Martin Smith, Gerard Fox and the CGE trade working group
If the talks between the UK and the EU conclude without a free trade agreement (FTA), leaving the two sides trading on World Trade Organisation (WTO) terms at the end of the transition period, the consequences will be catastrophic for the UK and non-trivial for the EU, which counts the UK as its second-largest export market. There were signs over the summer that this may be avoided: the EU signalled flexibility on fisheries and governance; the UK took steps to implement the Northern Ireland Protocol (NIP) and showed signs of recognising that regulatory autonomy trades off with market access. Some commentators wrote that agreement was likely to be reached on regulatory issues.
Rather than taking one side or the other in what has been referred to as a 'dialogue of deaf' – in which both sides talk past each other, repeating what they want and blaming the other side – we seek to bridge the gap and propose a solution to assuage both sides concerns. The fallout from No Deal would be both economic and political. The fact that the UK voted to leave the EU did not of itself necessarily have to lead to such mutual harm, mistrust, and acrimony.