The UK aspires to a Brexit deal that allows access to the Single Market for services.
Access to Services
“I do not believe the strength of this cooperation needs change because we are leaving the European Union, so long as it is understood that this involves working together, not simply rule taking. These principles can be applied to services trade too,” David Davies wrote to the Daily Telegraph on Tuesday.
The statement of the Brexit minister contradicts repeated warnings by the German Chancellor, Angela Merkel, reiterating that any Brexit agreement has to be inferior to EU membership.
Canada or Norway
David Davies belongs to hardline Leave campaigners, who express a preference for the Canadian mould of relations to the European Union. That precludes access to the Single Market for Services, although Davies has called for a “CEFTA plus” agreement, which would include access to the financial services market.
That has repeatedly been dismissed by Brussels as “cherry picking,” with trade experts recalling that any concession to the UK would trigger equivalent demands by all major trading partners.
Finance minister Philip Hammond and Interior Minister Amber Rudd envision a post-Brexit period that will resemble the status quo, modelled after the relationship with Norway.
A synthesis between hard and soft Brexit – or the Canadian and the Norwegian models – is expected to be presented by Theresa May in March.
While there is no apparent agreement model for Brexit, there is an emerging consensus over the need for a “transitional period.”
Theresa May formally requested a transitional period in her Florence speech. Brussels has willingly conceded a two-year transitional period until the end of 2020.
Status quo maintenance comes with the understanding of continued contributions to the EU budget and freedom of movement, two elements that are a non-starter for hardline Leave campaigners such as Trade Secretary Liam Fox and Foreign Minister Boris Johnson.
While the UK government is deeply divided, the European Commission is planning a state-by-state consultation to consolidate a Brexit negotiation agenda. By March, Michel Barnier should be ready to negotiate with a single mandate by the 27, unless there is a divergence of interests.