Joël Reland sets out what a closer relationship between the UK and the EU might realistically look like should the two sides decide to pursue one, suggesting that it is most likely to take the form of deepening the existing trading agreement rather than a full renegotiation.
One of the many curiosities of Brexit is that there is growing evidence that the British public is unhappy with the state of the UK-EU trade agreement, yet neither main party wants to do much about it.
56% of voters would now choose to re-join the EU in a hypothetical referendum, and there is also popular support for a closer relationship, for example via alignment on EU food and goods standards to improve trade, and a return to freedom of movement.
Yet such a ‘Swiss-style’ relationship with the EU remains politically almost infeasible.
The Conservatives won the 2019 election by uniting Brexit voters, the vast majority of whom still want to be outside the EU and have little appetite for closer relations. Labour, similarly, is keenly aware that its path to electoral victory rests on winning back red wall seats which by definition voted at least 55% for Leave. That means, for both sides, that any talk of a fundamental change to EU relations is strictly off-limits.
Moreover – and this point is often overlooked in the UK – it is far from clear that the EU wants to change the status quo. After all, the UK-EU trade and cooperation agreement (TCA) provides for tariff-free trade in goods (where the EU has a surplus with the UK) but is more restrictive on trade in services (where the EU has a deficit).
The EU is also very hostile to any semblance of ‘cherry picking’, where the UK seeks the best bits of EU membership without the countervailing responsibilities. Indeed, the EU dislikes its relationship with Switzerland, based on a ‘patchwork’ of individual agreements, and is actively trying to reform it. There is no chance of the UK getting a similarly customised offer.
The upshot of all this is that the TCA, withdrawal agreement and Northern Ireland Protocol are likely to govern UK-EU relations for the medium term at least.
Our new report examines how relations might evolve, for better or worse, within that scope. It shows that any change will be incremental – not radical – and any government which is serious about improving relations will need to focus on quick fixes before longer-term evolution.
In the short term, there are various deadlines and decisions which need to be managed in conjunction with the EU. There is not very much to be gained here, but there are potentially major costs if issues are poorly handled.
For example, the EU ‘adequacy’ decision which allows a free exchange of personal data between the UK and EU expires in 2025. Should the EU not opt to renew it, it could cost UK businesses billions in additional administration, and the simple way for the UK to ensure renewal is not to diverge from the EU’s GDPR regulation.
From 2024, an increased proportion of electric vehicle parts must originate from the UK or EU to continue qualifying for tariff-free trade under the TCA, yet manufacturers on both sides fear they lack the resources to meet this demand. The UK and EU could do their industries a big favour by extending the present grace period, but this will require mutual agreement.
Meanwhile, in 2026 the agreement on how much fish EU fishers can catch in UK waters will have to be renegotiated. The UK might try to increase its catch share, but this could lead to trade retaliation by the EU. The TCA provisions on energy cooperation expire at the same time, with the EU implying it may curtail energy supplies if the UK seeks to increase its fishing rights, which would be extremely painful for both sides.
These examples are illustrative – there are several more one could point to – of what is at stake if the UK and EU fail to cooperate on upcoming challenges.
Yet, should they find common ways through these issues, it could potentially restore an element of trust which has been absent from the relationship since 2016. This might lead both sides to consider, for the first time in a long time, how cooperation can be enhanced.
So, what could that mean in practice? The likely starting point is not a new trade agreement, but rather deepening the existing provisions of the TCA.
For a start, renewed trust might well lead to the EU allowing the UK into its Horizon Europe research programme – which the TCA provides for – and unfreezing cooperation on digital policy, where the UK and EU have similar ambitions in terms of regulating big tech.
Energy could be another key focus. There is a desire to increase shared interconnector capacity, which would vitally enhance energy security, but this would require an expansion of the terms of energy cooperation enshrined in the TCA. The UK has also just signed a memorandum of understanding with a handful of EU states to cooperate on offshore wind development in the North Sea.
On climate, there is a significant risk of new trade barriers once the EU implements its carbon border adjustment mechanism, but this could be eliminated by the UK and EU linking their emissions trading schemes, which the TCA already says both sides should give ‘serious consideration’ to.
There are also possibilities to establish new agreements beyond the TCA. An agrifood agreement would simplify border checks; new visa arrangements could make it easier for professionals or young people to travel between the UK and EU; while mutual recognition agreements for conformity assessments and/or professional qualifications would facilitate the movement of goods and services respectively. There might even be new security and defence accords.
Of course, this remains firmly in the hypothetical for now. Such changes rest on a UK government (most likely a Labour one) with the political will to do so, and the EU feeling enough trust and goodwill towards the UK to explore the options.
Nor is any of this likely to make a huge economic difference. It is largely tinkering at the edges. But in the current political climate it offers a realistic assessment of what a closer relationship could look like, if both sides want it.
By Joël Reland, Research Associate at UK in a Changing Europe.
This piece was originally published in City A.M. on 24 January 2023. The original can be found on the City A.M. website here.