Thursday 23 January 2020

Post-Brexit UK trade deal in a year 'impossible', new EU chief warns

Lack of clarity on services trade may cause wide-ranging economic disruption, British Irish Chamber indicates

Ursula von der Leyen heads the European Commission (Jean-Francois Badias/AP)
Ursula von der Leyen heads the European Commission (Jean-Francois Badias/AP)

David Chance

A post-Brexit trade deal covering services is needed to ensure basic continuity in an economy where all concrete poured carries a UK kitemark, all Irish actuaries are certified in the UK and the State's service sector exports exceed the trade in goods, the British Irish Chamber of Commerce has warned.

The stark warning was delivered as the new European Commission president, Ursula von der Leyen, pictured, yesterday said it would be "impossible" for Britain's Boris Johnson to meet his pledge to get a trade deal by the end of this year.

While attention has been focused on the plight of Irish farmers and food exporters trading across the Border and the Irish Sea, services are now a more significant portion of the overall economy.

The State runs a €10.45bn surplus in its services trade with the UK, compared with a €3.86bn deficit in the goods trade. The overall level of trade in services is €46bn, far more than the €36bn in goods.

"The elephant in the room is how we deal with services," said Peter O'Shea, the chamber's president. "The UK is an important services market for most EU member states, including Ireland, which exports more services to the UK than anywhere else in the world."

The trade in services spans everything from banking and insurance to recognising industry standards and professional qualifications, he added.

However, ahead of a first meeting with the UK prime minister in London yesterday, the initial salvoes fired by Ms Von Der Leyen indicated that the path to a deal would not be easy.

"Without a level playing field on environment, labour, taxation and state aid, you cannot have the highest-quality access to the world's largest single market," she said in a speech at the London School of Economics. "The more divergence there is, the more distant the partnership has to be."

Even leaving aside Mr Johnson's pledge to leave the EU without a deal if one cannot be agreed within the year, there has been no major trade-in-services deal ever struck. An EU-Canada deal took seven years and a proposed US-EU deal simply collapsed. Neither went anywhere near a comprehensive services deal.

Services account for around three quarters of a modern economy's output and employment, and so are even more sensitive than goods and agriculture trade deals.

Despite this, Katie Daughen, head of Brexit policy at the chamber, said there were reasons to be optimistic that a services deal could be struck.

While the UK's shock decision to leave the EU is unprecedented in terms of a country tearing up a close political and trading relationship, Ms Daughen, who authored a report by the chamber on services trade, said that the existing comprehensive agreements can be used as the basis of talks.

"Negotiations should be conducted using a 'negative listing' approach to ensure all services would be covered, unless otherwise stated," she said.

That means instead of the usual trade agreement talks in which negotiators start with a blank sheet of paper and build up, EU-UK talks on services would start with a comprehensive list, from which items would then be deleted.

"It would help promote as broad and in-depth coverage as possible," Ms Daughen said.

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