CLOSINGS: View Closings

Brexit Britain faces a reality check on trade

Britain and the European Union are finally set to begin what promises to be the toughest stage of the Brexit process:...

Posted: Dec 19, 2017 8:28 PM
Updated: Dec 19, 2017 8:28 PM

Britain and the European Union are finally set to begin what promises to be the toughest stage of the Brexit process: negotiating a new relationship and a transition phase to bed down the changes.

Both sides have identified the EU's recent trade deal with Canada as a template. But on its own this would be a bad deal for Britain, not least because the Canadian agreement does not include the services sector, which makes up 80% of the UK's economy. The key test for Britain will be how many extras it can win to upgrade the Canada deal.

Michel Barnier, the EU's chief Brexit negotiator, has said the UK's decision to leave the European single market and customs union limits the UK to "a free trade agreement on the Canadian model." David Davis, the UK's Brexit secretary, has expressed optimism about securing a "Canada plus, plus, plus" deal -- a bespoke agreement which takes the EU's best free trade agreements as a starting point, and adds services.

The EU has lauded its Canada deal, called the EU-Canada Comprehensive Economic Trade Agreement, or CETA, as "the gold standard for future trade deals." It abolishes almost all tariffs on goods, with most eliminated immediately.

It also reduces some non-tariff barriers, promising greater cooperation between Canadian and EU regulatory authorities, and offers improved access to some services markets, like telecoms, energy and maritime transport.

CETA would be far better for the UK than no deal, of course, but much worse than the advantages of EU membership that it currently enjoys.

Crucially, the Canada deal does not cover trade in services -- in particular financial services -- but also other areas from education to aviation. Barnier has crushed hopes of an upgrade on services, stating that there is no "single trade agreement that is open to financial services. It doesn't exist."

He confirmed that the UK's plan to leave the single market means UK financial service providers will lose their EU "passport," which allows them to operate throughout the bloc without setting up subsidiaries in EU countries (and vice versa).

CETA's offerings on financial services essentially repeat the WTO's General Agreement on Trade and Services (GATS), which offer significantly less market access than EU membership.

That's bad news -- the EU bought over a quarter of British financial services exports in 2014, totaling -22.7 billion.

Its goods coverage is also incomplete, with some agricultural products excluded, such as poultry and eggs, and 15 types of fruit and vegetables face tariffs of up to 20%.

UK Treasury analysis conducted before the EU referendum predicted that by 2030, the UK's economic output would be 6.2% lower under a CETA-style deal than what it would otherwise be.

The EU will have to tailor the Canada trade deal to suit the UK, because its economic profile is different. But the more bespoke the deal, the more protracted the negotiations will be -- and the UK is already facing a tight schedule.

The UK wants a trade deal and transition phase ready for exit day in March 2019. Yet CETA took seven years to negotiate. The new deal will also need to be ratified by each of the EU's member states, a process which is still ongoing for CETA.

"Most Favoured Nation" clauses in existing EU free trade agreements are a further obstacle -- if the EU offers the UK a deal on more favourable terms, other trading partners that have signed such clauses will be entitled to an equivalent upgrade.

Brexiteers like Foreign Secretary Boris Johnson insist Brexit is an opportunity to reclaim "lost" British sovereignty. But under a CETA-type deal, the UK would become a rule-taker, not a rule-maker. Canada has no say in setting EU rules and standards, but all its exports into the EU must meet strict European regulations.

A CETA-type deal would also use a controversial legal mechanism enabling foreign companies to sue the UK government if they believed a new British law would affect the value of their investments, potentially shaping British laws.

Throughout the Brexit process, the UK government has played down the complexities and trade-offs involved.

International Trade Secretary Liam Fox claimed that a new EU trade deal would be "the easiest in human history" because the UK and EU start from a position of convergence.

But the Brexiteers' desire for regulatory sovereignty -- and hence divergence from EU rules -- means customs and border checks will be needed where previously there were none.

Divergence also has major implications for the UK's only frontier with the EU -- the border between Northern Ireland and the Republic of Ireland.

Neither the UK nor Ireland want new border infrastructure, amid concerns it could stoke sectarian tensions in Northern Ireland. But this would be impossible to avoid if the UK diverged from the EU on regulations or standards.

The Irish border conundrum had threatened to delay progress in the Brexit talks until Prime Minister Theresa May committed to maintain "full alignment" with the EU's internal market and customs union if the two sides could not agree a solution to this thorny issue.

Remarkably, May's Cabinet has only just started to discuss what it wants from Brexit. So before trade talks can start, May must first find a consensus among her ministers.

Their range of views means this will be no mean feat. Brexiteers argue that Britain is in a strong position to push for pluses to the Canada deal because European businesses are desperate for access to the UK market.

But in trade terms, the UK needs the EU more than the EU needs the UK, and a "no" deal would damage the British economy.

European leaders are also determined to preserve the integrity of the single market and have been clear that there can be no "cherry picking" of benefits. Every "plus" that Britain wants to add to the Canada deal is likely to come at a price that will be unpopular with Brexiteers -- ranging from paying for market access to accepting EU migration or court rulings.

Depending on the price that May is willing and able to pay, there's a Brexit deal to be made.

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 289303

Reported Deaths: 3434
CountyCasesDeaths
Hennepin616511100
Ramsey25903487
Anoka20522218
Dakota20096183
Washington13066109
Stearns1291098
St. Louis7935101
Scott782754
Wright702436
Olmsted626134
Sherburne538640
Clay463856
Carver432213
Blue Earth387112
Rice386033
Kandiyohi373819
Crow Wing334631
Nobles298729
Chisago29358
Otter Tail282818
Benton278642
Winona258128
Mower241323
Douglas237631
Polk234423
Morrison219524
Lyon201911
McLeod195610
Beltrami194615
Becker187512
Goodhue185727
Steele17826
Itasca176124
Isanti174316
Todd171612
Carlton165710
Nicollet150823
Freeborn14465
Mille Lacs141630
Le Sueur138110
Waseca134011
Cass12849
Brown125011
Pine12458
Meeker11308
Roseau10503
Hubbard103822
Martin101920
Wabasha9611
Redwood83718
Dodge8060
Chippewa8057
Watonwan7984
Cottonwood7682
Renville75119
Sibley7414
Wadena7376
Aitkin69826
Rock6829
Pipestone67818
Houston6422
Fillmore6320
Yellow Medicine59311
Pennington5856
Kanabec54912
Murray5493
Swift5366
Faribault5081
Pope4990
Stevens4643
Clearwater4536
Marshall4438
Jackson4361
Unassigned38759
Lake3816
Koochiching3535
Wilkin3465
Lac qui Parle3383
Norman3227
Lincoln3171
Big Stone2841
Mahnomen2704
Grant2516
Red Lake2033
Kittson1917
Traverse1360
Lake of the Woods931
Cook600

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 222064

Reported Deaths: 2319
CountyCasesDeaths
Polk33019331
Linn13877164
Scott1085683
Black Hawk10730134
Woodbury10159121
Johnson935536
Dubuque907691
Story669721
Dallas624657
Pottawattamie612469
Sioux364625
Webster353033
Marshall343545
Cerro Gordo342644
Clinton319839
Buena Vista300014
Des Moines281719
Muscatine280968
Warren274011
Plymouth268941
Wapello251171
Jones227913
Jasper212443
Marion201719
Lee197916
Carroll195422
Bremer191312
Henry18037
Crawford173015
Benton166217
Tama152240
Jackson142113
Delaware140221
Washington137414
Dickinson134210
Boone134011
Mahaska125327
Wright12156
Buchanan115010
Clay11314
Hardin113010
Page11134
Hamilton10809
Clayton10715
Harrison106129
Cedar104913
Calhoun10487
Kossuth10236
Floyd102216
Mills10177
Fayette10159
Lyon10058
Poweshiek97913
Butler9746
Winneshiek95412
Iowa92312
Winnebago90223
Hancock8497
Louisa83916
Grundy83811
Chickasaw8354
Sac8297
Cherokee8134
Cass79721
Appanoose77310
Mitchell7704
Allamakee76811
Union7546
Humboldt7525
Shelby75010
Emmet74724
Guthrie73715
Franklin72921
Jefferson6852
Madison6734
Palo Alto6454
Unassigned6320
Keokuk5737
Pocahontas5532
Howard5419
Greene5160
Osceola5131
Clarke4774
Ida46813
Taylor4563
Davis4508
Montgomery44911
Monroe43712
Adair4298
Monona4212
Fremont3543
Van Buren3525
Worth3520
Lucas3216
Decatur3150
Wayne2957
Audubon2942
Ringgold2022
Adams1642
Rochester
Clear
30° wxIcon
Hi: 36° Lo: 27°
Feels Like: 21°
Mason City
Clear
31° wxIcon
Hi: 38° Lo: 28°
Feels Like: 24°
Albert Lea
Clear
32° wxIcon
Hi: 37° Lo: 29°
Feels Like: 25°
Austin
Clear
30° wxIcon
Hi: 37° Lo: 28°
Feels Like: 23°
Charles City
Clear
27° wxIcon
Hi: 37° Lo: 26°
Feels Like: 17°
A Sunny and Mild Saturday Expected
KIMT Radar
KIMT Eye in the sky

Latest Video

Image

Sidelined in quarantine: Coach Fennelly talks about his experience away from the game

Image

Here Comes Santa Claus Drive-Thru

Image

Here Comes Santa Claus Drive-Thru

Image

Santa Claus Visits Rochester to Lead Drive-Thru Parade

Image

Aaron's Friday Evening Forecast

Image

Increased demand for real Christmas trees

Image

Santa visits Rochester for drive-thru parade

Image

Salvation Army needs bell ringers

Image

Search for man stalking women

Image

Downtown Alliance for shopping locally

Community Events