LORDS

UK needs uniquely comprehensive trade agreement to protect services sectors

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22 March 2017

The EU Internal Market Sub-Committee is today publishing a report on the implications of Brexit for the UK's trade in non-financial services with the EU. This report considers the potential impact of Brexit on trade in five services sectors: professional business services, digital services, creative services, air services, and, tourism, education and health-related travel services.

Background

In December 2016, the EU Committee published Brexit: the options for trade, which evaluated four main models for future UK-EU trade including membership of the European Economic Area (EEA). However, in January 2017, the Prime Minister ruled out membership of the Single Market or EEA and made clear that the UK would pursue a "bold and ambitious" Free Trade Agreement (FTA) with the EU. This report outlines what a 'good' UK-EU FTA would look like for these non-financial services, as well as the implications of trading under World Trade Organization (WTO) rules.

Key Findings

The report calls on the Government to negotiate a FTA that secures market access and specific reciprocal arrangements in a number of areas. The following are examples:

Professional business services

  • A FTA should include significant provisions surrounding the mutual recognition of professional qualifications and regulatory structures. It should also include rights of establishment for all types of UK service providers in the EU and vice versa.

Data protection standards

  • In order to maintain the free flow of data, the UK should aim to secure an adequacy decision from the European Commission that recognises the UK has adequate data protection standards.

Intellectual property

  • Strong protections should be afforded to intellectual property rights, across the creative services sector, such as for registered and unregistered designs.

Aviation

  • UK airlines should be able to fly to any point within the EU and provide intra-EU services, either through full voting membership of the European Common Aviation Area (ECAA), or by means of a comprehensive UK-EU air services agreement. This will allow UK airlines to continue to offer the routes they fly today.

Trading under WTO rules

The report concludes that a 'no deal' scenario, or a deal that gave no special consideration to UK trade in non-financial services, would risk significant damage to these sectors. For instance, WTO rules do not provide for trade with the EU in aviation or broadcasting services at all.

While the UK's global standing in services may mitigate some negative consequences, faced with a 'no deal' scenario, businesses could be forced either to re-structure or relocate in order to continue to operate in the way that they do today.

Chairman’s Comments

Chairman of the EU Internal Market Sub-Committee, Lord Whitty, said:

"The UK is the second largest exporter of services in the world and the EU receives 39% of the UK's non-financial service exports. This trade is critical to the UK's economy as it creates employment and supports goods exports - we can't afford to lose that.

"To protect the UK's status as a global leader of trade in services, the Government will need to secure the most comprehensive FTA that has ever been agreed with the EU. Walking away from negotiations without a deal would badly damage UK plc, particularly in sectors such as aviation and broadcasting which have no WTO rules to fall back on.

"Given the consequences of a 'no deal' scenario and the length of time agreeing an FTA will take, the Government must prioritise securing a transitional trading arrangement with the EU to operate as we leave the EU in 2019 until a full comprehensive FTA with the EU can be concluded. This reiterates the recommendation we made in our report, Brexit: the options for trade, published in December 2016."

Further Information

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