The Institute of Economic Affairs has released details of its post-Brexit plan for trade between the UK and the EU, and the UK and the rest of the world.
The plan, which the IEA calls ‘Plan A+: Creating a prosperous post-Brexit U.K., is gaining favour among Conservatives. It calls for the adoption of a four-strand trade policy strategy, taking unilateral, bilateral, plurilateral and multilateral action to deliver a more competitive and thriving UK economy.
The IEA’s report on the plan makes recommendations about what initial moves the UK could make to realise the benefits of leaving the EU, including proposals for how the UK should negotiate with the EU and others, what it should seek in the negotiations and how it can improve its laws in areas like agricultural policy and fisheries policy. It also promotes solutions to the Irish border and trade agreements with the EU and other countries around the world.
It argues that now is the time to reset the EU-UK negotiation to advocate an advanced free trade agreement, recognising the laws on both sides of the English Channel. The government should seek to retain all the agreed elements of the Withdrawal Agreement (including the financial settlement, citizen’s rights, and the Transition Period), but proposes a new Northern Ireland backstop and framework for a future relationship.
The new backstop would comprise a basic Free Trade Agreement (FTA) between the UK and the EU for goods and a commitment by the two sides to undertake all necessary investment to enable paperwork relating to trade between Northern Ireland and Ireland to be overseen away from the border. This would take considerable co-operation between the two sides and would aim for a ‘Free Trade Plus’ agreement during the Transition Period.
UK-EU Free Trade Plus deal
An enhanced trading agreement between the UK and the EU post-Brexit would include:
• Full market access and national treatment;
• Zero tariffs in goods, including agriculture;
• Maximum regulatory recognition for both goods and services and a mechanism to manage differences that arise due to divergence in future;
• Baseline intellectual property protection, government procurement and investment rules;
• A recognition of each side’s laws by the other, to include in-depth regulations of specific areas (e.g. pharmaceuticals);
• Mutual recognition of qualifications and licenses obtained in each other’s countries;
• A recognition of specific sectors in key areas including telecoms, data and financial services.
UK customs clearance processes must accommodate a potential five-fold increase in customs documentation between the UK and EU on the day of Brexit.
The key element of an agreed arrangement is to separate the movement of goods from the processing of forms (electronically or otherwise) for as many traders as possible. This could be achieved through:
• General inter-agency and authority cooperation and information sharing;
• Use of simplified procedures and data processing at points of departure and destination;
• Fast-track procedures made available to qualifying operators and mutual recognition of Authorised Economic Operator programmes;
• Operation of self-assessment for importers to declare imports periodically and account for any duties payable;
• Agreement that physical inspection of goods is only to be carried out by means of random checks, except in duly justified circumstances;
• Recognition that security-related risk management systems on each side are acceptable to the other, and agreement to apply such measures in respect to third country trade.
The Irish border issue can be solved with unique solutions which could including trusted trader schemes and streamlined procedures for small businesses. To address the question, the UK should:
• Allow all traders to have any necessary checks carried out remotely, with electronic export and import declarations followed up if necessary with reviews at premises away from the border;
• Commit to following EU rules on aspects of the food and animal health regime in Northern Ireland, with suitable powers devolved to the government of Northern Ireland to enable local politicians to fully cooperate and coordinate with the Irish authorities, in accordance with the Belfast Agreement.
Free Trade Agreements with the United States, China, and other partners
Brexit creates an historic opportunity to form trade agreements with partners around the world. These can be pursued if the UK:
• Agrees with existing FTA partners that EU FTAs can be rolled over;
• Creates a different model of growth through more even-handed Economic Partnership Agreements with developing countries;
• Seeks membership of major existing arrangements which involve more than one country, including the Comprehensive and Progressive Trans-Pacific Partnership and the North American Free Trade Agreement;
• Joins numerous WTO groups as soon as possible and acts as a liberalising force within the organisation.
Unilateral action on independent trade and regulatory policy
After Brexit, the UK will have the opportunity to make its own decisions about domestic policy and trade policy. Many EU regulations are bad for growth. Reform could include:
• Lowering tariffs to zero on a unilateral basis for intermediate goods, so increasing the competitiveness of domestic manufacturing;
• Lowering tariffs to zero for agricultural products that the UK does not produce, lower the price of the increasing the supply of these goods to the UK market (e.g. bananas, oranges, rice, avocados).
• Joining the North East Atlantic Fisheries Commission and possibly joining other Regional Fisheries Management Organisations, participating in international negotiations on Total Allowable Catches for different fish stocks;
• Negotiating bilateral agreements with EU, Norway, Iceland and the Faroe Islands on access to respective Exclusive Economic Zones and management of fish stocks;
• Considering replicating Sustainable Fisheries Partnership Agreements to support developing countries and allow UK fisherman to access more fish stock;
• Phasing out subsidies to fishermen while seeking an alternative, fairer system of grants.
UK Financial Services
• Applying the EU’s capital requirements only to internationally-active banks;
• Allowing financial institutions with headquarters in the EU but working in the UK to remain operating in the UK, provided there is cooperation between the country of their headquarters and the UK financial authorities;
• Abandoning the EU’s double volume cap, or at least raise it to 11% and 17% as recommended by the UK’s Financial Conduct Authority (FCA) to facilitate large transactions;
• Pursuing a post-Brexit tax system that encourages investment, promotes start-ups and scale-up businesses, and reduces complexities. This should include scrapping the 8% bank surcharge, which pushes UK banks into a higher corporate tax rate than the US federal rate and many EU member states.
The report advocates replacing the free movement of workers with a policy in which workers from abroad are recruited where a skills shortage is demonstrated.
The plan was launched yesterday at an event in central London which was attended by David Davis MP, former Secretary of State for Exiting the European Union, Jacob Rees-Mogg MP, chairman of the European Research Group, Gisela Stuart, former Labour MP and Theresa Villiers MP, former Secretary of State for Northern Ireland. Mr Rees-Mogg has already commented.
The full report can be downloaded by clicking here.