Brexit and services: unicorn-spotting is a popular sport, but nothing beats the single market
When the UK Prime Minister presented her vision for the “deepest and broadest” possible trade agreement with the EU earlier this month, she did not shy away from the single largest hurdle in the Brexit negotiations to come: services. Theresa May admitted that the UK is asking for far more than the EU has ever given to any other trading partner.
Amongst the dozens of trade agreements which include services negotiated by the EU, the farthest reaching is undoubtedly the Comprehensive Economic and Trade Agreement with Canada (CETA). Only recently concluded, it represents the most up to date template for the European Commission approach. Even negotiations for a plurilateral Trade in Services Agreement (TiSA) amongst the WTO’s self-styled “very good friends of services” country group, have not gone further. It is therefore well worth, as many have done, considering CETA as an example of things to come if the UK goes down the free trade deal route post-Brexit as May advocates.
CETA’s scope is broad, covering sectors that have traditionally been excluded from trade agreements, such as financial services (albeit in a limited way), telecommunications, energy and maritime transport, as well as postal and express delivery services. It contains unprecedented provisions on the temporary movement of professionals and establishes a framework for the mutual recognition of professional qualifications for regulated professions. It also removes some limitations on citizenship and residency conditions for professional services to operate across borders.
But many restrictions remain, in the form of limitations or reservations, excluding specific mode of supplies (e.g. through the commercial presence of foreign operators on the domestic market) or preserving national legislation (e.g. minimum professional qualifications or public service obligations).
Within the EU, most of these restrictions continue to be set nationally. Therefore, the situation differs from one member state to another. For instance, in Austria, Germany or France, legal service providers are dependent on full admission to the Bar - which is further limited to nationals of EEA countries and Switzerland - and legal residency, with cross border supply of legal services limited to public international law. No such restriction applies to the UK with respect to Canada, illustrating continued differences when it comes to services liberalisation.
Certainly, CETA liberalises trade in services to a greater extent between Canada and the EU. But market access is neither complete nor unconditional. In other words, CETA may be “deep and broad” but it is still far shallower and narrower than the EU single market.
CETA may be the EU’s template, but it is not the UK Prime Minister’s. In her Mansion House speech, she called for a deal in which there would be no discrimination of EU service providers in the UK and vice-versa. She outlined a labour mobility framework that would enable UK professionals to provide services to clients in the EU in person or online. She proposed the full mutual recognition of professional qualifications and she suggested a tight regulatory cooperation mechanism to maintain similar regulations over time.
In reality this is an unlikely outcome no matter how ‘bespoke’ the deal is, as May has effectively argued for the objectives of the EU single market, launched in 1993 but still incomplete.
If the UK leaves the single market, realistically it might achieve some areas of non-discrimination, but not non-discrimination across the board. Achievements might include some rules on labour mobility for professionals, but not unfettered mobility, which would be free movement (a concept opposed by May herself). mutual recognition of some qualifications is also possible, but not mutual recognition for all. Again, the UK can achieve some regulatory cooperation, but not complete convergence.
“Certain aspects of trade in services are intrinsically linked to the single market and therefore our market access in these areas will need to be different”. Following months of denial, this acknowledgment by the Prime Minister is a welcomed first step but it remains a long way from reality.
A bespoke deal is an illusion. The absolute priority for the 27 remaining members of the European Union in the negotiations to come is to preserve the unity of the single market. This has been repeated time and again by representatives of all member states and the EU institutions. This is not a negotiating posture, but a central principle underpinning the EU and its member states’ strategic interests. The UK would act no different if it were on the other side of the negotiating table.
There is another reason why the EU will resist offering a deeper and broader deal than CETA to the UK. CETA contains a “most-favoured nation” clause for services which provides that extra-concessions given to a third country must also be given to Canada, with the EU gaining nothing in return. While this clause is subject to many exemptions (for instance, it does not cover professional qualifications), there are MFN clauses in many other EU FTAs and together they will certainly act as a strong deterrent against Theresa May’s vision.
There are only two options available: concluding a free trade agreement, which cannot be much deeper or broader than CETA, or remaining in the single market. The rest is little more than unicorn-spotting and a distraction when the parties are under tight time constraints.
Jude Kirton-Darling is a Labour Member of the European Parliament for the North East of England. Jude is a member of the International Trade Committee, the Industry, Energy and Research Committee and the Petitions Committee in the European Parliament.