Some time ago in March this year, Pascal Lamy, ex Director General of the WTO and former chief of staff to Jacques Delors when he was the President of The EU Commission, gave a speech to the Institute for Government (HERE). He suggested a free trade deal between the UK and the EU was a "no brainer", which I think surprised many. But what he said would be problematic was the gradual divergence between the UK and the EU in various areas.
Normally, trade deals begin with two separate economies or economic blocs and over time brings them together so standards converge. But we are beginning from a position where we are already completely converged, so in practice a trade deal should be very easy - as John Redwood and some economists have suggested. However, as M Lamy pointed out it is the divergence, where the UK wants to do things differently which will cause the trouble.
His prediction was right. Margrethe Vestager, the EU competition commissioner (HERE) has now said any future trade deal should respect EU labour and competition standards and avoid a race to the bottom. It is this which will take up a lot of time and effort in the negotiations because there is no precedent for it. If we do not intend to vary these things - why leave? If we do want to vary our standards how far do we want to go and what impact will this have on the EU? This is going to be a difficult area for Mrs May, does she sign up to harmonise labour and competition standards over which we have no say or does she placate the UKIP wing of the Tory party? It's a conundrum isn't it?
Update: Miriam González Durántez, the wife of Nick Clegg (HERE) makes this point well and suggests Mrs May has little understanding of how trade deals are struck. She also says the EU is a "regulatory magnet" because of its size and I think this is self evident. Whatever happens after Brexit we will not be able to diverge too far from existing regulations and we will have to comply with new ones. That or we will have to have two sets of regulations, one to sell to the EU and one for internal use and this would be crazy.
