EU should grant UK free movement of goods


Ahead of the Chequers showdown, where Theresa May’s entire cabinet is supposed to finally settle on a policy for the UK’s long-term relationship with the EU as a non-member, expectations are that the prime minister is manoeuvring towards an arrangement known to the initiated as “the Jersey model”. This is the package required to ensure the free movement of goods across the UK-EU border in the same way as today. It includes a comprehensive customs union or something like it; the single market or something like it for all goods including agriculture (but not services); and some added areas of alignment such as accepting the EU’s VAT system

(This comes as no surprise to Free Lunch readers, of course. We noted in December that it was the only way to respect the commitments on Ireland; and have pointed out the signs that the government has realised the same.)

The standard reading of the mood in Brussels is that this solution is unacceptable. The European Commission has focused on “off-the-shelf” solutions, such as Norway’s European Economic Area deep integration model with the EU, or a Canada-style free trade agreement. Of the examples available, only the latter would fulfil all the criteria set out in the UK prime minister’s early speeches; only the former (plus a customs union) would fulfil the promise of no physical infrastructure on the Irish land border. According to The Times, May’s officials believe the EU will force the UK to choose between these two options — and it is likely the government will choose the Norway model (with a customs union-like arrangement) on the edge of the abyss.

As far as I can judge, this is an accurate take of the EU’s position. But from many conversations with policymakers (in the EU itself and in the member states) I get a distinct sense that this is partly a consequence of omission. European politicians have not had to seriously consider a “goods only” model for the simple reason that the UK has come nowhere close to making such a proposal. Britain’s public negotiating position remains one of promiscuous self-contradiction.

If (a big if) the UK could get serious, its best move would be to make an unambiguous, committed and earnest proposal for a permanent deal for free movement of goods akin to the Jersey model. Only when it does will member states have to engage with it properly. And when they do, chances are they will find much to like and might be minded to compromise. Examine them properly, and the arguments rehearsed in Brussels against a proper agreement for the free movement of goods — my colleague Alan Beattie sets them out well — are not as convincing as all that.

First, how could the EU ensure the integrity of its rules if goods could freely circulate between it and the UK? The answer, clearly, is that the UK would have to accept all EU rules and European court jurisdiction permanently for all that has to do with the trade and production of goods. Qualitatively this would be like the EEA — whose members the EU trusts to enforce the rules on their territory — but would differ in scope, because services would not be covered. That is why the European Free Trade Association court provides a suitable model for jurisdiction and enforcement.

Second, what about unfair competition? The UK has foolishly threatened to deregulate to favour its industries after Brexit, giving the EU cause to be worried about an unlevel playing field. So the UK would also have to accept a whole set of “flanking policies”. The rules it accepts EU laws and jurisdiction for would have to include certain environmental, social and state aid standards.

If the UK is serious, it will accept all of this. And if it does, other EU objections fall away. Some worry that other countries would prefer the British model to EU membership. Really? Note that the UK would accept to be permanently governed by rules set by an organisation and adjudicated by a court in which it has no representation, and to continue to adjust as the rules change over time. This is in no way preferable to EU membership; it is only preferable to a much weaker association still.

Then there is the mantra of the indivisibility of the “four freedoms”. As I have argued before, there are deep economic reasons why it is incoherent to treat the free movement of people separately from the free movement of services. But there is no such incoherence with pursuing only two freedoms: those for capital and goods. It is sometimes said that it is becoming ever harder to separate services from goods, given that goods are often sold with service contracts attached or built-in service components through software. But this is just as much an objection to standard FTAs in goods as to a more ambitious single market in goods. It just means some advanced goods may not flow easily because of their service content.

The hypothetical test case is this. Suppose Canada, for whatever political reasons, asked the EU to upgrade their bilateral trade deal. The upgrade would involve Canada unilaterally subjecting itself to all EU rules on goods production and trade, plus a number of flanking policies, now and as they change in the future. It would also enter a customs union, adopt the EU’s trade policy and accept the jurisdiction of EU courts in these fields. In return, it would ask the EU to dismantle border checks on trade, dismantle its own checks on imports from the EU and enforce EU rules against goods flowing into Canadian territory from third countries.

If the request were meant in earnest, could the EU respond in any other way than welcome it with open arms?

Numbers news

  • The UK Office for National Statistics will start to release gross domestic product estimates on a monthly basis, rather than the quarterly frequency that is commonly used around the world. Chris Giles explains what this means.

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EU should grant UK free movement of goods

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