IPPR proposes creation of ‘shared market’ between the UK and EU
New model would aim to keep benefits of single market while allowing divergence from EU rules over time
The Government should strike a new relationship between the UK and the EU that secures the benefits of the single market through an agreement on regulatory alignment, according to a new report from IPPR, the progressive policy think tank.
The new model is based on the UK and the EU sharing each other’s markets in an ambitious new partnership. It would see the UK and EU continuing the regulatory alignment that exists today and the formation of a new comprehensive customs union that directly mirrors the existing customs union—and so allows tariff-free trade and for the UK to benefit from EU trade deals and for the EU to benefit from the scale of the UK’s economy in future trade negotiations.
As a result, the proposal would mean no interruption to the UK’s trade with the EU and avoid a hard border between Northern Ireland and the Republic of Ireland. It is more ambitious than demands of Remain campaigners for the UK to enter the EEA, since the shared market would include agriculture, fisheries and a customs union, and thereby eliminate the need for customs and compliance checks that exist between EEA countries and the EU, such as at the border between Norway and Sweden, where there were 229,000 customs checks in 2016 alone.
The shared market approach addresses a key demand from Leave campaigners on national sovereignty. It does this by allowing for the possibility of divergence over time—with clear and proportionate consequences for doing so—through a mechanism called “reverse accession”. Just as the single market is progressively unlocked for Ukraine as it aligns its regulatory regime with the EU, if the UK took the decision to diverge, it would lose a proportionate level of its preferential trading arrangement with the EU.
It also addresses the jurisdiction of the European Court of Justice, which would cease after the transition. In the shared market model, enforcement and adjudication would be carried out by a new UK surveillance authority and UK Court of Justice, which would include representatives from both the UK and the EU.
The shared market would include alignment on regulations governing goods, services, and capital as well as measures such as state aid, employment rights, environmental protections, gender equality and anti-discrimination legislation. The report argues that there is a precedent for the EU compromising on freedom of movement for third countries. The free movement of people does not apply to the DCFTA with Ukraine, and the EU has agreed compromises on labour mobility for its agreements with Switzerland and Liechtenstein. The report says that similar compromises could and should be struck with the UK.
The proposal is for a dynamic arrangement. As the EU and UK updated their regulations, they would need to ensure continuing alignment. If divergence were to occur, a “declaration of incompatibility” would be issued giving the UK and EU 6 months to agree a plan to bring their regulations back into alignment before proportionate consequences would be triggered.
As part of the agreement, the UK would make a continued financial contribution to the EU budget and co-invest with EU partners in projects on the continent, recognising the benefits that it would receive from these investments.
Crucially, the proposed deal uses mechanisms for which there are precedents in other EU agreements:
Regulatory alignment leading to single market treatment included in the Deep and Comprehensive Free Trade Agreement with Ukraine
Independent enforcement and dispute resolution mechanisms found in the EEA agreement with the EFTA Court
Compromises on freedom of movement are included in the agreements with other third countries such as Switzerland and Liechtenstein
The report argues that the shared market model would respect the vote to leave, take into account the priorities of the public, and at the same time protect jobs and living standards. IPPR will put the report to Brexit Secretary David Davis at a meeting on 19th December.
IPPR also calls for a transition arrangement based on full participation in the single market, including abiding by all elements of the single market acquis, in order to give the UK and the EU sufficient time to agree the future long-term partnership.
It argues that a ‘no deal’ scenario – or a thin trade deal that represents a significant economic rupture between the UK and the EU – would be deeply damaging for both the UK and the EU’s economies post-Brexit.
Tom Kibasi, Director of the IPPR and an author of the report, said:
"The shared market is a practical proposal that honours the referendum result while securing our economic interests. It is neither remaining in the EU nor crashing out in a hard Brexit.
This isn't a proposal for the 15% of extremists on either side: it is a proposal for the 70% of people who want a sensible deal, built on precedents, that would work for the whole country."
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The new IPPR report The Shared Market: a new proposal for a future partnership between the UK and the EU will be available at http://www.ippr.org/research/publications/the-shared-market from 06.00 Wednesday 13th December.
IPPR aims to influence policy in the present and reinvent progressive politics in the future, and is dedicated to the better country that Britain can be through progressive policy and politics. With nearly 60 staff across four offices throughout the UK, IPPR is Britain’s only national think tank with a truly national presence. Our independent research covers the economy, work, skills, transport, democracy, the environment, education, energy, migration and healthcare among many other areas.