Filenews 13 September 2024
The election of the new UK government has placed renewed emphasis on strengthening the country's troubled relationship with the European Union. There are frequent ministerial visits, a climate of kindness and plans for bilateral agreements and broader reforms.
All this is welcome. Britain's economy is smaller than it would have been if it had remained in the EU – businesses face more difficulties and fewer opportunities. But while British Prime Minister Keir Starmer has acknowledged the importance of improving relations with Britain's biggest trading partner, a better plan will be needed to make it happen.
Starmer's predecessor, Rishi Sunak, put UK-EU relations on a friendlier footing, including resolving the impasse over trade arrangements for Northern Ireland. While Starmer is right to want to build on this, his approach lacks the ambition needed to put the UK economy on a path to stronger growth.
His party has already ruled out measures that would be a real game-changer – reintegration into the EU's single market or customs union. Although a review of the post-Brexit arrangement known as the Trade and Cooperation Agreement is expected in 2026, the EU sees this as a technical exercise rather than an opportunity for revision.
Most measures to expand the existing trade relationshipwould require an agreement between the 27 governments of EU member states before negotiations can even begin. This is a difficult task, all the more so when the bloc faces a war on its borders, political disagreements and a huge competitiveness gap.
For Brussels, the pain caused by Brexit in the UK is perhaps its only redemptive value: Eurosceptic parties across the continent in particular have withdrawn any mention of leaving the EU.
Even so, there are several areas in which, with a little political will and creative thinking, both sides could make real progress.
Some "victories" are very close. The expansion of cooperation in energy transmission and trading is one of them. Linking the UK's emissions trading plans to EU plans would ensure a level playing field and reduce costs for exporters. It would also give British businesses access to a much larger carbon market.
Facilitating access for EU young people to study and work in the UK and simplifying visa requirements should also be made possible. Labour could go even further and rejoin the EU's Erasmus student exchange programme, redressing one of the great injustices that Brexit has imposed on UK youth. Making it easier for business professionals, including touring musicians, to travel and work also makes sense.
Another objective should be to ease non-tariff barriers to trade, including border controls on food and agricultural products, certificates of conformity and enforcement of rules of origin. These changes will certainly prove more difficult.
However, these agreements could form the basis for bolder reforms. Both sides face a common set of challenges: growing security risks, chronically low productivity and strained public finances. Both need to increase defense spending. Both need to attract higher levels of investment and encourage innovation, even in the face of an ageing population and backlash over migration.
Given the scale of these challenges, improvements to trade rules may seem insignificant. But they are still a big step in the right direction.
Performance – Editing: Stathis Ketitzian
The Bloomberg editorial team
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