In a much anticipated speech delivered at Lancaster House on Tuesday, Prime Minister of the United Kingdom, Mrs. Theresa May, confirmed speculation that the UK’s membership of the European Single Market was off the table, an option which has been colloquially dubbed a “hard” Brexit. The news may be dismaying (no pun intended) to some who preferred a “soft” Brexit (remaining in the single market). However, it is not unexpected given the main reasons why 52% of Britons voted in favour of leaving the EU in the first place, inter alia, stemming the tide of immigration and getting away from the “intrusiveness” of Brussels.
In a speech that was both conciliatory but also declarative, Mrs. May said as much as she succinctly outlined the reasons for the UK’s decision. It should be noted that while serving as Home Secretary, Mrs. May was part of the “Remain” camp during the Brexit campaign. However, during her bid to assume the office of Prime Minister, she strongly and famously stated that “Brexit means Brexit“. Among the reasons enumerated by Mrs. May include Britain’s “profoundly internationalist” history and culture and the belief that EU membership has come at the expense of the UK’s external trade relations. To this effect, she noted that trade as a percent of UK GDP (an indicator of a country’s trade openness) had stagnated.
She went further by noting the difference in political traditions between the UK and EU, including the incongruity between the UK constitutional principle of parliamentary sovereignty and the power of supranational institutions in Brussels to make laws for the UK, and the inability to hold those institutions accountable. While stressing that she did not wish to see a disintegration of the EU, she ultimately argued that there was need for greater flexibility by the EU if it is to succeed.
12-point Brexit Plan
In her biggest speech since coming to 10 Downing Street, Mrs. May sought to quell criticisms over the lack of clarity of her Brexit strategy by outlining a 12-point plan which would guide the UK’s Brexit negotiations, and with the overarching goal of fostering “a new, positive and constructive partnership” between the UK and the EU.
Mrs. May, therefore, ruled out membership of the Single Market, citing instead her preference for a comprehensive free trade agreement (FTA) with the remaining 27 countries of the EU.Five main models of arrangement have been proffered in the literature but Mrs. May has strongly stated that she wants a model unique to Britain.
She has stated that the UK would not have to contribute to the EU budget but noted she was prepared to make contributions if there are any specific European programmes in which the UK may wish to participate.
More confusingly, however, was her statement that she wanted to remain a partial member of the EU Customs Union (EUCU), yet still control the UK’s trade policy by not being bound by the common custom tariff or the EU’s Common Commercial Policy. To my mind, this is at cross-purposes. There is, of course, precedent in the EU of countries being in a customs union relationship with the EU, while not being EU members, such as Turkey, San Marino and Andorra who apply the CET on only certain goods. However, the essential element which differentiates a customs union from an FTA is that parties to a customs union apply a common external tariff (called the Common Customs Tariff in the EU). I am at pains to see how the UK can be a member of the EUCU without being bound by the CET to some extent. In such a case, it would be best to simply just negotiate an FTA.
More Outward Looking Britain
Besides outlining her vision for a future relationship with the EU, Mrs. May also elaborated that she wanted to build “a truly global Britain” and significantly expand its trade with the world’s fastest growing export markets, as well as have its own tariff schedules in the WTO. As an EU member, the UK was bound by the Common Commercial Policy and was unable to enter into third party trade negotiations.
The outward looking Post-Brexit UK is good news for Caribbean countries. As I noted in previous articles, countries of CARIFORUM (countries of the Caribbean Community plus the Dominican Republic) currently enjoy preferential access to the UK market under the CARIFORUM-EU Economic Partnership Agreement (EPA). Once the UK leaves the EU, it will no longer be bound under the EPA and Caribbean countries will no longer have preferential access to the UK market. Since the UK is a major trading partner for the region and the region’s largest in Europe, it is within the region’s interest to negotiate some form of WTO-compatible preferential agreement with the UK post-Brexit, even though admittingly the region would likely be at the back of the queue.
On this note, she highlighted her newly created Department of International Trade (headed by Mr. Liam Fox) and mentioned the large queue of countries eager to negotiate an agreement with post-Brexit UK, including the US under incoming President Donald Trump. It is worth noting that recently the Dominican Republic indicated its interest in an FTA with the UK.
Deadline and Preparedness to walk away empty-ended
Of interest is that Mrs. May has stuck to her previously stated end of March deadline for making the Article 50 notification under the Lisbon Treaty (which is the only way the formal process of withdrawing from the EU can begin). The UK Supreme Court is set to render its judgment in the appeal on whether parliament or the executive branch has the power to decide to make the Article 50 notification. Depending on the ruling, Mrs. May’s timeline may not be realistic. Mrs. May has called for a phased-in approach to the withdrawal and has also reiterated that Parliament would have a vote on the final withdrawal agreement.
Highlighting that a punitive approach by the EU would be “an act of calamitous self-harm for the countries of Europe”, Mrs. May has indicated that she is prepared to walk away with no agreement rather than a bad one.
Reaction in Europe to Mrs. May’s speech has been mixed as this Telegraph article notes.
Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.