueprint. It is an insurance policy if things go wrong. In economic terms, it could amount to shock therapy.

The Government also needs to decide whether the Trade Secretary is supposed to be negotiating trade deals. Given the importance of this to giving substance to Brexit, he probably should be. For that, the UK will need to leave the customs union.

The UK need not replicate the arrangements of other countries  – it will want more market access than Canada, whose trade deal with the EU contains only limited provisions on services, and more control and influence than Norway, which is a passive recipient of single market regulation.

Securing continued market access for services is perhaps the biggest priority for the negotiations. The UK has a £17.1 billion trade surplus with the EU in this sector.12 But negotiations will not be straightforward. For financial services, which account for a third of the UK’s services exports to the EU, the only ‘offthe-shelf’ arrangements to preserve the access currently enjoyed under the passporting regime would be through EEA membership. This would require the UK to conform to EU financial services regulation now and in the future, but with no formal say over its content or development.

On securing public consent

The Government should explain clearly to the public that most of the fiscal dividend available from the EU budget after Brexit will not materialise.

Parliament should have an opportunity to express a view on the Government’s negotiating position prior to the triggering of Article 50.

On the EU’s negotiating position

A reality check is in order for the EU. The four freedoms of the single market are not inviolable and inextricably interdependent. Far from being ‘completed’, the single market in services remains, in places, an aspiration. Nor is freedom of movement for people as complete as it appears. Purism by EU negotiators on this question would not only be inconsistent with reality; it would also clash with other Member States’ economic interests.

On Article 50

Before triggering Article 50, the Government first needs to decide for which exit door to aim. Furthermore, it should continue to restrain itself from pressing the trigger until it has a good deal of clarity from its negotiating partners that they are in a position to agree reasonable terms.

The Government does not need to trigger Article 50 prematurely to prove its intent. That certainly means waiting until next year. It could mean waiting a good deal longer – even until autumn 2017 after the French and German elections.

A settled relationship with the EU will not be found within the two years specified under Article 50. As such, transitional arrangements may well be required to prevent a sudden reversion to WTO rules. 

Full paper

© Open Europe