Norway, Switzerland, Canada: No Models for Brexit

FOR THE UK, NEGOTIATING THE LEGAL FRAMEWORK AND THE TERMS OF TRADE RELATIONS WITH THE EUROPEAN UNION IS GOING BE AN UPHILL STRUGGLE. SOLUTIONS CURRENTLY BEING MOOTED FAIL TO ADDRESS THE NATURE OF THE PROBLEM

by Claudio Dordi, Dept. of Legal Studies, Bocconi
Translated by Alex Foti


The legal framework of economic and trade relations between the UK and the EU after Brexit will be defined by the outcome of negotiations which, as agreed between the two parties, will be held in a the transitional period going from March 2019, the date when the United Kingdom is expected to leave the European Union, to December 2020. This relatively long timeframe should not be surprising: it is an arduous task to terminate a relationship based on the single market for goods, services, labor and capital, which is enshrined in international treaties and governed by a massive body of secondary legislation (EU regulations and directives). The current absence of trade duties between member states, made possible by the presence of the customs union, is only one of the aspects of the deep economic and trade relations linking EU countries to one another. In fact, the proper functioning of the single market depends on the harmonization of the technical standards and safety rules required for products in each state, and convergence in the criteria established for access to the professions and the provision of services (e.g. financial services), which took decades of negotiations between states in EU bodies and have produced countless legal acts.

Once necessary regulatory convergence was achieved, the operation of the principle of mutual recognition has concretely sanctioned the right of products and services to move freely within the EU if they have access to the home market. The solution to the problem is certainly not made any simpler by the objectives stated by the United Kingdom in its White Paper of Brexit: the avowed desire of "developing a broad and deep economic relationship with the EU” clashes with the declared aim of the British to leave the the single market and the customs union, a choice which may have effects beyond the economic sphere, if one considers the need to establish future border controls between Northern Ireland and the Republic of Ireland to control the flow of goods and people in and out of the UK.
 
The limits placed by the British government on the set of solutions exclude some of the trade integration models without accession that the EU has developed with third countries, better known as Third States, which have been at the center of the Brexit debate in recent months. The Norway model contemplates a European Economic Area (Iceland and Liechtenstein are also part of it) where, even in the absence of customs union, third countries can have access to the single market, but includes elements that go against the spirit of Brexit, such as the free movement of people, the maintenance of a financial contribution to the EU cohesion fund, and, above all, the acceptance of EU legislation relevant for the circulation of goods and services (acquis communautaire), without any possibility of participating in the decision-making process. The Swiss model, based on a series of ad hoc bilateral agreements, and the Ukraine model (an association agreement based on a free trade area) also provide for a sort of participation in the European domestic market. The Canadian model, as expressed by the Canada-EU Trade Agreement (CETA) has downsides concerning the lack of harmonization of technical and health regulations and, above all, is very cautious when it comes to the liberalization of trade in services, which is very important for the United Kingdom. The latter has also proposed other models, which have been largely rejected by the EU, such as the proposal of agreements aimed at strengthening customs cooperation, or the principle according to which there should be mutual recognition of the regulations existing in the two entities if inspired by the same results, which would be difficult to implement in the absence of common institutions and courts that can resolve disputes.
 
Finally, there is the problem of commercial relations with non-EU countries, regulated today by a series of trade agreements negotiated and concluded by the EU on behalf of member states: by leaving the EU, these agreements will become null and void for Great Britain. The first diplomatic steps taken by British in view of future agreements with non-EU countries have yet to provide positive results. In conclusion, it is clear that merely identifying the legal model that will regulate future EU-UK commercial relations is going to be hard work; and it will be even more complex to negotiate the technical and legal terms of Brexit and, especially, make them work in practice.