A leading trade expert has rejected attempts to characterise Brexit as a “deal or no deal” negotiation, labelling such rhetoric “not helpful”.
Prime Minister Theresa May will begin the process of EU talks next week by triggering Article 50, and a former trade negotiator has said that debate should be focused on what measures May can secure for transition.
Speaking earlier today at the Institute of Directors, Legatum Institute director of economic policy Shanker Singham said: “I don't think it's an either-or situation. There are going to have to be some interim measures.
“The real question is whether our basket of interim measures a fairly well stocked basket or is it very thin. This is something we can't know at this point because it depends on negotiation, but clearly there will be something in it.”
He added: “The notion that it's either no deal or you have a deal is clearly not helpful in how we proceed.”
Shangham's comments were backed by Hosuk Lee-Makiyama, director of think tank The European Centre for International Political Economy.
Lee-Makiyama said it was not sustainable in either Brussels or London for the UK and the EU to trade on worse terms than those offered to more geographically distant partners like Japan and South Korea.
“There will be a Free Trade Agreement, of one form or another...and there will be a number of transition measures, because there is no such thing as a hard break-up,” he said, adding Brexit talks will be be “completely different” in tone to those of a normal free trade negotiation.
“All politics prefers the status quo,” Lee-Makiyama said. “Status quo in the case of an FTAs...is no agreement. Status quo in Brexit is where we stay in touch, we call each other and, yeah, you can see the kids, and 'Let's try to keep things normal,'” he said.
“In that sense there is an inbuilt agenda in Brussels, in Paris, as well in London to make it a smooth transition.”
However, he also warned the UK would still have to deal with burdensome rules of origin, which determine the national sources of products.
Even in countries that have already agreed free-trade with the EU, Lee-Makiyama estimated roughly half of exports still fall under tariffs because of the time-consuming and resource intensive nature of these requirements.
“The actual utilisation rate of a free trade agreement is less than 50 per cent. Half of the exporters in Korea or Switzerland or Norway where they have crafted these wonderful trade agreements don't use trade agreements. Why? Because it's so damned difficult to prove that your stuff was made in Norway.
“They would rather pay the 25 per cent or 50 per cent duty. It's cheaper and it's faster.”