The Directorate General for Internal policies at the European Commission has commissioned a report which examined the challenges that Brexit will pose to the future of trade in services between the EU and the UK.

The report examined a variety of existing arrangements/models that the EU and UK could use as a blueprint in order to inform their future relationship on trade in services.

More specifically, the report examined six models:

  • UK remains part of the EEA (EEA model)
  • UK and EU strike a deal that is similar to the FTA between EU and Canada (CETA model)
  • UK and EU strike a deal that is similar to the FTA between EU and Korea (Korea model)
  • UK and EU strike a deal that is similar to the EU-Ukraine Association Agreement (Ukraine model)
  • UK remains part of the Customs Union (Turkey model)
  • UK and EU do not strike an agreement and trade in services happens under GATS and the WTO system (WTO model)

Conclusions

The report concludes that the EEA model would be the perfect solution as it would result in no disruption in trade in services between UK and EU, as the substance of EEA law is largely aligned to the EU single market law.

However, the report also concludes that all other models should not serve as blueprints for future EU-UK relations, as they do not go far enough in making trade in services as frictionless as possible. This is because these models usually do not have a comprehensive scope (in terms of which sectors are covered) or allow common standard setting and although they include rules on market access and national treatment, those rules are not directly applicable.

Finally, the report concludes that the worst possible scenario for trade in services would clearly be a Brexit without agreement as then the relation between the UK and the EU in trade in services would be governed by GATS (WTO model). This is because GATS is a rather weak framework that does not allow for passporting and leaves numerous uncertainties.