The United Kingdom has now used up more than half the time it had to agree on an exit deal with the European Union, once it decided to leave in the Brexit referendum. The deadline to wrap up the negotiations is March 29, 2019. First of all, the U.K. has to decide the terms under which it will exit the European Union. The leaders of the other 27 E.U. member states will decide in mid-December whether sufficient progress has been made in these initial negotiations. If they think that enough progress has been made, the U.K. and E.U. can then start negotiating early next year about their future relationship.
It’s not yet clear what future relationship the U.K. wants. It claims that it wants both a close trading relationship with the E.U. and an ambitious trade agreement with the United States, but it can’t have both. Here is how things are likely to play out.
The U.K. wants deep relationships with the E.U. and the U.S.
The U.K. seems to want “deep” agreements with both the European Union and the United States. Such agreements would have to deal with the ways that domestic policies, such as product standards and regulations, can impede trade. Different countries can have different regulations, which causes problems when there are clashes between the rules of the jurisdiction where a product is made and the rules of the jurisdiction where the product is sold. Deep trade agreements try to mitigate the negative consequences that different regulations have for trade.
These efforts can be very controversial if people think that regulatory standards are being relaxed to liberalize trade. This helps explain why people protested the stalled TTIP transatlantic trade agreement, and why many British people are unhappy at the prospect of importing meat that has been washed in chlorine (this is common practice in the United States, but not the U.K. or Europe).
The problem is that you can only really have a deep agreement with one jurisdiction. Although lots of countries have preferential trade agreements with multiple partners, they are relatively “shallow” agreements, which focus primarily on reducing tariffs. That works, because the agreements have rules of origin, which restrict the terms of the agreement to products produced in the participating countries. However, if you are trying to have multiple deep agreements, then any changes to domestic rules apply to all products, wherever they are produced. This means that your commitments to different partners cannot be disaggregated. That is a big problem if the partners have different or even incompatible regulatory requirements.
The U.K. wants to have it both ways — but it can’t
This is the challenge the U.K. will face when negotiating with the E.U. and the United States. On Nov. 6, Commerce Secretary Wilbur Ross told the Confederation of British Industry’s annual conference that the U.K. should move away from the E.U.’s regulatory approach toward that of the United States. The next day the E.U.’s chief Brexit negotiator, Michel Barnier, emphasized that such a move would limit the depth of any U.K.-E.U. trade agreement.
Although the differences in the U.S. and E.U. approaches to regulating risks are often overblown, they do frequently adopt different standards. In particular, the E.U. tends to regulate food safety risks associated with new technologies — such as genetic modification, pesticide residue levels, the use of growth-promoting hormones, and antimicrobial treatments of meat — more stringently than does the United States. As a result, products that meet U.S. standards cannot necessarily be sold in the E.U. In contrast, products that meet E.U. standards can usually be sold in the United States.
If the U.K. follows Ross’s advice and adopts U.S. food safety standards, products complying with U.K. standards would be excluded from the E.U.’s market. British firms might choose to comply with the E.U.’s standards anyway; this happens so often that it is called the “Brussels effect.” However, they would have to demonstrate to the E.U. that they actually comply with E.U. standards. As the TTIP negotiations demonstrated, proving compliance can be cumbersome and discourage exports, particularly by small- and medium-size firms, which have fewer resources and are less committed to exporting.
Sometimes regulations clash directly
It is far harder again for a country to have multiple deep agreements when its partners have incompatible regulatory requirements. In that case, meeting one requirement means that you don’t meet the other. This is the situation with E.U. and U.S. automobile safety standards on everything from windshield wipers to turn signals. Automakers need to make cars to two sets of standards to sell them in both markets. The TTIP negotiations sought to resolve the issue by getting European and American regulators to accept that the other’s standards are equivalent in effect if different in detail.
However, the negotiations foundered before the issue could be resolved. In this case it was the U.S. regulator — the National Highway Transport Safety Administration — that was not persuaded that E.U. standards provided an adequate level of safety. This means that the U.K. cannot resolve the issue by accepting U.S. standards as equivalent to E.U./U.K. ones.
As the food safety and automobile safety examples illustrate, the U.K. faces a binary choice. Integrating more closely with the United States will pull it farther away from the E.U. Cleaving closely to the E.U. will limit how close it can draw to the United States. The U.K. cannot have its trade cake and eat it, too.
Alasdair R. Young is a professor in the Sam Nunn School of International Affairs at the Georgia Institute of Technology, where he directs the Center for European and Transatlantic Studies, a Jean Monnet Center of Excellence. He is the author most recently of “The New Politics of Trade: Lessons from TTIP,” Agenda Publishing, 2018.
This post draws on research supported from the European Union’s Erasmus+ Programme (Jean Monnet Chair 2012-3121 and Jean Monnet Center of Excellence 2014-1842). It reflects the views only of the author, and the Commission cannot be held responsible for any use which may be made of the information contained herein.