The Union Flag and the flag of the European Union outside a hotel in Milton Keynes, north of London. Britain may soften the blow of a hard exit by agreeing to a limited free-movement scheme. AFP PIC

The British prime minister has indicated that the United Kingdom will formally trigger Brexit by March. Britain will then have two years to negotiate an amicable exit.

Talks will probably centre on immigration policies and trade. Will Britain be free to trade with the European Union without restrictions and tariffs? Will the people from EU be free to move and live in the UK and vice versa, as the situation is currently?

These were the main issues dominating the Brexit referendum. The “leave” population was concerned with the large exodus of people leaving their countries and making their way into Britain. How will the migrant issue be addressed by Britain and EU?

Theresa May is now left with carrying the progeny left behind by the previous administration. She has been charged with the unenviable task of balancing two major trepidations, and how she will handle it will leave either a positive or negative mark on her office.

She has promised to try and reach an amicable balance, a best possible deal on trade in goods and services, and at the same time address concerns of the British populace on issues of free movement. What this means is whether the UK can continue to have a free trade agreement with Europe, while at the same time curbing EU migration.

It may be timely to look at other countries that have a trading partnership with Europe, but whose borders are closed to the kind of migration prevailing between EU member states. Norway is not a member of the EU, but has full access to its single market, pays a financial contribution and recognises migrant populace from EU, who can live and work there.

Considering that the main driving force behind the referendum was immigration, it is uncertain that Britain may be able to get a good and lucrative trade agreement without free movement thrown in. Switzerland has a free trade agreement with access to the single market for most industries, except for the banking and services sector. Again, there is the provision for free movement of people, although this has been restricted after a referendum
two years ago. Although the restriction has yet to be implemented, Brussels has retaliated by stalling particular trade agreements and freezing participation in education projects.

Canada has a trade deal, which includes preferential access to the EU single market, but without the obligations of Norway and Switzerland. Under the trade deal, Singapore and Hong Kong employ free trade policies without barriers on trade.

But, having looked at the models, though they look attractive, the UK needs to scrutinise and decide. It is not in a similar position because of the large number of immigrants already settled in the country, and EU may not be kind if free movement was not in the bargain. Britain needs urgently to have a model balancing trade and restricted movement of people.

What if there is no clear agreement at the end of the negotiation? Triggering Article 50 gives a two–year period and at the end of it, there may be an extension, which if not given, the UK has to leave. If such is the case, then the default World Trade Organisation (WTO) rules on international trade will apply.

WTO sets rules for international trade that apply to all members, no free movement or financial contribution, no obligation to apply EU laws. Goods that are traded, however, would still need to meet EU standards. Some tariffs would be put into place for trading with the EU, but trade in services would be restricted. A quick look at some of the provisions of the WTO may be helpful.

Under the WTO agreement, countries cannot normally discriminate between trading partners subject to some exceptions where participating countries may set up a free trade agreement that applies only to goods traded within the group. Therefore, the UK and the EU would be bound to apply to each other the tariffs and other trade restrictions they apply to the rest of the world.

However, such may be an unlikely scenario. Britain has long been allies with EU countries and it is likely that more-than-cordial relationships will be preserved. Furthermore, only four per cent of Brits had swung the votes on June 23 last year.

May is certain that Britain and Europe are close friends, allies and trading partners, but she maintains that the sovereignty of Britain, where laws and governance are concerned, will be the priority. In this respect, she may be moving in the direction of reviving old trade partners, while forging close relationships with new trading partners. Although this move may be heralded as one that has foresight and may be well for the UK, there are concerns within that May needs to address.

Chief among the concerns is the UK’s devolved administrations: Scotland, Wales and Northern Ireland.

The Institute for Government predicts that May would do well to ensure that all four administrations are working in tandem. The majority of the votes in Scotland were in favour of remain. Any move to force the devolved administrations to comply may have serious ramifications and undermine relationships between the four administrations. It is in May’s interest to ensure that all four administrations are instrumental in making the Brexit negotiations work for the benefit of the UK.

A clean break with the EU’s single market or a softer approach? A clean break would be detrimental as it would affect close to 500 million consumers. But, the hard facts are clear. Britain is in no position to keep the juicy parts of the union and cut off the not-so-juicy aspects.

May is confident that she may be able to work out the best-possible deal for the UK in terms of trading with and operating within the single European market. Undoubtedly, she wants Britain to regain control of immigration, restore its sovereignty and get the best trading terms.

If the UK regains control of immigration, then the movement of people may be restricted. The UK may need to leave the EU single market. Although a new free trade deal may be negotiated, EU nations may not be generous with the terms if freedom of movement is not included.

A soft approach would be to allow the UK to remain as part of the single market, ensuring that British-made goods are exported to Europe without tariffs.

But, this may come with a price, which May’s government may not agree to, that is, that the UK continues to be part of EU freedom-of-movement arrangements.

UK may soften the blow of a hard exit by agreeing to a limited free-movement scheme, and this may be used as a negotiating tool towards the UK having a comprehensive trade deal with the EU, similar to the Comprehensive Economic and Trade Agreement enjoyed by Canada.

Grace Xavier is research fellow,
Faculty of Law, University of Malaya

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