Brexit plan envisages EU-UK Free Trade Area

Industry and European leaders have given a cautious welcome to an agreement within Britain’s Cabinet on the nation’s Brexit strategy that was thrashed out on Friday. It will see an EU- UK Free Trade Area and Britain remaining closely aligned to the EU’s single market on agriculture and goods via a “common rule book,” though the services sector will be excluded. Britain would also remain within a “combined customs territory.” “As a result, we avoid friction in terms of trade, which protects jobs and livelihoods, as well as meeting our commitments in Northern Ireland,” said Theresa May.

Britain is still set to leave the EU on March 29, 2019. On Saturday, the Prime Minister further elaborated her position that would include ending free movement, ending the jurisdiction of the European Court of Justice, and exiting the EU’s common agricultural and fisheries policies.

The agreement followed a summit at the Prime Minister’s country retreat, Chequers, ahead of which tensions ran high, as members of the cabinet remained deadlocked over what Britain’s future negotiating strategy should be to enable talks with EU leaders to continue and to allay concerns of business. Ahead of the summit, some pro-Brexit Conservatives had publicly urged the Prime Minister to not give into what they saw as a campaign for a “soft Brexit.” However, in the face of past criticism over her willingness to accommodate those pushing for a “hard” Brexit, the Prime Minister appeared to face down those forces. Ahead of the meeting, The Times reported that cards for the local Taxi service had been placed in the foyer of Chequers to ferry anyone who resigned (and therefore would no longer have their official card).

Exclusion of services, a positive for India

Pressure has been mounting on the British government to clarify its position as a host of businesses have expressed concerns about the lack of direction and clarity. Jaguar Land Rover became the latest firm to warn that its future investment in the UK was under threat in the event of a bad Brexit deal.

“It’s broad enough that it is open to interpretation: there will be iteration in the next few weeks but for me the main message is that Theresa May wants a soft Brexit: this was not giving in to the hard Brexit requests,” says Pratik Dattani, managing director of the consultancy Economic Policy Group and former UK director at FICCI. While the proposals on goods would likely allay some of the concerns of Indian businesses in the UK, he said that the exclusion of services could be seen as a positive for India in any future trade agreement negotiation. “India would be in a very strong negotiating position,” he said, explaining that with 80 per cent of the UK economy focussed on services, Britain would have to look to deals with countries such as India. “For India, this would mean selling more Indian services into the UK…Britain will have to negotiate bilaterally on services with different countries and when the time comes to start negotiating India can be more confident in the negotiations it has on access to the services market.”

Cautious welcome

The developments received a cautious welcome from the industry body the CBI, which described the agreement as a “genuine confidence boost.” “Initial signs suggest the proposal is based on the evidence firms have provided on the impact on jobs and Living standards. That is good news.”

Michel Barnier, who is leading the EU’s negotiations with Britain also welcomed the agreement and said they looked forward to assessing the proposals in a White Paper due to be published next week to see if they were “workable & realistic.”

Some of those pushing for a hard Brexit expressed scepticism: Jacob Rees-Mogg who leads the influential pro-Brexit European Research Group of MPs noted that all that had been seen was three pages out of a 120 document and that if too much power were conceded to Brussels, he would vote against the government in future legislation on the issue. MPs opposed to a hard Brexit also expressed concerns: “May’s proposal is no ‘soft Brexit’ – it does nothing for services which makes up 80% of our economy, will be rejected by the EU and leaves us with two choices: the UK continues to participate in the customs union and the single market; or a hard Brexit. She has ruled out the former,” said Chuka Umunna, one of the Labour MPs pushing for a People’s Vote on Brexit.

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