EU Free Trade Agreement on services critical for UK
28 Mar 2017
LBS economist points to negotiation priorities as PM triggers Article 50
Services account for nearly four fifths of the UK economy and should be among the Prime Minister’s top priorities now Article 50 has been triggered starting the clock on the UK’s exit from the EU, a London Business School economist has said.
Linda Yueh, Adjunct Professor of Economics, London Business School made the remarks writing earlier today in Forbes.
“Prime Minister May wants the UK to negotiate its own trade deals, so that excludes being part of the EU Customs Union which requires members to have a common external tariff with the rest of the world,” Yueh said.
But with financial and other services such a substantial pillar of the UK economy, a separate EU Free Trade Agreement (FTA) on services is critical, Yueh believes.
“Services account for nearly four fifths of the UK economy and Britain is the world’s second largest exporter of services,” Yueh said.
“That will require a separate agreement since Customs Union only covers goods, so the Prime Minister will have to negotiate a Free Trade Agreement (FTA) with the EU to determine what access the services sector will have to the European Single Market,” Yueh added.
There are few FTAs that comprehensively cover services – a hugely important but complicated area since non-trade barriers like standards are more relevant here than tariffs and customs arrangements. In fact, as Yueh points out, the most advanced FTA, the EU Single Market, is undergoing continuing liberalisation of the services market, so it is likely to take some time to craft such an agreement.
The formal notification delivered to Donald Tusk today officially starts the clock on the UK’s two-year negotiating window. But, as Yueh notes, if all 28 nations agree more time is needed to negotiate critical trade deals, this could still yet be extended. Or a transitional period could be implemented. That card is still on the table. And either would be better than a “cliff edge”, Yueh says.