4 Mak in g sen seo


BREXIT f trade arran Customs Uni on


The EU cu stoms unionis a 50‐year‐old agreement betweenEu ropeanmember states that facilitates free trade by ensu ring they all apply the same import du ties ongoods entering the union. This means goods canthentravel freely once they are withinthe EU. The countries also agree not to impose tariffs ongoods travelling betweencountries inthe union. Once goods have cleared cu stoms inone country, they canbe shipped to others inthe unionwithou t fu rther tariffs being imposed. If the UK left the Cu stoms Unionbu t stayed inthe Singlemarket, ou r exporters wou ld have to contend with what are called 'ru les of origin'. These ru les are designed to demonstrate that goods that legally originated inthe UK, and did not containmore thanthe maximumpermitted level of parts and components fromelsewhere, qu alify for du ty‐free entry into the EU. The UK cou ld opt to leave the singlemarket bu t stay inthe cu stoms union, bu t that does meanit cou ldn't negotiate free trade deals with other countries, as the EU does that. It might also meanpaying money to the EU and accepting ECJ ju dgements whenthey relate to trade and it is unlikely to cover farm produ ce or fish, becau se the UK wou ld not be inthe CommonAgricu ltu ral Policy or CommonFisheries Policy.


Si ngle market


The single market is anagreement that encompasses the free movement of goods, services, capital and people. Inadditionto a commonexternal tariff, a single market also tries to cu t back onthe u se ofnon‐tariff barriers su ch as different ru les onprodu ct safety and environmental standards, replacing themwith a commonset of ru les governing trade ingoods and serviceswithinthe common market. Some have described it as perhaps the most ambitiou s type of trade co‐operation, becau se as well as eliminating tariffs, qu otas or taxes ontrade, it also inclu des the free movement of goods, services, capital and people. To stay inthe single market, countries have to allow the free movement of goods, services, capital and people, meaning that immigrationis difficu lt if not impossible to control.Membership of the single market also normally involves making annu al payments towards the EU's bu dget and accepting the ju risdictionof the Eu ropeanCou rt of Ju stice.


Free Trade Area


If the UK left both the single market and the cu stoms unionit cou ld negotiate a free trade deal with the EU. A free trade area is one where there are no tariffs, taxes or qu otas ongoods and/or services from one country entering another. However, the negotiations to establish them cantake years and there are normally exceptions. Inthese agreements, agricu ltu re and fisheries might be exempted, certainindu stries protected and some goods may not be covered. There is a free trade zone inEu rope and the UK helped to create it ‐ the Eu ropeanFree Trade Association(EFTA). It counts Norway, Iceland, Switzerland and Liechtensteinas members, bu t they now have a very close relationship with the EU and all bu t Switzerland are part of the single market. The EU also has free trade arrangements with many other countries around the world, so it is not against negotiating one with the UK inprinciple, bu t compared with staying inthe single market or the cu stoms unionthis wou ld be the "hardest" form of Brexit.


Norway opti on


Norway’s deal with the EU means staying inthe EU SingleMarket and leaving the Cu stoms Union, with fu ll access to the SingleMarket for both goods and services. The UK wou ld have to continu e to abide by the EU’s fou r freedoms, inclu ding freedom of movement and it wou ld have to accept the EU acqu is ( the accumu lated legislation, legal acts, and cou rt decisions which constitu te the body of Eu ropeanUnionlaw) and regu lations, withou t having a say onwhat those ru les might look like inthe fu tu re. The UK wou ld be su bject to the Eu ropeanFree Trade AssociationCou rt (EFTA) rather thanthe ECJ (thou gh that cou rt follows ECJ ju dgements). The UK wou ld be free to pu rsu e its ownindependent trade policy, thou gh inpractice Norway, along with other countries inthe EFTA, oftennegotiate as a bloc.


Turkey opti on


If the UK were to consider the Tu rkey option, it wou ld meanleaving the EU SingleMarket and EU Cu stoms Union, bu t creating a new cu stoms unionwith the EU. This wou ld ensu re tariff‐free trade for goods covered by anew cu stoms union, bu tmeans applying the EU’s commonexternal tariff for trade to those goods imported fromother countries. Following thismodel wou ld eliminatemost checks and controls for indu strial goods, bu t wou ld still meanbu sinesses had to comply with varied border documentation, which does not lead a seamless and frictionless border. Accepting the EU’s commonexternal tariff wou ld also constrainthe UK’s ability to strike new trade deals and requ ire the UK to comply with a su bstantial number of EU produ cts regu lations. Other options discu ssed, wou ld meanleaving the SingleMarket and Cu stoms Union, bu t negotiating a new bespoke bilateral free trade and cu stoms agreement. Three potential models that cou ld form the basis of su ch anagreement are:


Swi ss opti on


Switzerland has a bespoke arrangement with the EU (Mu ltiple bilateral deal), based on more than 120 bilateral agreements developed over the last two decades. The Swiss have tariff‐free trade with the EU and limited access to the EU Single Market for services. However, inretu rnthey accept free movement of people and comply with the EU’s regu lations inrelationto the parts of the SingleMarket they access,withou t having a say onwhat those ru les look like. They canpu rsu e anindependent trade policy, thou gh in practice they oftennegotiate together with other EFTA countries.


World Trade Organi (WTO) opti


on


If the UK leaves the Single Market and Cu stoms Union withou t a deal, we revert to trading with the bloc of 27 member states onWTO terms, meaning that both the EU and UK wou ld apply tariffs to trade betweenthem. With no agreement on regu latory equ ivalence between the EU and UK, there wou ld be no preferential access to the EU market for services. There wou ld also be no by‐passing of bilateral agreements to ease the flowof trade – anunparalleled situ ationgiventhat no major country trades with the EU onWTO terms alone. Infact, in2016 of the top 10 trading partners with the EU by total trade (the US, China, Ru ssia, Japan and India) have a su bstantial number of bilateral agreements that go well beyond the terms of WTO trade. Of the top 20, there are no countries that trade on WTO ru les alone with no bilateral agreements and no free trade deals.If the UK left the EU with no agreements of any kind, then technically its relationship with the EU wou ld be weaker thanany of the EU’s maintrading partners.


zati on Ukrai ne opti on


The Ukraine’s associationagreement with the EU (Deep and Comprehensive Trade Area) provides for nearly‐fu ll access to the Single Market throu gh a special arrangement designed as a potential first step towards fu ll EU membership. This provides the Ukraine with an unprecedented market access for goods and services, particu larly financial services. They however mu st abide by the EU’s regu lations and acqu is, and there is no free movement of people.


Canada opti on


The EU’s new agreement with Canada (a Comprehensive Economic and Trade agreement) allows tariff‐free trade with the Single Market for indu strial goods and some agricu ltu ral produ ce bu t very limited access for services. Canada doesnot have to comply with the EU’s regu lations, bu t there ismu tu al recognition where each side accepts the other country's regu lations for market access to some services. It canlead its own trade policy bu t that means cu stoms controls and compliance with the “ru les of origin” checks.


Over the past few years we have regu larly heard talk of the Eu ropeanUnion’s “cu stoms union” and “single market” inthe context of Brexit.


We know that it is possible to be a member of ju st the cu stoms unionand not the single market, which is the case for Tu rkey, Andorra or the Isle ofMan for example. Alternatively, it is possible to be a member of ju st the single market bu t not the cu stoms union, take Norway or Iceland for


example. Some other options discu ssed have inclu ded the Norway and Canada options, as well asMu ltiple bilateral deals and associationagreements. Here we take a look at some of the different options.


Y TIR g emen ts


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24