IEA reacts to Government's draft Withdrawal Agreement
The briefing makes the case that while the proposed deal would help to minimise some of the disruption that might be caused by the UK’s departure from the EU, it could make it harder to realise the full economic benefits Brexit has to offer.
The controversial aspects of the deal as it stands include: the transition period, the financial settlement and the Irish backstop.
- The transition period anticipated in the Withdrawal Agreement will effectively keep the UK in the Customs Union and the Single Market until the end of 2020, with all ‘four freedoms’ including movement of people, and continued jurisdiction of the ECJ.
- The UK asked for this period, which should provide more than enough time to negotiate and implement a proper Free Trade Agreement. Nonetheless, any ambition to ‘take back control’ would be on hold for at least another two years.
- The UK will be free to ‘negotiate, sign and ratify’ new trade deals during the transition. But the UK will not be able to implement these deals without EU approval, even if other parties were ready to do so.
- The financial settlement honours commitments already made during the UK’s membership, but there is still a case for attaching conditions.
- An offer to pay up to £20bn would at least ensure that the rest of the EU would not be out of pocket during the transition period, and cover the UK contribution to pensions. The remainder could then follow the conclusion of a comprehensive Free Trade Agreement (FTA).
- The biggest sticking point is the Irish backstop. This is only supposed to be a temporary solution if an FTA cannot be ratified in time, but the UK would remain tied to customs union and have to commit to continued regulatory alignment too.
- Most importantly, Northern Ireland would be treated differently from the rest of the UK during this time. Many EU laws would continue to have direct effect there, and there would be new checks on goods moving from the rest of the UK.
- In sum, the proposed deal could make it harder to realise the full economic benefits of Brexit, while threatening the integrity of the UK.
Commenting on the briefing, the IEA’s Chief Economist and Head of the IEA’s Brexit Unit Julian Jessop said:
“With this agreement, the UK may is able to negotiate new trade deals during the transition period in principle. But having the theoretical right to do so is meaningless when trading partners will see the UK is in a de facto customs union in perpetuity. This agreement sets out that the UK will remain bound by the rules of the EU, but with less in determining them, and liable to pay an extortionate financial settlement of around £39 billion.”
Notes to editors:
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To download the IEA’s Brexit Unit briefing ‘Dissecting the Deal’ please click here.
For more IEA research on Brexit click here.
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