Peers: Ministers need 'game plan' for EU transitional trade deal after Brexit

Posted On: 
12th December 2016

Ministers must forge a transitional trade deal with the EU for after Brexit, because a permanent free trade agreement cannot be hammered out in the Article 50 negotiating period, peers have said.

Lords have spelled out post-Brexit trade options for the UK
Credit: 
PA Images

According to two Lords EU committees the Government must establish a “game plan” for a transitional arrangement before it triggers the two-year formal negotiations over its exit from the bloc.

In a new report, the EU Internal Market and External Affairs Sub-Committees also noted that the UK will have to accept “trade-offs” in sovereignty if it wants to maintain free trade.

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And they raised concerns that a new free trade deal would not match the benefits of single market membership, while urging ministers to spell out whether they hope for Britain to stay in the customs union.

Chancellor Philip Hammond yesterday gave his strongest hint yet that the Government would seek a transitional deal with the EU, after a period of mixed messages from ministers.

Theresa May hinted last month she wanted to avoid a “cliff edge” scenario for the City, but Brexit Secretary David Davis has reportedly told firms he is “not interested” in such an arrangement.

Baroness Verma, the chair of the Lords EU External Affairs Sub-Committee, said: “It is unlikely that a bespoke EU trade agreement can be agreed within Article 50’s two-year period, so a transitional deal is vital for protecting UK trade, and jobs that rely on trade.”

She urged the Government to focus on forging an EU free trade deal so it can be free to thrash out similar arrangements with non-EU countries afterwards.

The report said a new free trade arrangement (FTA) with the bloc would be the most flexible option, but would be complex and take longer than two years to negotiate.

Chair of the EU Internal Market Sub-Committee Lord Whitty warned: “While an FTA would provide the greatest flexibility, and no commitment to freedom of movement, there is no evidence that it could provide trade on terms equivalent to membership of the single market.”

He added: “Trade-offs will need to be made in whatever trading framework we eventually agree. The Government is committed to curbing the free movement of people and the reach of the European Court of Justice. This is incompatible with full single market membership.”

CUSTOMS UNION

Elsewhere, the report said the Government must urgently decide whether or not it hopes for the UK to remain in the customs union, which governs the movement of goods.

“Doing so would mean no border checks for goods between the UK and EU, but would restrict the UK’s ability to sign trade deals with the rest of the world. It does not cover services,” a statement with the report added.

It also argued "temporary extension of participation in the customs union" would be an "important element" of any transitional trade deal.

The report comes after the Government refused to cave to Labour demands for it to spell out whether or not it intends to retain membership of the customs union.