May’s New Brexit Dream Amounts to ‘Turkey Plus’

(Bloomberg Opinion) -- The full U.K. government white paper on its proposed future relationship with Europe is due to be published this week. But the framework document that came out of the Cabinet meeting at Chequers, the prime minister’s country residence, is an unsatisfactory answer on several levels to the EU’s repeated demands for specific proposals. 

In effect, Prime Minister Theresa May suggests cloning key EU institutions specifically for the U.K.’s sake. She wants a “common rule book for all goods including agri-food” which can only remain harmonized if some common U.K.-EU structure works constantly on keeping the two countries’ standards and trade rules from diverging — but she doesn’t want the European Commission to do it, as it has done for decades. She wants a “joint committee” to resolve disputes about the application of the “common rule book” — but she doesn’t want the European Court of Justice to play that role. 

Reproducing the EU’s internal practices for an outside trade partner only makes limited sense. The EU’s customs union with Turkey is overseen by an Association Council formed by the parties, the kind of joint body that the Chequers document appears to envision. But under this union’s rules, Turkish goods (and just the non-agricultural ones at that) only circulate freely in the EU if they comply with EU standards, and it’s the EU that sets tariffs and other trade barriers. Turkey doesn’t aspire to draft the standards jointly with the EU; all it can get is a transition period for EU rules it cannot immediately introduce into its legal framework. Turkey also recognizes the ECJ’s jurisdiction in interpreting the customs union’s rules, if not in enforcing them.

In a normal situation, negotiations could lead to U.K. acceptance of the Turkish arrangement with some small modifications. But the situation isn’t normal. Opportunities for a compromise in line with previous EU practice are severely limited on the U.K. side. The idea of the U.K. as a rule-taker is anathema to Brexiters, not least because it would reduce scope for trade deals with countries outside the EU — at least the ones that already have deals with the EU.

If, however, the U.K. isn’t a rule taker, the EU will need to accept outside participation in the drafting of its internal rules — something it doesn’t do for any trade partner.

May appears to believe this basic contradiction can be resolved for goods coming from outside the U.K.-EU customs union if the U.K. promises to apply its own tariffs and standards to imports meant for its domestic consumption and EU tariffs and standards to imports targeting the EU. Within a customs union, however, such an arrangement is extremely difficult to enforce, as Russia found out when Belarus, its customs union partner, began “exporting” European food banned under Russia’s sanctions policy. Four years after Russia banned the imports of a long list of agricultural products from the EU, the practice continues, and Russian and Belorussian officials keep squabbling about it.

Unless the U.K. specifically agrees to follow EU standards and set the same tariffs as the EU for external trade, the way Turkey does, its proposal is likely to be met with skepticism from the EU. May and her negotiators have been told again and again that the new customs plan has to be workable. They have also been told that the U.K. can’t “cherry pick” elements of the single market. The government hasn’t taken much heed of either red line. On Saturday, May called on the EU to “get serious” and discuss the deal she’s offering, as if it’s the EU that has wasted all this time before coming up with a rudimentary proposal. That’s not going to endear her to anyone in Brussels, Berlin or Paris.

The best way for the U.K. to enjoy the benefits of free trade with the rest of the EU is, as ever, to remain in the EU. Now, however, May’s government appears to be hoping for a much-improved version of Turkey’s limited deal, a “Turkey Plus” arrangement. If the U.K. somehow manages to achieve a better version of the customs union, Turkey is likely to demand better terms, too — and so are other close EU partners such as Norway and Switzerland, which wouldn’t mind a say in setting EU rules, either.

Once the U.K. is in a position to resume negotiations, the EU will push it toward the current Turkish scenario rather than a “Turkey Plus” one. It’s an unattractive replacement for full EU membership, though, in terms of both sovereignty and economic benefits, but it’s likely the only realistic alternative to a cliff-edge Brexit remaining today.

It’s time for the U.K. politicians and public to realize how the choice has narrowed — and to vote again on exiting the EU. Surely even many Brexiters understand now that they didn’t realize what they were getting into when they voted in 2016. Those of them who don’t care about the economic consequences should get a chance to confirm it by casting their ballots anew.

©2018 Bloomberg L.P.