Brexit: UK needs comprehensive EU trade deal to protect non-financial services sectors, says report

The UK Government was called on to negotiate a FTA that ‘secures market access and specific reciprocal arrangements’ in various areas for UK businesses in the services sectorReuters

The UK government needs a unique comprehensive trade agreement with the European Union (EU) to protect its services sectors, said a House of Lords Select Committee report published on Wednesday (22 March).

According to Lord Whitty, chairman of the EU Internal Market sub-committee, the government must try to "secure a transitional trading arrangement with the EU" until a more comprehensive deal is finalised.

In January 2017, the UK Prime Minister Theresa May had ruled out membership of the Single Market or European Economic Area (EEA), saying that the UK would instead try to ink a Free Trade Agreement (FTA) with the bloc.

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May, who is set to trigger the formal two-year Brexit process on 29 March, has also maintained that having no deal with the EU would be better than having a bad deal.

The committee's report now outlines the impact on UK's non-financial services in the event of having a good UK-EU trade deal. Professional business services, digital, creative, air services, tourism, education and health-related travel services were some of the sectors covered in the report.

According to the committee, a good trade deal between the UK and EU would protect the service sector. The report, however, called on the UK Government to negotiate a FTA that "secures market access and specific reciprocal arrangements" in various areas. For instance in aviation, it expected the agreement to allow UK airlines to fly to any point within the EU and provide intra-EU services.

The report was not favourable towards the UK not having a deal with the EU. In such a scenario, the report said, trade between the UK and the bloc would default to World Trade Organisation (WTO) rules and tariffs.

Sectors such as aviation and broadcasting, which have no WTO rules to fall back on, would then be forced to restructure their businesses or even re-locate, the report said.

Lord Whitty said in a statement: "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."

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