Sixteen ways to fix Brexit

Brexit is damaging growth. But there ways to make it better.

Last week was the fifth anniversary of Britain leaving the European Union. And I don't think anyone can say that it's gone especially well. So, the Business and Trade Committee took itself off to Brussels to work out how we need to reset our relationship with the EU so that our economy can grow faster.

All in all, we think Brexit has cost about 4 to 5% of our economic output. That is a really big hit. So, we spent time with the European Commission, with our counterparts in the European Parliament, and had talks with British and European businesses in the British Ambassador’s Residence before then stopping off in Geneva to talk to the World Trade Organization. What struck me is that there are at least 16 different ways in which we can build a much closer relationship with our friends and allies in the EU.

Let's remember that at the time of Brexit, the world was a very different place. There was perhaps some room for confidence in the UK being able to sign free trade agreements around the world. The world looks very different now. Donald Trump's arrival back in the White House means that he's now putting tariffs on friends, allies, and enemies alike. We now have a second invasion of Ukraine by Russia; we've got multiplying difficulties with China. So, the world is frankly a lot more dangerous than it was at the time of Brexit. And that means that we've probably got to do a heck of a lot more to draw much closer to our allies in Europe.

Now, because the Government has set out its red lines: no return to free movement, no joining the single market and no customs union, the relationship that we can put back together is going to be quite limited. And that means there's going to be a limited impact of a reset with Europe on economic growth. But we can make progress. We found that there are probably 16 different ways in which we can tighten that relationship with Europe in a way that is good for our country and good for our economy.

Number 1 is security. The world has got to start spending more on military defence. We've got to spend more on European military defence and we've got to make sure that those contracts are actually going to companies that are employing people here in the UK. So, tightening up our defence alliances and coordinating our defence spending with Europe is probably quite a good idea.

We’ve also got to help each other guard our critical national infrastructure. We're all linked by cables, whether those are undersea power cables or undersea data cables. Lots of those transatlantic cables land on the continental shelf just off the west of Ireland. But they're vulnerable to Russian attack at the moment. And so, for a country like ours with a powerful navy, it's important that we're coordinating the safeguarding of our critical national infrastructure in the future.

The 3rd big area of cooperation is economic security when it comes to China. We already screen investments from China, but we don't really screen exports terribly well. And we don't do that in a way that is coordinated with Europe. So, the 3rd big area of cooperation is coordinating our economic security regime and also probably tightening our relationship when it comes to safeguards against China dumping products in Europe and the UK that have been made with unfair subsidies. It’s important that we work together to try and build a level playing field with China.

The 4th big area is then in the whole field of home affairs, policing and basically the business of keeping each other safe. We must ensure that we're sharing intelligence much more effectively than we do today, not least because Europe and the UK has a shared interest in smashing the gangs that profit from the human misery that is illegal human trafficking.

The 5th area of cooperation is simply honouring the rights that we granted for EU citizens who are still living in the UK. Ultimately, if we want a deeper relationship with Europe in the future, Europe does need to trust that we're going to honour the agreement that we put in place. There were concerns that we heard in Brussels about whether we're doing that at the moment, and we've got to put those doubts to rest.

The 6th area of cooperation is actually in providing our young people with the chance to visit Europe and to allow young Europeans to visit the UK. This has been called a youth experience scheme, but it's basically giving our young people the chance to learn about our common European history. If you think about the French exchanges that you might have gone on as a kid – it’s really difficult to arrange those today and we’ve got to make it much, much easier. I think it can be done in a way that’s sensibly managed. We have just got to make sure that it's specific to a particular age cohort, we’ve got to make sure that it's visa-based, and we've got to make sure it's limited for a fixed period of time so that it doesn't drive up the net migration numbers.

The 7th area of cooperation is full implementation of the Windsor framework. These are the special arrangements that help ensure that there is no hard border between Northern Ireland and Ireland. At the moment, we haven't fully implemented the promises that we made when we signed the Windsor framework, and this is a big matter of trust not only for the people of Ireland but across the European Union as well. So once again, if we’re to get a deeper relationship with Europe, it’s really important that we're seen as a country that honours its bargains. Full implementation of the Windsor framework is one of the ways in which we do that.

The 8th area of cooperation is around data. Many people will have heard of the GDPR Act. It's one of the things that ensures that even though there's not free movement of people, there is free movement of data between the UK and Europe. That is something that is incredibly important to us because we are such a brilliant services economy, and we export a lot of services digitally. If we can't move data backwards and forwards, between the UK and the EU, that trade is going to be hurt badly. The current data adequacy agreement that we have in place with the European Union runs out very soon. It is vital for many British jobs that we get that renewed for the future.

The 9th area of cooperation is then what they call an SPS deal. It's about ensuring that it's much easier for us to export and to import agrifoods. At the moment, there are very limited arrangements, and it means that there are lots and lots of checks that need to take place on either side of the border. It is a red tape nightmare. This is one of the areas where the government has said it wants to strike a much closer relationship with Europe. It's super important that we get that done. At the moment, it's our smaller exporters that have been hit hardest by the multiplication of red tape when it comes to the agrifood sector. We need a deeper relationship for the future. What that may mean is a lot of what’s called dynamic alignment around standards. That’s something that people are a bit wary of. But frankly, we just need to be pragmatic about this. And some of the arrangements that we’ve put in place for the Windsor framework could actually help us get this sorted. It’s good for business and it's good for small businesses in particular.

The 10th area of co-operation is BTOM, the border target operating model. We’re about to stand up a whole load of new checks at our borders for all the imports that are coming in. That is a potential nightmare for traders. So doing things like accelerating trusted trader schemes, or digitalising the way customs information is exchanged, frankly, that is going to make things an awful lot easier for companies in Britain and indeed companies in Europe. It will be good for trade.

The 11th area of cooperation is around fisheries. When we did the Brexit deal, about 25% of the EU wide quota for fishing in our waters was transferred back to the UK. But that deal runs out very soon. It is really important – although it is difficult – that we actually start thinking about this quickly because it will be one of the things that could be a deal breaker if we don't get it fixed. There is going to be a lot of tough talk on either side of this but unless we get this fixed, we're not going to get a reset with the EU.

The 12th area of cooperation is just thinking a bit more ambitiously about where we do align our regulations with Europe. In the agrifood sector, for example, it makes a lot of sense for us to align things very, very closely. But what we heard in Brussels from British businesses is that that alignment would make an awful lot of sense in other sectors, too. Financial services is a really good example. We’re just about to sign a very ambitious deal with the Swiss called the Bern Financial Services Agreement. It basically means that we're going to trust the Swiss regulator to get things right. In sectors like financial services, where we've got real strengths as well as really strong regulators, it’s important that we do as much as we can to align standards to make that trade flow with Europe much, much easier. Another way in which we can do that is by rejoining the PEM convention. This governs the rules of origin, which basically allows you to bring down tariffs if you've got a certain amount of content from Europe or our neighbours, in the product. Again, it's something that would just make trade flows between the UK and Europe far, far easier.

The 13th area of cooperation is in new sectors like technology and artificial intelligence. Here are sectors where there could be some advantages in doing things a little bit differently to Europe, which is frankly overregulating new industries. What would make sense is not regulatory alignment but regulatory coordination. Let’s make sure that we know what the other is doing so that again, trade between the UK and Europe can be as smooth as possible. We heard loud and clear from the tech sector, based in Brussels but representing British business, that this is an area where we do need some freedom to do things on our own terms. But if we don't have regulatory alignment, regulatory cooperation is something that we should be trying for.

The 14th area of cooperation is in energy. This is one of the biggest opportunities for closer ties between the UK and the EU. The reason? We share the North Sea and the North Sea could well become one of the world’s biggest power plants. We’ve got real strength in offshore wind, so working together to make sure that we are building a big offshore wind system in the North Sea is something that's a of real interest to both the UK and Europe. However, at the moment, our electricity trading systems aren’t wired together in the way that they could be, and we've got to fix that to make sure the trade in green energy is much easier in the future. One of the biggest issues in this space is what’s called CBAM, the carbon border adjustment mechanism. This is something that both the EU and the UK is introducing but two different versions. It basically means that we will be charging a kind of tariff on products coming into our market if they've got too much carbon in them. We don't want to decarbonise our own industry and then just import a load of carbon from elsewhere. The problem is that the carbon price in Britain is much lower than it is in Europe. What that will mean is that if we're exporting products containing carbon to Europe, we’ll basically be hit by a new tariff war. So joining these systems up would make an awful lot of sense in ensuring that we’re not shooting ourselves in the foot and we're doing what we can together to decarbonise our economies.

The 15th area of cooperation is in working together to grow international trade. What was really striking at the World Trade Organization is seeing the way in which the UK is now a real leader on trade policy and seeing the number of countries around the world that are still interested in using the WTO to help advance that trade. About 80% of goods that are traded around the world today are still traded under WTO rules. So making sure the UK and Europe are working together at the WTO to advance free trade and fair trade is something that's really important. Part of the WTO is gridlocked at the moment, because the Americans won't appoint judges to the appeal court at the WTO. That's slowing things down. Some of the other countries have set up a different way of hearing appeals called MPIA. It's something that Europe is already a member of and frankly, there’s a real interest in the UK joining that arrangement so that there's a coalition of the willing working together to help free and fair trade in the world advance.

The 16th area of cooperation is dialogue. So at the moment, we have a whole load of working groups that we use to talk about difficult things between the UK and Europe, but frankly, they’re going a little bit slowly. So making sure that the Prime Minister, Keir Starmer and the President of the EU Commission, Mrs Von der Leyen, actually sit down once or twice a year to just talk about the things that are getting stuck in negotiations would be a really, really good idea. It would just mean that all the niggles that stand in the way and snare up and slow down the talks that go on, week in, week out in Brussels are cleared up a lot, lot faster.

So there we are. There are 16 ways in which the UK EU reset could deepen relationships five years on from Brexit. It’s not going to recover the 4 to 5% of our economic growth that we have lost because of Brexit, but it could help our economy grow an awful lot faster in the future. This is something that the Business and Trade Committee is going to be looking at in some depth. I hope it's going to be something that we publish a report on fairly soon. So I'd love to know your views about some of the things that you think should be on the table. If you've liked this video, please like it and share it with your friends and neighbours. And of course, if you'd like these updates, make sure that you subscribe.