Brexit

Extend Article 50 and set a clear direction in the trade negotiations

BY Adam Taylor   /  14 March 2019

With the Brexit clock ticking, neither hardened Brexiteers nor staunch Remainers are happy. With fewer than three weeks to go, the UK Parliament has rejected what European Union leaders said was the final take-it-or-leave-it offer. While some are calling for a second referendum and hardliners are fine with a no-deal Brexit, creative solutions make a third way possible, drawing on the experiences of other nations.

Extend Article 50 and set a clear direction

With the two year negotiating window almost up, both UK and EU lawmakers are running out of patience, and for good reason. However, keeping things in perspective, two years is not a long time to negotiate something as transformative as Brexit. The recent NAFTA modernization talks took over two years and were simply an upgrade. The Canada-EU talks that produced CETA took 7 years to complete. Negotiating Brexit on a couple tanks of petrol just isn’t realistic.

Both sides should agree to extend Article 50, shred the calendar and take the time to do things right. At the same time, Parliament must provide a clear indication of where it wants to go. It should look to the Norwegian and Swiss models as guidance for a clean exit, while recognizing neither is ideal especially for the second largest economy in Europe that wants greater accountability over its affairs, not less.

The Canada-United States model should also be reviewed as the parallels, while not perfect, are similar. The main point is that two sovereign jurisdictions with highly integrated economies and entrenched supply chain linkages can find creative solutions to complex challenges when they have an economic interest in doing so.

The UK clearly needs access to the EU market just as the EU needs access to the UK market. It’s time to decide once and for all if leaving the EU is worth the trouble, and if leaving without a deal is worth the risk. Simply put, Parliamentarians must agree on what a credible and realistic path forward looks like and convince EU lawmakers that an extension of Article 50 is in the interests of both sides.

Customs-related negotiations are common in 21st century trade talks

For most Brexit backers, the idea of remaining in a customs union with the EU post-Brexit is as unappealing as remaining part of the EU itself. However, all sides more or less agree on one fact: any temporary measures must be quickly replaced by a formal trade agreement.

As part of these negotiations, provisions must be reached across all areas of customs administration and trade facilitation – as is common in all modern trade talks. Items to be covered in this chapter will include setting out all rules in a predictable manner, providing opportunities for advance rulings to ensure proper compliance, accounting for new 21st century items such as express shipping and the use of information technology and allowing for review and appeals when disputes arise. All of these very provisions were recently updated as part of the NAFTA modernization negotiations between Canada, the US and Mexico.

NAFTA modernization talks are similar to Brexit in that free trade rules that had been in place for over a generation were suddenly threatened by dramatic shift. In North America, the upheaval was due to a protectionist administration under US President Donald Trump, who vowed to rip up the pact if the US didn’t get a better deal.

The EU and the UK need each other

Brexit negotiations have been painful, emotional and sometimes irrational which is typical in any divorce. Both sides have skin in the game, making things difficult. Negotiating a post-Brexit trade agreement won’t be easy but both sides need to get it done for their businesses and workers who need a swift return to economic predictability. The good news is that each side’s offensive interests are relatively straightforward: the EU wants to keep selling the UK its goods (in this area, the EU already enjoys a surplus), while the UK wants to sell the EU its services – its predominant economic driver.

It’s not all straightforward. But simplicity is the best place to start in a complex trade negotiation, especially when a win-win outcome is the only way to secure lasting prosperity for both parties. We learned during the recent NAFTA talks that all sides must be able to go home to their constituents and say they won. Despite the complex issues surrounding Brexit, the only way forward is for both sides to put some water in their wine and accept shared pain for shared gain.

Adam Taylor is a principal at Export Action Global, an Ottawa-Toronto and London-based trade consultancy. He was an advisor to Canada’s Prime minister and a former trade minister in the previous Conservative Government during the CETA and TPP trade negotiations


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