The UK won’t opt for CETA+ because that model simply doesn’t exist

Twitter is all a buzz with news — via Robert Peston — of what Brexit might actually mean.

In particular, Peston provides some rather fascinating insight on what the new PM believes Brexit may mean:

I am reliably told that Brexit, for May (and therefore for us), equals:
1. discretionary control over immigration policy;
2. discretionary control over lawmaking;
3. no compulsory contributions to the EU budget.

He goes on to say that the Brexit Secretary David Davis is working up a version of the Canadian trade deal with the EU:

There is an alternative model for our new economic arrangement with the EU — which, I am told, has a 75% chance of being negotiated successfully (that is a wholly spurious probability by the way, and should be interpreted as a statistical version of cabinet ministers crossing their fingers and toes).
This model is being developed by the newly created Department for Exiting the European Union, under David Davis, and it consists of a British reworking of Canada’s EU free-trade deal, with — and this is the trickiest part — a bespoke add-on for our service sector.

I can tell you right now that this is nonsense.

I’ve been through all 1,598 pages of the Canadian — EU trade agreement.

Like all trade deals, its full of schedules on reducing tariffs on various types of cheeses; details on ‘rules of origin’ procedures and quotas on certain products, including motor vehicles.

The EU will impose tariffs on Canada cars that don’t meet origin requirements.

Why are there quotas? To prevent US cars entering the EU via the Canadian Market. In particular, the summary of the negotiated texts sets out why there are Rules of Origin requirements:

The rules of origin set the conditions under which a product qualifies as ‘European’ or ‘Canadian’ and hence for the tariff preferences of CETA. The objective is to avoid products of a third country indirectly benefitting from the Agreement. The EU and Canada have different rules of origin systems, reflecting the particular structures of their economies. In most of the cases, this did not constitute a problem, but for some products/sectors which are important for both sides and on which the rules strongly differed, a compromise had to be found.

The summary note also highlights the additional CETA determined duty-free quotas (on top of existing EU tariff rate quotas) for Canadian beef (45,838 tonnes), sweet corn (8,000 tonnes of canned sweet corn), pork and common wheat (100,000 tonnes) .

All trade deals are based in the particular structures of the negotiating economies. Our economy is so different than the Canadian economy, we’d likely need to change every single one of the 1,598 pages of CETA. That is to say we’d need our own UK-EU trade deal. That’s a viable option, but doing a CETA+ suggests taking CETA as a template which would be like using the National Hockey League as a template for reforming the Premier League.

There is no way that the Brexit Department can deliver a “British reworking” of CETA.

[NOTE: that’s before the UK farming and automotive industries lobby against any quotas and before the 27 countries in the EU each ratify this hypothetical CETA+ deal; the CETA deal took seven years to negotiate and still hasn’t been approved.]

No, any discussion of CETA+ model for the UK is just plain nonsense.

What is far more interesting are the 3 points Peston raised at the top: discretionary control over immigration, laws and contributions.

Notice what is missing: full access to the Single Market. And notice the language of the third point: “no compulsory contributions to the EU budget”.

Most of the commentary on the Brexit model focuses on the tension between access to the single market and restrictions to immigration. Access to the Single Market comes with a cost: accepting freedom of movement (as the Swiss are learning) and contributions to the EU budget.

That requirement is relaxed if you don’t want full access to the Single Market.

But what is the cost to the UK if we want partial access to the Single Market?

Well, if we’re unwilling to have full freedom of movement (especially as we don’t have it now), we will have to buy access to our preferred aspects of the Single market, such as R&D programmes, unfettered access for certain agricultural and manufacturing goods and retaining passporting for financial services.

Claiming Brexit means “no compulsory contribution” leaves the door open to discretionary contributions to the EU budget.

And that suggests Brexit remains something closer to an version of the EEA model, rather than some nonsensical and impractical “British reworking” of CETA.

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