Swiss Style Brexit

 

WEEKLY COMMENT 27-04-2017

By Barry Edwards

Swiss Style Brexit

 

The run up to the UK general election has brought the debate about the Brexit negotiations to the forefront with all parties claiming they have the answer to getting the best deal. Similar to the pre referendum debate, the proposals put forward currently are as unrealistic as you can get when you look at the reality of what is achievable. It is about time that a serious proposal was discussed that has some possibility of being the framework that could form the basis of an agreement.

John Springford of the Centre for Economic Reform (CER) has published a paper headed ‘Brexiting Swiss-style: The best possible UK-EU trade deal’. This is a serious attempt to actually suggest how the real agreement between the EU and the UK might evolve using an arrangement that has survived, without contravening the ambitions of the Brexit promoters, over many years. If you click on the link below you can read the paper (10 pages);

http://www.cer.org.uk/sites/default/files/pb_swiss_style_21april17.pdf

The paper is easy to read and takes you through the main points that John Springford believes have the most relevance to a similar deal that could be negotiated with the UK. Since this arrangement has been operational for many years there is good reason to use this as a basis for a UK/EU trade deal. Below are some extracts from his paper;

“Since Britain voted to leave the EU, the 27 other member-states have made ‘no cherry-picking’ their mantra. The UK will not be allowed to pick the parts of the single market it likes (such as trade and investment) and avoid the parts it does not (such as free movement and the supremacy of EU law).”

“Despite the 27’s ‘no cherry-picking’ rule, any trade agreement between the UK and the EU will require both sides to decide which sectors of the economy should continue to have the lowest trade barriers possible, given Theresa May’s decision to leave the single market. Thus, the negotiation will be an exercise in sectoral bargaining, as with all free trade agreements.”

“The Swiss-EU bilateral agreements show that compromises between sovereignty and economic integration are possible. Bilateral committees in the sectors where the Swiss and EU co-operate closely determine whether the Swiss should update their regulations to match those of the EU. The ECJ does not adjudicate disputes (although Swiss updates to their regulations must take account of ECJ case law). Something similar would be a potential ‘landing zone’ for the EU-27 and the UK in their forthcoming negotiations.”

It is clear that there will not be a new version of the single market negotiated since the EU 27 have made it clear that is not on the table. Therefore, expecting that trade and services with the EU can be conducted in a similar fashion as they are now is unrealistic and extremely unlikely in any form. This seems to be what many UK politicians are trying to convince the British people will be the eventual outcome mainly because they need us as much as we need them.

The government are keeping their cards very close to their chest at the moment but we may see more detail in their manifesto when it is published. I suspect that all we will see is a rehash of the statements made since article 50 was implemented as the Conservatives do not wish to reveal too much prior to the negotiations starting. That is a reasonable position to take and most people probably agree with that approach. However, implying that things will not change that much is a false promise in my view and that is where those of us who follow this in detail have a major problem with the politicians.

The reality is quite different and even if an agreement outlined by this paper is the best that can be achieved, the UK will struggle and is likely to suffer economically and diplomatically. It is not surprising that the electorate is not being told the truth since the prospects of a post Brexit UK are particularly gloomy when all the circumstances are taken into consideration.

Any government that is in power during this time will have to execute a big stimulus to the economy to prevent a long period of low growth or possibly recession. That will mean substantial investment in infrastructure and financial support for business in a way that has not been available previously. There will have to be massive encouragement for companies around the world to invest in the UK since most will look to Europe directly to establish manufacturing plants and to provide services.

This will be a big challenge for any government and they will have to involve the best creative talent to make the post Brexit environment economically successful and appealing to international businesses. The changes the UK is about experience will be long-lasting and how that is handled will determine whether the country comes through this process as a thriving economy with some real influence around the world or a small country on the edge of Europe without much relevance amongst the international community.

That’s all for this week, more observations next week.