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Where are the ‘free market’ red lines for phase 2?


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IEA Brexit Unit responds to the news that the Brexit talks are moving to phase two

https://iea.org.uk/wp-content/uploads/2017/12/EU-Briefing-on-red-lines-for-phase-2-final.pdf
Summary: 

  • The EU has confirmed that phase 2 of the Brexit talks, covering the future relationship, can now begin. However, there are still no clear answers to the challenges posed by the unique position of Ireland.

  • The UK has committed, subject to specific conditions, to maintain ‘full alignment’ with the rules of the single market and customs union.

  • However, this commitment only applies if other solutions are not found, and only then to the extent necessary to avoid a ‘hard border’.The meaning and scope of‘alignment’ is also open to interpretation.

  • The commitments made to date therefore need not result in a ‘soft Brexit’ in the longer term.

  • Ideally, the two sides would now move immediately to finalise a comprehensive free trade agreement (FTA). But given how long it has taken just to get this stage, some form of transitional period is now a necessary evil.

  • The EU is proposing that the UK continues to abide by the rules of the single market and customs union during this period. This would effectively put Brexit on hold.

  • This might just about be acceptable if the period is short, and the time is used well. The UK should at least insist on being able to open negotiations on trade deals with other countries. In the meantime, there is no case for additional budget contributions over and above those already agreed in the financial settlement.

  • At the end of this period, the UK should be able to improve substantially on the EU-Canada trade agreement (‘Canada ++’). But it should also retain the option of a clean break. This needs to be a credible threat to secure the best possible deal.


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Julian Jessop is an independent economist with over thirty years of experience gained in the public sector, City and consultancy, including senior positions at HM Treasury, HSBC, Standard Chartered Bank and Capital Economics. He was Chief Economist and Head of the Brexit Unit at the IEA until December 2018 and continues to support our work, especially schools outreach, on a pro bono basis.



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