Labor may want to change the UK-EU trade deal at some point, but a soft Brexit in the form of a customs union with the EU, or a return to the EU single market , was excluded. Indeed, a soft Brexit would not have the democratic legitimacy of EU membership, writes Derrick Wyatt.
The UK-EU Trade and Cooperation Agreement – the current UK-EU trade deal – is being described as a ‘hard’ Brexit because some politicians have argued for a Brexit “soft”. A soft Brexit would mean the UK joining a customs union with the EU and/or UK membership of the EU single market.
Sir Keir Starmer said in January 2021 that there were ‘elements’ of the UK-EU trade deal which ‘already need to be improved’, but he excluded any “major renegotiation” of the agreement. It follows that for Labour, a customs union with the EU and membership of the EU single market are not an option.
In a previous blog I said there were good reasons why Keir Starmer ruled out the UK joining the EU. Here I argue that there are good reasons to rule out a soft Brexit. A good reason could be that such a policy could cause more votes to be lost in the so-called “red wall” seats than it would win elsewhere. I’ll leave that to others to assess. The good reason I would put forward is that any soft Brexit the EU agrees to would be an undemocratic option for the UK, as it would mean accepting EU decisions on key issues without the UK having his say.
Soft Brexit via a Turkish-style customs union with the EU
The Turkey/EU Customs Union requires Turkey to apply the same customs duties on its imports of industrial goods from non-EU (“third”) countries as the EU. This means that Turkey cannot be used as a low-cost route for exports from these countries to the EU. And this means that imports into the EU from Turkey do not need documents and checks to see if they contain third country components which should be subject to customs duties. So far, so good.
But while Turkey is bound by EU agreements with third countries, it is not entitled to duty-free access to their markets. To do this, it must negotiate its own trade agreements with these countries. It’s easier said than done. A country with a trade deal with the EU gets duty-free access to the Turkish market anyway, making it difficult or impossible for Turkey to get its own trade deal with that country. Furthermore, Turkey has no say in the terms of trade agreements the EU negotiates with third countries and may be required to grant trade concessions that it would never have offered if it were negotiating for herself.
Labor Customs Union Proposal
The Labor customs union said it would negotiate with the EU if it won the 2019 elections, which would have avoided the flaws of the Turkish model. The UK and the EU would act together to strike trade deals with countries around the world, and the UK would have a ‘say’ in making those deals.
The problem was and is that the EU would never agree to such an arrangement. A major sticking point would be giving the UK a say in negotiating EU trade deals with third countries. The EU should give the UK some sort of vote when the Commission’s negotiating mandate is set by the Council, and at the end of negotiations when the Council agrees to sign a deal that has been negotiated. There should also be a mechanism for the UK to influence the course of the negotiations.
You could say that the UK could always be guaranteed to opt out of a deal if it didn’t approve of the outcome. But that would not be a solution. It would be going back to the Turkish model. This would leave the UK bound by the new deal, under the terms of its customs union with the EU, but unable to take advantage of the terms of that deal in its trade with the third country concerned.
No UK government would be likely to agree to be bound by trade agreements negotiated on its behalf by the EU if it did not have a real say in the negotiation and conclusion of these agreements. This would be essential to ensure democratic accountability to the UK Parliament and electorate. But the EU would never agree to give the UK a say in the negotiation and conclusion of trade agreements, and to make the UK a kind of associate member of the EU. This would be precisely the kind of “picorage” that the EU has always rejected.
The option of a permanent customs union with the EU, along the lines envisioned by Labor in 2019, has never been a practical option. Labor now seems to have accepted it.
Soft Brexit via ‘Norway’ option
An alternative route to a soft Brexit would be for the UK to adopt an economic relationship with the EU similar to that of Norway. Norway is one of three EFTA states (Norway, Iceland and Liechtenstein) that have an agreement with the EU under which they participate in the EU single market, apply EU single market legislation EU and make significant financial contributions to EU projects.
In practice, the EFTA States have no choice but to adopt new European rules. EFTA states are free to negotiate their own trade agreements with other countries as they are not part of the EU customs union. As they are not part of the customs union, there are customs controls on trade between EFTA countries and EU countries, and customs duties are imposed on goods containing non-EFTA components or not significant EU.
Free movement of workers
Free movement of workers would return under any variation of the Norwegian model that can win EU approval. It seems that most people in the UK now think it was a mistake to leave the EU, and only a small majority supports reintegration into the EU. This suggests that free movement is something the public as a whole is ready to accept, even if it could be a loser in some and possibly many constituencies. But if free movement were not fatal to the prospect of a Norwegian-style soft Brexit, the fact that the UK is subject to EU laws without having any influence on the content of these laws would be very most likely.
The Norwegian model would leave the regulation of UK companies to the governments of their main competitors
The impression that EU single market laws are only about technical rules that nobody needs to worry about is wrong. They somehow regulate an economically and politically important subject. A non-exhaustive list includes air, road, rail and maritime transport, pollution and the fight against global warming, company law, public procurement, state support for businesses, energy, takeovers and mergers, the activities of advertisers, lawyers, banks and insurance companies and the National Health Service.
The EFTA states do not apply the single market tax harmonization rules, but one would expect the UK to do so. And France could insist that the UK join the Common Fisheries Policy, to restore pre-Brexit French fishing quotas in UK waters.
As an EU member state, it was the UK’s influential participation in the EU legislative process (with veto power in some cases) that gave democratic legitimacy to the application of the law. from the EU to the UK. If the United Kingdom adopted a soft Brexit on the Norwegian model, the United Kingdom would have no say in the development and modification of the European legislation which applies to the United Kingdom, and this democratic legitimacy would be lacking.
An independent committee appointed by the Norwegian government said that “Norway is in practice bound to adopt EU policies and rules… without the right to vote”. He noted that “this democratic deficit is the price Norway is paying for enjoying the benefits of European integration without being [an EU Member].’ It is highly unlikely that any UK government and parliament would be willing to sign a legislative blank check to the EU as the price of a soft Brexit.
Derrick Wyatt, QC, is Emeritus Professor of Law at the University of Oxford and a former litigation lawyer in the EU courts. He has advised government bodies and businesses on legal issues related to the EU internal market, environment and climate change. He is a member of the International Academic Council of Fundacion Fide, an independent, non-partisan Spanish think tank.