Most trade agreements arise from a desire to liberalise trade – making it easier to sell goods and services into one another’s markets. Brexit will not. Brexit arose from key political, rather than trade, objectives: to have control over our borders, to have sovereignty over our laws, not to submit to the European court of justice (ECJ), and not to pay money into the European budget. When negotiations start it will be the first time countries seek a trade agreement with the clear understanding that they are increasing barriers between them.
I campaigned to stay in the EU, but as a democratic politician, I have to recognise that these objectives provide the benchmarks by which leave voters will judge the future trade relations we negotiate with the EU. Unless the new agreement delivers these objectives in substantial measure, we will find it difficult to justify the final result to the 52% who voted leave.
Of course we must try to retain the economic benefits of the single market when we leave the EU: some argue this means we should negotiate to stay inside the European Economic Area (EEA), which would retain the friction-free trade not only in goods but also in services, upon which the bulk of our economy is based.
However, the political price to be paid for such access is correspondingly high, and runs directly counter to the leavers’ four objectives. In the EEA, Britain would be obliged to keep the four freedoms, including the free movement of people, so no regaining control of our borders; align its regulatory regime with the EU’s – so no regaining sovereignty (in fact we would no longer have a seat at the table so there would actually be a reduction of sovereignty); follow ECJ rulings; and still pay into the EU budget.
The UK would technically not be a member of the EU, but we would in effect become a vassal state: obliged to pay into the union’s budget while having even less sovereignty than we do now – no longer able to appoint commissioners, sit on the EU council to have a say in how we determine our regulations and laws, or appoint British judges to the ECJ to adjudicate disputes. The 52% would almost certainly consider this a con.
Some have suggested we should retain membership of the customs union, the benefits of which extend to goods rather than services, and establish common import tariffs with respect to the rest of the world. But that is not possible. The only members of this union are the member states of the EU, and they alone have negotiating power.
Other countries such as Turkey have a separate customs union agreement with the EU. If we were to have a similar agreement, several things would follow: the EU’s 27 members would set the common tariffs and Britain would have no say in how they were set. We would be unable to enter into any separate bilateral free trade agreement. We would be obliged to align our regulatory regime with the EU in all areas covered by the union, without any say in the rules we had to adopt. And we would be bound by the case law of the ECJ, even though we would have no power to bring a case to the court.
As a transitional phase, a customs union agreement might be thought to have some merit. However, as an end point it is deeply unattractive. It would preclude us from making our own independent trade agreements with our five largest export markets outside the EU (the US, China, Japan, Australia and the Gulf states).
More important, were, say, the EU to negotiate an agreement with the US that was in the union’s best interests but against our own, our markets would be obliged to accept American produce with no guarantee of reciprocal access for our own goods into the US.
Turkey faces precisely such an asymmetry with Mexico, with which the EU negotiated an agreement 20 years ago. Turkey still faces a 20% tariff on its clothing goods exported to Mexico, while it imports Mexican cars on a tariff-free basis.
Labour has been right to say the government must focus on the outcomes rather than the structures. The key is not to try to fit these political and economic requirements into inappropriate existing bodies such as the EEA or the customs union, but to develop a bespoke agreement based on what both sides need.
Labour must evince a positive vision for the future of our country outside the EU. One that is consistent with the leave voters’ objectives, without sacrificing our rights and protections, as the Conservatives threaten to do. That vision must also reassure those who voted to remain that the friction-free access into the single market that we have enjoyed for so long can in large part be maintained.