A workable Brexit Strategy
TL;DR UK should invoke Article 50 with the intention of staying in the single market as an interim measure. Once out of the EU, but in the single market, start separate negotiations outside of the two year time limit on the long term future trade relationship between the UK & EU.
In light of the UK government not having a strategy to leave the UK, I’ve decided to offer them my unsolicited guidance.
June 23rd The UK voted to leave the European Union. This is fact, and is not disputed. The High Court has ruled this is advisory, and will need an act of parliament to enact. The referendum did not however define or advise what relationship the UK will have with the EU after exit, and there are many shades of grey in this regard.
The single biggest question on the future state of the UK and EU relationship is with regards to the Single Market. Whether the UK remains within the single market, or out of the single market, will have significant impact on a number of areas, from trade, to immigration, with differing administrative burden dependant on the choices made.
To leave the EU, Article 50 needs to be invoked, which puts a two year time limit on negotiations for the future relationship. If the UK were to leave the single market, the scope of the negotiations would need to be very wide, as it would be renegotiating all trade tariffs between the two, in addition to border controls and migration. Staying within the single market reduces the scope of negotiations significantly.
The two year time limit puts the UK government on the back foot. It is poorly equipped right now to negotiate the extensive trade deal required to ensure the best outcome outside of the single market. As part of the EU, there was no requirement for the UK to have the capacity to negotiate trade deals, as these were done as a single EU bloc.
The recent Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU took 7 years to negotiate and be signed, with the process initiated in 2009 and completed in 2016. With that as a benchmark, two years is woefully short of the time required to negotiate a trade deal that works for the UK & Europe.
To effectively negotiate a deal that works for the UK, a way needs to be found around the two year time limit. There have been attempts by the UK government to start negotiations before enacting Article 50 which starts the clock, and these attempts have been sharply rebuffed.
The only way to get something in place within the two year time limit is to dramatically reduce the scope of negotiations. The only effective way to do this, is to go in with the clear intention of negotiating to stay within the single market. This takes all trade and immigration discussions off the table as there is a clear precedent for staying in the single market without being a member of the EU.
Once the UK has exited the EU, whilst remaining a member of the single market, this then enables the UK to start negotiations, outside of the two year time limit imposed by Article 50, on life outside of the single market.
So how would this work? As an act of parliament is required to enact Article 50, the first step would be to table an act for the UK to leave the EU, whilst remaining within the single market. It is important that the act tabled clearly states the desire to remain within the single market, for two reasons. Firstly, it will receive the least amount of opposition from pro-remain MP’s. Secondly because it would show a clear mandate at the negotiating table with the EU the desire to remain within the single market, and would help prevent unwanted terms being forced on the UK when exiting the EU.
This is only step one though. Whilst the UK is negotiating the terms of exiting the EU, and remaining in the single market, it gives the government the time to build up a trade negotiation capability. Once the UK has left the EU, it can then initiate a second round of negotiations, outside of Article 50 and the two year time limit, to leave the single market.
Without the two year time limit, the ability for the EU to force the UK to accept unpalatable terms is greatly reduced. In addition there will be the ability to start negotiations with other governments outside of the EU, which gives the UK negotiating leverage. It must be noted that the UK government would not be able to sign any trade deals until it has left the single market, but there is no prohibition on initiating negotiations with potential partners.
The new trade deal to take the UK outside of the single market should be taken to parliament to be approved, so would need to be done in consultation with MP’s. Doing this would keep the electorate engaged and ensure that the final deal agreed to had the endorsement of the independent elected parliament.
This entire process could take up to 10 years for the UK to leave the single market, but would satisfy the outcome of the referendum within two years by leaving the EU. It would put the markets at ease, as the change would be gradual, allowing the markets time to readjust to new trading conditions. It strengthens the trading position of the UK, and allows for the best possible outcome.
It would most likely upset those who voted to leave expecting an immediate stop to immigration, but the reality is a drastic change to the trading relationship between the EU and the UK, negotiated on a forced two year timeline will not work out positively for the UK.
The decision to leave the EU will in be effect be for the lifetimes of all of those who voted in the referendum. Rushing the negotiation and implementation of that decision would be foolish. This is a long term decision, and must be implemented with a long term view on achieving the best possible outcome for all.