8. Conclusion – Rebuilding UK-EU cooperation

A strong trade relationship needs more than a Free Trade Agreement

The UK’s future trading relationship with the EU will continue to be crucial for the UK economy. For most goods and services, it is far easier to compete in a market close to home than one thousands of miles away. More than 50 per cent of the UK’s trade is with the EU and associated economies in terms of Switzerland, Norway and Turkey. The EU is at the centre of one of the largest parts of the global value chains that dominate world trade, and it would be reckless to turn our back on this. It is also a dominant global regulator, whose actions will affect our businesses.

Countries that aspire to trade extensively between themselves, which are typically neighbours, build deep relationships. This is why there are examples around the world of Customs Unions and Single Markets. Contrary to some UK thinking, the EU is not a global exception: it has merely gone further than a lot of other regional integration efforts. Nor is the EU particularly protectionist by global standards. 

In terms of cooperation with neighbours, there are numerous ways in which this has been done in Europe, from standardisation to the rules of origin for goods trade, and science research funding, to membership of regional regulatory bodies. Nearly every European country takes part in some of these, seeing a benefit that outweighs any cost – even if they do not aspire to membership. It is unrealistic for the UK to stand outside and expect trade with the EU to be maintained.

Slowly, it seems the UK Government has accepted that it does need deeper relations with the EU. Thus the participation in Horizon, with an acceptance that this comes with ECJ oversight. And the request for Mutual Recognition Agreements, and regulatory cooperation in financial services. These are in our interests, but we cannot expect the EU to grant them without further negotiation. Similarly, we should seek to join regulatory bodies where this is in our interests, for example in aviation safety or chemicals management. The UK’s decision to go it alone in these areas will be costly for the Government, bad for trade, and offer few benefits that specialists have yet been able to discern.

There need be no contradiction between regional integration and global interaction. Australia and New Zealand have significant ties, including a single market in some areas, but the latter in particular is a leader in seeking global trade cooperation. North American trade ties are strong, but Mexico and Canada still also look outwards. The UK can have a deep relationship with the EU and seek strong relationships elsewhere.

If we can accept the need to go beyond the Trade and Cooperation Agreement, there are many ways to do this – those listed here and others that business, NGOs and others can identify. These may become clearer after the changes in trade come into force on January 1. 

The UK Government needs also to establish a new structure to manage European relations, led by a dedicated minister. A regular programme of official and ministerial visits and other events should then support enhanced cooperation. Our shared geography requires regular meetings, and these can be used to review the relationship and consider where it makes sense to do more. 

Relations between the UK and EU will take time to stabilise, and we cannot expect both sides to want to agree such a big agenda immediately. Instead, both will need time to consider their best interests, and where cooperation makes sense. There will be domestic opponents in both cases. It is thus important to be clear about the rationale: that we will both benefit from rebuilding ties, economically, politically, culturally. 

We will continue to be neighbours, and should seek to be good neighbours and heavy traders. Relations have taken a knock in the last four-and-a-half years, and it is time to start rebuilding them.

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