Global trade deals will be bigger outside than in the EU, says David Davis

Brexit minister says UK can negotiate tariff-free access to EU single market and article 50 should not be triggered until end of year

David Davis, the new minister for Brexit, believes it will be possible to secure bilateral trade deals with the rest of the world that are larger than the value of the EU single market within two years. He also believes that tariff-free access to the EU single market can be negotiated for the UK because it is in the self-interest of the UK, and the EU. His preferred model is the recently struck Canadian comprehensive and economic trade agreement (Ceta).

Davis, who was appointed on Wednesday evening in the first round of cabinet appointments to Theresa May’s government, thinks that article 50, the formal process for negotiating the UK’s exit from the EU, should not be triggered until the end of the year.

Discussing the balance of negotiating power between the UK and the EU in the event of Brexit, Davis said in February: “The pressure from European companies for a free trade deal between the UK and the remaining members of the European Union would be huge.

“We have far more to gain than we have to lose, while the opposite is true for the EU. People have spoken, wrongly, about 3.3 million British jobs being ‘linked’ to our membership of the EU. Well there are over 5 million jobs on the continent that are linked to trade with Britain.

“The first few months may be hysterical, but the leaders of France, Germany, Spain, Italy, Poland and the rest know that the way to lose elections is to destroy your own industries. That is a powerful advantage for us.”

Davis claims that even if the UK were unable to reach a deal, and the trade relationship between the EU and the UK reverted to the terms of the World Trade Organisation, the tariff barriers are relatively small and “almost certainly negotiable down to zero”.

His ambitions, set out in an article for Conservative Home and other lectures, are likely to be regarded as optimistic by trade experts, and by some civil servants in Whitehall. The UK at present does not have the capacity to negotiate trade deals as such deals have for years been conducted at the EU level. Whitehall is scouring business, the European commission, and friendly world powers for trade specialists.

Davis also appears to be opposed to settling for a halfway house as an interim measure in which Britain joins the EEA in the same way as Norway so allowing access to the single market but on condition it retains free movement of labour and capital.

Davis wrote: “The idea that we have to fit our future into some Procrustean bed created for far smaller countries is nonsense.”

But he does state it might be negotiable saying “it does not work for the UK as it stands”. He added: “To make it viable it would need an arbitration court (not the European court of justice), a dispute resolution procedure, and a number of other institutional changes. It would be possible to design and even negotiate such a structure, but it would take much more than two years.”

Instead Davis argues the Swiss option – European Free Trade Association membership plus a host of bilateral treaties – is the best starting place. But he also acknowledges that in Switzerland problems have developed due to the EU insistence on Switzerland accepting free movement.

He says instead the best model is the Canadian Ceta deal that the EU has just struck. “It eliminates all customs duties, which the EU website excitedly describes as worth €470m (£395m) a year to EU business. A similar deal with Britain would save it five times that on cars alone. This would be a perfectly good starting point for our discussions with the commission.”

He claims the balance of advantage lies with the UK in the negotiations. “If Europe wants to stick to trading on a WTO basis, they are very badly positioned to do so. Everyone knows that the balance of trade is in Europe’s favour.

“We currently import £59bn more from Europe than we export. After Brexit we would be Europe’s largest export market, worth £289bn in 2014, larger than China.”

In his Conservative Home article written only a fortnight ago, he conceded the deals with the EU would be complex, but if the EU slapped tariffs on the UK, a Conservative government could retaliate by putting tariffs on EU products and use the revenue to invest in British industry.

He also insists he does not see independence from the EU as an excuse to worsen working conditions by deregulating labour laws beyond their current state.

He claims the single market has held back UK productivity: “In the single market period our exports grew if anything slower than our OECD [Organisation for Economic Cooperation and Development] competitors, despite our membership. During the single market period, despite all the costs incurred, the treaties signed, the regulations implemented, despite all the controversies of the European project, our performance in selling to Europe was worse than our competitors outside the EU.”

The first bilateral trade deals should be struck with the US, China, Canada and Hong Kong, followed by Australia, India, and South Korea, he said.

He also favours institutional changes in Whitehall to secure these deals. He writes: “The funding would be available to set up an office in every major commercial centre and capital, completely separate from the Foreign Office, staffed with experts who know the language, the customs and the regulations, and are on hand to help British businesses develop links in the country.”


Patrick Wintour Diplomatic editor

The GuardianTramp

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