[...]First, the agreement we reach with the EU must respect the referendum. It was a vote to take control of our borders, laws and money. And a vote for wider change, so that no community in Britain would ever be left behind again. But it was not a vote for a distant relationship with our neighbours.
Second, the new agreement we reach with the EU must endure. After Brexit both the UK and the EU want to forge ahead with building a better future for our people, not find ourselves back at the negotiating table because things have broken down.
Third, it must protect people’s jobs and security. People in the UK voted for our country to have a new and different relationship with Europe, but while the means may change our shared goals surely have not – to work together to grow our economies and keep our people safe.
Fourth, it must be consistent with the kind of country we want to be as we leave: a modern, open, outward-looking, tolerant, European democracy. A nation of pioneers, innovators, explorers and creators. A country that celebrates our history and diversity, confident of our place in the world; that meets its obligations to our near neighbours and far off friends, and is proud to stand up for its values.
And fifth, in doing all of these things, it must strengthen our union of nations and our union of people. [...]
A crucial moment
[...] We are in the process of turning that agreement into draft legal text. We have made clear our concerns about the first draft the Commission published on Wednesday – but no-one should be in any doubt about our commitment to the Joint Report we agreed in December.
We are close to agreement on the terms of an implementation period which was a key element of December’s deal.
Of course some points of difference remain – but I am confident these can be resolved in the days ahead.
Both the UK and the EU are clear this implementation period must be time-limited and cannot become a permanent solution. But it is vital to give governments, businesses and citizens on both sides the time they need to prepare for our new relationship. [...]
Existing models will not work
In my speech in Florence, I set out why the existing models for economic partnership either do not deliver the ambition we need or impose unsustainable constraints on our democracy.
For example, the Norway model, where we would stay in the single market, would mean having to implement new EU legislation automatically and in its entirety – and would also mean continued free movement.
Others have suggested we negotiate a free trade agreement similar to that which Canada has recently negotiated with the EU - or trade on World Trade Organisation terms.
But these options would mean a significant reduction in our access to each other’s markets compared to that which we currently enjoy.
And this would mean customs and regulatory checks at the border that would damage the integrated supply chains that our industries depend on and be inconsistent with the commitments that both we and the EU have made in respect of Northern Ireland. [...]
We have been clear all along that we don’t want to go back to a hard border in Ireland. We have ruled out any physical infrastructure at the border, or any related checks and controls.
But it is not good enough to say, ‘We won’t introduce a hard border; if the EU forces Ireland to do it, that’s down to them’. We chose to leave; we have a responsibility to help find a solution. [...]
I want to make one final point. Just as it would be unacceptable to go back to a hard border between Northern Ireland and Ireland, it would also be unacceptable to break up the United Kingdom’s own common market by creating a customs and regulatory border down the Irish Sea.
My personal commitment to this is clear.
As Prime Minister of the whole United Kingdom, I am not going to let our departure from the European Union do anything to set back the historic progress that we have made in Northern Ireland – nor will I allow anything that would damage the integrity of our precious Union.
Facing up to some hard facts
[...] We are leaving the single market. Life is going to be different. In certain ways, our access to each other’s markets will be less than it is now. How could the EU’s structure of rights and obligations be sustained, if the UK - or any country - were allowed to enjoy all the benefits without all of the obligations?
So we need to strike a new balance. But we will not accept the rights of Canada and the obligations of Norway.
The second hard fact is that even after we have left the jurisdiction of the ECJ, EU law and the decisions of the ECJ will continue to affect us.
For a start, the ECJ determines whether agreements the EU has struck are legal under the EU’s own law – as the US found when the ECJ declared the Safe Harbor Framework for data sharing invalid.
When we leave the EU, the Withdrawal Bill will bring EU law into UK law. That means cases will be determined in our courts. But, where appropriate, our courts will continue to look at the ECJ’s judgments, as they do for the appropriate jurisprudence of other countries’ courts. [...]
But, in the future, the EU treaties and hence EU law will no longer apply in the UK. The agreement we reach must therefore respect the sovereignty of both the UK and the EU’s legal orders. That means the jurisdiction of the ECJ in the UK must end. It also means that the ultimate arbiter of disputes about our future partnership cannot be the court of either party.
The next hard fact is this. If we want good access to each other’s markets, it has to be on fair terms. As with any trade agreement, we must accept the need for binding commitments – for example, we may choose to commit some areas of our regulations like state aid and competition to remaining in step with the EU’s.
The UK drove much of the policy in this area and we have much to gain from maintaining proper disciplines on the use of subsidies and on anti-competitive practices.
Furthermore, as I said in Florence, we share the same set of fundamental beliefs; a belief in free trade, rigorous and fair competition, strong consumer rights, and that trying to beat other countries’ industries by unfairly subsidising one’s own is a serious mistake.
And in other areas like workers’ rights or the environment, the EU should be confident that we will not engage in a race to the bottom in the standards and protections we set. There is no serious political constituency in the UK which would support this – quite the opposite.
Finally, we need to resolve the tensions between some of our key objectives.
We want the freedom to negotiate trade agreements with other countries around the world. We want to take back control of our laws. We also want as frictionless a border as possible between us and the EU - so that we don’t damage the integrated supply chains our industries depend on and don’t have a hard border between Northern Ireland and Ireland.
But there are some tensions in the EU’s position too – and some hard facts for them to face as well.
The Commission has suggested that the only option available to the UK is an ‘off the shelf’ model.
But, at the same time, they have also said that in certain areas none of the EU’s third country agreements would be appropriate.
And the European Council’s Guidelines aspire to a balanced, ambitious, and wide-ranging deal, with common rules in a number of areas to ensure fair and open competition.
This would not be delivered by a Canada-style deal – which would not give them the breadth or depth of market access that they want.
And it is hard to see how it would be in the EU’s interests for the UK’s regulatory standards to be as different as Canada’s.
Finally, we both need to face the fact that this is a negotiation and neither of us can have exactly what we want.
Future economic partnership
[...] So I want the broadest and deepest possible partnership – covering more sectors and co-operating more fully than any Free Trade Agreement anywhere in the world today. And as I will go on to describe we will also need agreements in a range of areas covering the breadth of our relationship. [...]
So rather than having to bring two different systems closer together, the task will be to manage the relationship once we are two separate legal systems.
To do so, and to realise this level of ambition, there are five foundations that must underpin our trading relationship.
First, our agreement will need reciprocal binding commitments to ensure fair and open competition. [...]
Second, we will need an arbitration mechanism that is completely independent – something which, again, is common to Free Trade Agreements. [...]
Third, given the close relationship we envisage, we will need to have an ongoing dialogue with the EU, and to ensure we have the means to consult each other regularly.
In particular we will want to make sure our regulators continue to work together; as they do with regulators internationally. [...]
Fourth, we will need an arrangement for data protection.
I made this point in Munich in relation to our security relationship. But the free flow of data is also critical for both sides in any modern trading relationship too. The UK has exceptionally high standards of data protection. And we want to secure an agreement with the EU that provides the stability and confidence for EU and UK business and individuals to achieve our aims in maintaining and developing the UK’s strong trading and economic links with the EU.
That is why we will be seeking more than just an adequacy arrangement and want to see an appropriate ongoing role for the UK’s Information Commissioner’s Office. This will ensure UK businesses are effectively represented under the EU’s new ‘one stop shop’ mechanism for resolving data protection disputes.
And fifth, we must maintain the links between our people.
EU citizens are an integral part of the economic, cultural and social fabric of our country. I know that UK nationals are viewed in entirely the same way by communities across the EU. And this is why at every stage of these negotiations, I have put the interests of EU citizens and UK nationals at the heart of our approach.
We are clear that as we leave the EU, free movement of people will come to an end and we will control the number of people who come to live in our country. [...]
Moreover, with all its neighbours the EU has varying levels of access to the Single Market, depending on the obligations those neighbours are willing to undertake.
What would be cherry-picking would be if we were to seek a deal where our rights and obligations were not held in balance. [...]
Goods
[...] When it comes to goods, a fundamental principle in our negotiating strategy should be that trade at the UK-EU border should be as frictionless as possible.
That means we don’t want to see the introduction of any tariffs or quotas. And – as the Secretary of State for Exiting the European Union set out in his speech in Vienna last week - we must ensure that, as now, products only need to undergo one series of approvals, in one country, to show that they meet the required regulatory standards.
To achieve this we will need a comprehensive system of mutual recognition.
The UK will need to make a strong commitment that its regulatory standards will remain as high as the EU’s. That commitment, in practice, will mean that UK and EU regulatory standards will remain substantially similar in the future. [...]
Our default is that UK law may not necessarily be identical to EU law, but it should achieve the same outcomes. In some cases Parliament might choose to pass an identical law – businesses who export to the EU tell us that it is strongly in their interest to have a single set of regulatory standards that mean they can sell into the UK and EU markets.
If the Parliament of the day decided not to achieve the same outcomes as EU law, it would be in the knowledge that there may be consequences for our market access.
And there will need to be an independent mechanism to oversee these arrangements. [...]
I want to explain what I believe the benefits of this approach could be, both for us and the EU.
First, associate membership of these agencies is the only way to meet our objective of ensuring that these products only need to undergo one series of approvals, in one country.
Second, these agencies have a critical role in setting and enforcing relevant rules. And if we were able to negotiate associate membership we would be able to ensure that we could continue to provide our technical expertise.
Third, associate membership could permit UK firms to resolve certain challenges related to the agencies through UK courts rather than the ECJ. [...]
Fourth it would bring other benefits too. For example, membership of the European Medicines Agency would mean investment in new innovative medicines continuing in the UK, and it would mean these medicines getting to patients faster as firms prioritise larger markets when they start the lengthy process of seeking authorisations. But it would also be good for the EU because the UK regulator assesses more new medicines than any other member state. And the EU would continue to access the expertise of the UK’s world-leading universities.
And, of course, Parliament would remain ultimately sovereign. It could decide not to accept these rules, but with consequences for our membership of the relevant agency and linked market access rights.
Lastly to achieve as frictionless a border as possible and to avoid a hard border between Northern Ireland and Ireland, we also need an agreement on customs.
The UK has been clear it is leaving the Customs Union. [...]
So we have thought seriously about how our commitment to a frictionless border can best be delivered. And last year, we set out two potential options for our customs arrangement. Option one is a customs partnership between the UK and the EU. At the border, the UK would mirror the EU’s requirements for imports from the rest of the world, applying the same tariffs and the same rules of origin as the EU for those goods arriving in the UK and intended for the EU. By following this approach, we would know that all goods entering the EU via the UK pay the right EU duties, removing the need for customs processes at the UK-EU border.
But, importantly, we would put in place a mechanism so that the UK would also be able to apply its own tariffs and trade policy for goods intended for the UK market. As we have set out previously, this would require the means to ensure that both sides can trust the system and a robust enforcement mechanism.
Option two would be a highly streamlined customs arrangement, where we would jointly agree to implement a range of measures to minimise frictions to trade, together with specific provisions for Northern Ireland.
First, measures to ensure the requirements for moving goods across borders are as simple as possible.
This means we should continue to waive the requirement for entry and exit declarations for goods moving between the UK and the EU.
And we should allow goods moving between the UK and the rest of the world to travel through the EU without paying EU duties and vice versa.
Second, measures to reduce the risk of delays at ports and airports. For example, recognising each other’s “trusted traders” schemes and drawing on the most advanced IT solutions so that vehicles do not need to stop at the border.
Third, we should continue our cooperation to mitigate customs duty and security risks.
And fourth, measures to reduce the cost and burden of complying with customs administrative requirements, including by maximising the use of automation.
And recognising the unique circumstances in Northern Ireland, and our shared commitments to avoiding a hard border, we should consider further specific measures.
80% of North-South trade is carried out by micro, small and medium sized businesses.
So for smaller traders – who as members of the community are most affected but whose economic role is not systemically significant for the EU market - we would allow them to continue to operate as they do currently, with no new restrictions.
And for larger traders we would introduce streamlined processes, including a trusted trader scheme that would be consistent with our commitments.
Both of these options for our future customs arrangement would leave the UK free to determine its own tariffs with third countries - which would simply not be possible in a customs union.
I recognise that some of these ideas depend on technology, robust systems to ensure trust and confidence, as well as goodwill – but they are serious and merit consideration by all sides.
So to conclude on goods, a fundamental principle in our negotiating strategy is that trade at the UK-EU border should be as frictionless as possible with no hard border between Northern Ireland and Ireland. [...]
Services
[...] We recognise that certain aspects of trade in services are intrinsically linked to the single market and therefore our market access in these areas will need to be different.
But we should only allow new barriers to be introduced where absolutely necessary. We don’t want to discriminate against EU service providers in the UK. And we wouldn’t want the EU to discriminate against UK service providers.
So we want to limit the number of barriers that could prevent UK firms from setting up in the EU and vice versa, and agree an appropriate labour mobility framework that enables UK businesses and self-employed professionals to travel to the EU to provide services to clients in person and that allows UK businesses to provide services to the EU over the phone or the internet. And we want to do the same for EU firms providing services to the UK. [...]
Similarly, on financial services, the Chancellor will be setting out next week how financial services can and should be part of a deep and comprehensive partnership. We are not looking for passporting because we understand this is intrinsic to the single market of which we would no longer be a member. It would also require us to be subject to a single rule book, over which we would have no say.
The UK has responsibility for the financial stability of the world’s most significant financial centre, and our taxpayers bear the risk, so it would be unrealistic for us to implement new EU legislation automatically and in its entirety.
But with UK located banks underwriting around half of the debt and equity issued by EU companies and providing more than £1.1 trillion of cross-border lending to the rest of the EU in 2015 alone, this is a clear example of where only looking at precedent would hurt both the UK and EU economies.
As in other areas of the future economic partnership, our goal should be to establish the ability to access each others’ markets, based on the UK and EU maintaining the same regulatory outcomes over time, with a mechanism for determining proportionate consequences where they are not maintained. But given the highly regulated nature of financial services, and our shared desire to manage financial stability risks, we would need a collaborative, objective framework that is reciprocal, mutually agreed, and permanent and therefore reliable for businesses. [...]
Post-Brexit Britain
[...] A Global Britain which thrives in the world by forging a bold and comprehensive economic partnership with our neighbours in the EU; and reaches out beyond our continent, to trade with nations across the globe. [...]
Yes, there will be ups and downs in the months ahead. As in any negotiation, no-one will get everything they want. We will not be buffeted by the demands to talk tough or threaten a walk out. Just as we will not accept the counsels of despair that this simply cannot be done. We will move forward by calm, patient discussion of each other’s positions. It is my responsibility as Prime Minister to provide that leadership for our country at this crucial time. By following the course I have set out today, I am confident we will get there and deliver the right outcome for Britain and the EU. [...]
Full speech
Open Europe responds to the Prime Minister’s Road to Brexit speech
The Guardian view on Theresa May’s search for a Brexit solution: a long and winding road
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