Wolf and Sandbu on Brexit countdown
Theresa May has triggered Article 50, officially starting the two-year process of the UK leaving the EU. The FT’s chief economics commentator Martin Wolf and economics editorial writer Martin Sandbu discuss what kind of deal can be agreed in those two years.
Filmed by Nicola Stansfield. Produced by Daniel Garrahan
Theresa May has sent her letter notifying the European Council of the UK's intention to withdraw from the European Union, according to Article 50 of the EU treaties. And that means we've started a process of two years, Martin, from the day she sent the letter, and it was received by Donald Tusk, the European Council president. So everything now is about what sort of exit deal, transition to the future, and new settlement for a new relationship can actually be agreed in those two years. And I think we should start with the general question, what can we hope to see happen in those two years that are set aside for negotiation.
There are three huge things that have to happen. We have to agree to a divorce. If we don't-- and obviously, I'm assuming we want that. Because we're not going to have a warm relationship, if that breaks down. That's obvious.
A crashing out possibility. We don't want that.
The divorce closes off the past. So we will have to agree money. We'll have to agree on what happens to the status in many different ways of EU people in the UK, and UK people in the EU. And that includes, of course, businesses as well. But it's mostly about people. And that's very complicated, and then there are a whole raft of institutions whose future we have to determine, some that are based here, and some of which we are part, and which matter to us like EURAT.
So that's one thing, then we have to agree a framework at least, ideally we would like to agree the whole thing of the future trading relationship, which is going to be tailor-made. It won't be staying in the single European economic area, therefore in the single market in the Customs Union. It's going to be something specific to us. And we're going to have to agree a transition. It's got to be finished by the end of 2018. There's a big question about when it will really start. Will it really start now? Or will it only start when the German election is over? If we're optimistic, they can really make a lot of progress, in which case they've got a year and a half to agree all this. I think it's a very big ask to agree all this.
The biggest question marks, I think, are around whether it's possible to agree on what the future relationship at least will look like, if not agreeing the deal itself in two years. And the reason why I think, probably, I am a bit more optimistic than you is because, for all the words of seeking an ambitious free trade agreement, actually the UK government has decided to seek something that I find very unambitious.
The UK government has decided to leave the single market, to leave the Customs Union. So at least on the economic side, that leaves relatively little, with one big exception. On the good side, it basically means, well, let's try to agree to not reintroduce tariffs that have been taken down between European countries decades ago. So there's tariff-free trade in all goods now. Let's try to keep that. Services are much harder. That will be, I think, the very difficult point. Because, of course, the UK has an important services export sector, finance, and other things. But on goods, I think, it's all been well that ambitious, actually. It's much worse than the current trading relationship. But for that reason, there isn't all that much to agree. This is what makes me a relative optimist. That, if the UK could settle for a standard free trade agreement in goods only, I think it's there for the taking.
There are, I think, two other difficulties, which you've hinted at. One where we clearly agree that the services trade is going to be about regulation, first and foremost. And what the British government wants there-- and actually it wants the same thing in goods. I'm going to add that. Because there are regulatory questions in goods. How do we certify that a UK good in the new system fits into the EU regulatory framework for the single market? We want that because we want it to be sold into the single market very, very easily. So British companies will need a process, which is very simple, very efficient to certify that they're meeting EU regulations, while we are going to insist we're not under the ECJ.
That's going to be quite tricky, the European Court of Justice. So I think the regulatory questions and the that the government puts it under the label of enhanced equivalents are going to be quite difficult. Not at the beginning, because at the beginning, We've got exactly the same regulations. But presumably sovereignty means they're going to diverge in future. So how in future-- and that's part of the long-term deal-- are we going to establish equivalence, not just for services, but also for goods? Do they meet EU standards? I think that's going to be quite tricky.