Switzerland, not unlike the United Kingdom, always had a somewhat awkward, if not difficult, relationship with Europe, especially with the European Union. On the one hand, Switzerland is geographically situated at the centre of the continent and therefore highly dependent on being on good terms with its surrounding neighbours, all of them being EU member states, with the exception of Liechtenstein. On the other hand, Switzerland always saw itself as being special: neutrality, (semi-)direct democracy and strong federalism are seen as being in the DNA of the country and, thus, largely incompatible with EU membership.

In this chapter I will first describe how the current situation with the so-called “Bilateral Agreements” came about and what exactly they are. I will then look at how the Bilateral Agreements work and at their advantages and disadvantages. I will then consider how such an approach would work with the UK and what kind of precedent might be set by it.

HOW THEY CAME ABOUT

After the Second World War, Switzerland, like other European countries, went on its quest for an ideal form of cooperation. The above political sensitivities were seen as obstacles to joining any international organization which was seen as being “political”. Thus, it took three referenda for Switzerland to join the United Nations, and accession to the EU was always seen as being very difficult and, indeed, has stood no chance of being accepted in a referendum to this very day. For Switzerland, therefore, foreign policy was always foreign trade policy. When some Western European states in 1960 joined around the UK to set up the European Free Trade Association (EFTA) as an alternative to the European Economic Community (EEC), Switzerland was among them.

Since then, Switzerland has cautiously tried to deepen its relations with the (now) EU. Next to concluding the odd agreement to facilitate trade in special fields, such as watches or insurance, in the early 1990s it embarked, together with the other EFTA states at that time, on a venture which would link these states to the EU's internal market. In 1992 the European Economic Area (EEA) Agreement was signed and should have entered into force on 1 January 1993.

On 23 June 2016, the people of the United Kingdom voted to leave the European Union. On 31 January 2019, the UK formally left. The question as to whether the UK would “really” leave was thus definitively answered. Although, under the terms of the Withdrawal Agreement, a transitional period running until 31 December 2020 is currently under way (and may be extended, once only, for one or two years), the UK is now, in EU terms, a third country. Although it was never imagined that it would be used by the UK, Treaty on European Union (TEU) Article 50 has served its purpose and is no longer relevant. The only way back into the EU would be through the provisions of TEU Article 49, which would see the UK applying again for membership as a third country. All of the UK's hard-won accumulated exceptionalism has gone for all time: no more rebate, no opt-out of the single currency and the Schengen agreement on the dismantlement of frontiers, no opt-in to justice and home affairs provisions, no February 2016 New Settlement. All gone.

Thus, one question has been definitively answered, but another remains open. Just what sort of future relationship will the UK enjoy with the EU? This is a question of obvious significance for both sides and yet, strangely if understandably, it was hardly debated, let alone answered, in the run-up to the 23 June 2016 Brexit referendum. Moreover, it is a question that, ultimately, can only be answered by both sides together. Equally understandably, once the referendum result was known, debates began, both in the UK and in the EU, about what the answer to the question might be, bookended by debates about what it could be and what it should be. Almost immediately, alternative models were suggested, and these tended to be associated with particular countries; for example, “Norway”, “Canada +”, “Switzerland”, “Singapore on the Thames”, “Ukraine” and so on. But what exactly do such models entail, and how have they evolved? What are their perceived advantages and disadvantages, especially for the countries concerned?

PORTUGAL AND THE SECOND WORLD WAR

The long authoritarian rule of António de Oliveira Salazar (1932–68) and the democratic transition following the 1974 Carnation Revolution were the main factors determining Portugal's post-Second World War position regarding European organizations. Following a 28 May 1926 military coup d’état against the democratic regime, Salazar was appointed finance minister and granted extraordinary powers to enable the country to avoid imminent financial collapse. On 5 July 1932 he was appointed as Portugal's one hundredth prime minister. A new constitution was drafted, with Salazar as its guiding spirit. Taking a leaf out of the book of other authoritarian and fascist regimes at that time, he organized a popular referendum on 19 March 1933 to approve his Constitution but also to consolidate his powers and vision.

The resulting Estado Novo (New State) effectively established an antiparliamentarian, corporatist and authoritarian form of governance that would last until 1974. Salazar rapidly outlawed political parties, imprisoned opposition leaders, instituted censorship of the press and reorganized the state, imitating many of the features of the regime of his contemporary in Italy, Benito Mussolini, including the creation of a secret police service, the “State Defence and Surveillance Police” (Polícia Internacional e de Defesa do Estado) which, profiting from technical assistance from Nazi Germany's Gestapo, established concentration camps and tortured prisoners.

Salazar consolidated his hold on power during the 1930s, surviving abortive uprisings and a 1937 assassination attempt. During the 1939–45 war, the Portuguese government adopted a “neutral” position, aiming to preserve its profitable economic trade with Germany but also wishing not to jeopardize its centuries-old alliance with the United Kingdom (the Anglo-Portuguese Alliance, ratified by the Treaty of Windsor in 1386, remains to this day the oldest extant alliance in the world). Portugal's neutrality also meant that its overseas territories were less at risk of invasion and occupation. However, following the December 1941 entry of the United States into the war and the strategic importance for the Allied forces of the Azores, the Portuguese government was forced to align itself more closely with the Allies, while remaining theoretically neutral.

The UK is a founding member of the Council of Europe and has played a leading part in its activities. But recent evidence suggests that the UK government may be under pressure to reconsider its traditional position, in particular in the wake of the Brexit decision.

TODAY

A recent disquieting sign was noted by the House of Lords EU justice subcommittee in January 2019. It pointed to a change in the UK government's wording of the post-Brexit Political Declaration agreed with the European Union. The draft declaration suggested the future relationship should incorporate the UK's commitment to the European Convention on Human Rights and Fundamental Freedoms. However, the final version released in November 2018 had changed the wording to a commitment to respect the framework of the Convention. Clarification supplied by the parliamentary under-secretary of state for justice simply stated that the government would not repeal or replace the act while Brexit was ongoing, but added, “It is right that we wait until the process of leaving the EU concludes before considering the matter further.”

“Considering the matter further” perhaps implies that it has had some consideration already. It certainly does not inspire confidence that the decision is already secure and that the UK will remain committed both to the Convention and – a fortiori – to the Council of Europe.

There are other straws in the wind that might give credence to some doubts on this front. The latest revision to the Protocols of the European Convention on Human Rights (Protocol 16) has neither been signed nor ratified by the UK. The UK is not alone in this, but it has a particular sensitivity about taking advice from what it might see as a “foreign” court, and this opens that possibility. Protocol 16 creates an optional system by which the highest national courts can seek advisory opinions from the European Court on the interpretation of the Convention. The UK government justified its hesitant position by stating it would observe “how the system operates in practice, having regard particularly to the effect on the workload of the Court, and to how the Court approaches the giving of opinions”.

INTRODUCTION

It was one of the strangest cabinet meetings in British political history. Yet it was also one of the most important. The three leading members of the government – the prime minister (Clement Attlee), the foreign secretary (Ernest Bevin) and the chancellor of the exchequer (Stafford Cripps) – were absent, either on holiday or in hospital. It was thus a depleted cabinet that decided on 2 June 1950 to decline the invitation to participate in the talks which led to the formation of the European Coal and Steel Community (ECSC).

The meeting was chaired by the Deputy Leader of the Labour Party, Herbert Morrison, who would later say that the “Durham miners would not wear” participation in a ECSC. Still, a full cabinet would probably not have decided differently. Although the UK was not being asked at that stage to accept a coal and steel community under an independent supranational authority, it was being asked to confine any talks to that option. Given that Bevin had earlier described the Council of Europe in a magnificently mixed metaphor as a “Pandora's Box full of Trojan Horses” he was unsurprisingly also opposed to any “ultimatum on pooling the coal and steel industries of Great Britain with those of other countries”.

A common interpretation5 is that the UK stumbled into a fateful self-exclusion from what would become the European Communities through a mixture of accident, conceit, incompetent preoccupation with the internal politics of the Labour Party (“the Durham miners will not have it”) and suspicion of forms of European integration with supranational institutions and federal ambitions (“a Pandora's box full of Trojan Horses”). That suspicion may also have been self-defeating. Had the UK accepted the invitation to the talks it might have bent them to its own preferences for a more intergovernmental form of cooperation. As Edmund Dell put it, the UK might have “sucked the federalism” out of the ECSC had it remained in the talks (after all, even without the UK the ECSC emerged with a Council of Ministers that had not been a part of Jean Monnet's original design of the Schuman Plan).

For over 7.5 billion people in the world, “the World Trade Organization (WTO) model”, if it means anything at all, signifies the set of rules overseen by the WTO that have largely governed world trade since the Second World War. To 60 million people in the United Kingdom, on the other hand, it means what happens if their government fails to reach a trade agreement with the European Union by the end of the transitional period foreseen in the Withdrawal Agreement, and their mutual trade is governed by WTO rules alone. Such an outcome is also often known as “no deal” and this chapter is mostly about the implications and consequences of that outcome. I start, however, by outlining what WTO rules in general mean.

THE WTO

The WTO came into operation on 1 January 1995, following the conclusion of the 1986–94 Uruguay Round of trade talks held under the auspices of the the General Agreement on Tariffs and Trade (GATT). It is an international organization with 164 members and codifies the rules for international trade in goods (the GATT), services (the General Agreement on Trade in Services, GATS) and intellectual property (Agreement on Trade-Related Aspects of Intellectual Property Rights, TRIPS), and supports a dispute settlement procedure and a monitoring function. In addition, it has a number of side agreements such as the Trade Facilitation Agreement and the Government Procurement Agreement.

The GATT, the WTO's intellectual and operational forerunner, arose in 1947 as a means to achieve trade liberalization following the Second World War. Recognizing that the protectionism and competitive devaluations of the 1920s and 1930s had exacerbated the slump and that trade tensions had contributed to the war itself, the USA led 21 other countries to a more liberal but rules-based system than had pertained previously. There had initially been hopes for an International Trade Organization (ITO) which would have had extensive and far-reaching powers to manage world commerce, but the Americans eventually felt this a bridge too far and let plans for the ITO fail. The GATT was a temporary agreement (a treaty, not an international organization, as were the International Monetary Fund and the World Bank) designed just to let desired levels of trade liberalization proceed with sufficient international oversight to make them credible.

Negotiating its withdrawal from the European Union was a painful, protracted process for the United Kingdom. It was also a process that saw it concede ground to the EU on most withdrawal issues. Unsurprisingly, the EU was often presented in much of the UK media and particularly by supporters of Brexit as inflexible and short-sighted. There were accusations that it was not only refusing to show any appreciation of the UK position, but also intent on “punishing” the UK into leaving. Such accusations overlook the fact that, on the question of Northern Ireland, at least, the EU adopted a position of relative flexibility. Conscious of the challenges that Brexit posed for the island of Ireland, the EU and the UK agreed a dedicated Protocol providing for a set of arrangements unique in the EU's external relations. While the EU is quick to point to the flexibility it has shown in agreeing special terms for Northern Ireland, these are not without their problems for the UK and the EU.

That the Withdrawal Agreement contains a dedicated Protocol on Ireland/Northern Ireland is due to a range of challenges that UK withdrawal from the EU poses for Northern Ireland and the island of Ireland more generally and, importantly, the EU's and the UK's willingness to respond to these challenges. The willingness was evident as soon as then Prime Minister Theresa May, on 29 March 2017, submitted her letter to Donald Tusk, president of the European Council, notifying the EU of the UK's intention to withdraw, and in so doing setting in motion the Article 50 withdrawal process. That notification recognized the need to pay attention to the UK's “unique relationship” with Ireland and “the importance of the peace process in Northern Ireland”. Hence, a “return to a hard border” on the island of Ireland should be avoided and the Common Travel Area (CTA) between the UK and Ireland maintained. Moreover, the UK had “an important responsibility to make sure nothing is done to jeopardize the peace process in Northern Ireland, and to continue to uphold the [1998] Belfast [‘Good Friday’] Agreement”.

For a while, the Comprehensive and Economic Trade Agreement (CETA) between Canada and the European Union, which provisionally entered into force on 21 September 2017, seemed to be the preferred post-Brexit default option for the United Kingdom, at least in the eyes of the prime minister, Boris Johnson, who on 3 February 2020 declared, “We want a comprehensive free trade agreement, similar to Canada’s.”1 But the initial suggestion of aiming for an ambitious “CETA+” soon lost steam and the Conservative government started instead to talk about a more basic CETA-like agreement that would allow the UK to escape key EU regulations and to align with the EU's regulatory regime at the lowest level possible. And then, when negotiations between the EU and the UK officially started, the UK turned even further away from the CETA template by stressing the goal of regulatory independence.

From an analytical perspective, the idea that the CETA could be a model for the UK seemed a little far-fetched from the outset, for three reasons. First, the UK's economy (2019 gross domestic product (GDP) = $2,910 billion), is much larger than Canada's economy (2019 GDP = $1,730 billion) and, usually, size counts when it comes to the scope of trade agreements. Second, the UK is much more relevant, in terms of exports and imports, to EU economies than it is to Canada. This observation holds particularly for financial services, where, as will be seen below, the CETA does not even go beyond existing World Trade Organization (WTO) practices. Third, the gravity model shows that distance is critical in regard to trade volumes. The CETA is an agreement between faraway entities and can't be easily used as a model for neighbouring economies.

However, analytical considerations often do not square with political considerations, and so CETA might yet become an option for the UK–EU negotiators if the Johnson government's “hard Brexit” option does not materialize. But given that, as matters currently stand, the transition period ends on 31 December 2020, it would be an illusion to expect that a CETA-style agreement could be negotiated in the few months left before then, especially given that the Covid-19 pandemic has interrupted and badly delayed talks between the parties.

The options presented in this book may appear, at first sight, mainly of academic interest because the United Kingdom has already left the European Union and the British government appears bent on a minimal agreement providing for free trade in goods, accompanied by limited provisions on services and a number of sectoral agreements. It is even ready to envisage a “no deal” Brexit, falling back on World Trade Organization (WTO) non-preferential terms, if no agreement is reached in the limited time available. However, as this volume goes to press, it would be a mistake to conclude that a thin deal or “no deal” Brexit is the last word on the future relationship.

The negotiations are taking place in an unusually fluid environment, in which Brexit is a lesser priority for both sides than coping with the overwhelming public health and economic crises. The two chief negotiators and the British prime minister succumbed to the Covid-19 virus for several weeks in spring 2020 and the negotiations have been conducted fitfully at a distance. Any agreement reached in the crisis atmosphere of 2020 is by nature provisional.

This Afterword draws attention to a number of considerations that might lead British and EU leaders to reconsider the nature of the future relationship in the months and years ahead: (1) the extraordinary circumstances in which the negotiations are being held; (2) geopolitical turbulence; (3) changes in the British political scene; and (4) different scenarios for the EU's own future. The Afterword concludes with tentative reflections on other models presented in earlier chapters that may prove instructive in the further evolution of UK–EU relations.

NEGOTIATIONS LIKE NO OTHERS

The negotiations between the EU and the UK to define their future relationship began in March 2020 and were always going to be difficult. The two sides’ objectives diverged widely on key provisions and the time available to overcome these differences was very short. Unless the UK requested and was granted by the end of June 2020 an extension to the transition period that was due to expire on 31 December 2020, the negotiations needed to be concluded, signed and ratified in less than ten months.

This chapter provides a brief outline of what the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) is before discussing the UK government's declared objectives in potential membership of it. It then provides an assessment of what the CPTPP offers as a comprehensive free trade agreement, compared to the provisions of recent EU Preferential Trade Agreements (PTAs). The EU has negotiated bilateral PTAs with CPTPP members Japan, Canada, Mexico, Chile, Peru, Vietnam and Singapore, is well advanced in negotiations with Australia and New Zealand, and negotiations with Malaysia have been initiated but not greatly advanced. Any assessment of the costs and benefits of CPTPP membership depends on the specific commitments negotiated bilaterally between the UK and each CPTPP member. This includes, in particular, detailed schedules on tariffs, tariff rate quotas, cross-border services, investment liberalization and government procurement. It may also include provisions on recognition of regulatory provisions, such as on professional qualifications, food and product standards and data protection.

A full assessment of the impact of UK membership of the CPTPP is therefore currently not possible and any comprehensive study is beyond the scope of this chapter. A general assessment of the relative gains from potential CPTPP membership is therefore provided by a comparison between the EU–Japan Economic Partnership Agreement (EPA) and Japan's commitments under the CPTPP. The chapter discusses some of the questions that will arise in any negotiation process. Finally, as the initiative to launch negotiations with the CPTPP (as well as the USA, Australia and New Zealand) is the first step towards a new independent trade policy for the UK, the chapter looks at what this tells us about how the UK might go about decision-making and negotiating future trade agreements.

THE CPTPP

The origins of the CPTPP go back to an initiative by the P4 (Brunei, Chile, Singapore and New Zealand) for the Trans-Pacific Strategic EPA that came into force in 2006. In 2008 negotiations began with eight other countries (the USA, Japan, Canada, Mexico, Vietnam, Malaysia, Peru and Australia) and in 2016 these signed the Trans-Pacific Partnership (TPP). This expansion was driven by the US decision to join in order to provide the economic underpinning of the Obama administration's “pivot to Asia”.

BACKGROUND

The United Kingdom is unique in the United Nations in retaining sovereignty over – and international responsibility for – more than 20 dependent territories. These are spread around the globe, in the Pacific, Atlantic and Indian oceans and in the Caribbean and Mediterranean seas. All, except Gibraltar, are islands. Each has its own constitution and individual relationship with the UK. All enjoy substantial internal legislative, executive and judicial autonomy, with ultimate sovereignty and responsibility for international relations3 and defence being retained by the UK. Most of these territories have been possessions of the British Crown for hundreds of years. In some cases (Gibraltar and the Falkland Islands), UK sovereignty is contested. The relationship between the Channel Islands and England dates back to 1204, when King John withdrew English troops from Normandy. The Isle of Man came under the English Crown in 1399.

When the UK joined the European Community (EC) in 1973, all the UK territories were consulted and opted for different forms of very limited association with the Communities. Unlike the legal situation of the UK itself as an EU member state, which evolved almost beyond recognition over 46 years, the rules applying to the UK's dependencies remained unchanged in a “time warp” until Brexit in 2020. In the 2016 referendum on the UK's membership of the EU, with the exception of Gibraltar, none of the 510,000 inhabitants of the other territories were allowed to vote. Nonetheless, the legal relationship between the territories and the EU ended, as with that of the UK itself, on 31 January 2020.

Today, almost four years after the referendum and in the midst of the Covid-19 pandemic that will reshape international relations, the territories – like the UK itself – suffer from political, economic and legal uncertainty. They are all, without doubt, “fragile ships floating in a storm-tossed sea”.

Because of their sui generis, fragmentary and outdated nature, none of the treaty arrangements made for the UK dependencies in 1973 could serve as a model for the UK's future relationship with the EU after 2020.

For me, as a convinced European, Europe has always been about far more than a market. Europe is mostly about preserving and promoting a way of life: our values, the things that we care about, our civilization, the things which go to make up our European identity. The United Kingdom is incontestably an important part of European civilization and therefore it must remain a part of the European dream. From that broader point of view, Brexit is deeply regrettable and will have profound consequences, but it is not the end of the story. A new relationship between the EU and the UK must be found and, as this book will show, all sorts of models have evolved that may illuminate and perhaps even inspire the negotiators’ work. We know the equation they have to solve and that has not changed for a long time: how can the UK remain as distant as possible from European political integration while benefiting as much as possible from European economic unification? Different solutions have been found in the past, and will need to be found in the future.

It would be a mistake, in that context, to confuse the current negotiating stances of the two sides with what that relationship will turn out to be in the longer run. From a swift glance at the “to-do” list – the telephone directory of issues that will need to be settled and negotiated – it is clear that it is simply impossible for everything to be done within one year, nor even within two or three, were an extension to the transitional period to be requested and agreed. That was true before the Covid-19 crisis erupted and is even more true now. What is possible, and hopefully probable, is some sort of an interim agreement that settles most of the issues that need to be settled in the short term and establishes some general principles according to which all the other issues will be negotiated in due course. And then there will be, as in any agreement, implementation schedules or sequences or transitions. At least from the trade agreement point of view, such a staggered process would appear to be a “no-brainer”.

It would be a mistake, also, to confuse political rhetoric with underlying relationships.

Turkey applied to join the European Economic Community (EEC) on 31 July 1959, barely a year after the Treaty of Rome creating the Community had entered into force. The decision to apply was taken exclusively for political reasons. Relations between Turkey and Greece had deteriorated sharply after the first of many crises erupted over the Crown Colony of Cyprus, the UK government having made it clear that it was going to vacate the island as part of the gradual demise of the British Empire. Greece had applied to join the Community in June 1959. It was therefore important for the then leaders of the Turkish Republic to do the same, so as not to be left behind.

The response of the EEC to both countries was that they were not ready for membership, because their economies were at a much lower level of development than that of the six original members of the Community. Instead, the two applicant countries each signed an Association Agreement with the EEC, Greece in June 1961 in Athens, Turkey on 12 September 1963 in Ankara. The agreements were similar in their structure. Each country was offered a process of gradual economic integration that would prepare it for a customs union, to be completed at an (originally unspecified) date and that would, in turn, serve as a stepping stone to full membership of the Community.

It cannot be sufficiently stressed that economic integration and the establishment of a customs union were not perceived as being ends in themselves but, rather, as instruments to prepare the two countries for full membership of the Community. In the case of Turkey, this objective was explicitly recognized in the Preamble to the Association Agreement, which stated, “Recognizing that the support given by the European Economic Community … will facilitate the accession of Turkey to the Community at a later date.” Article 28 of the same agreement further stated that, “As soon as the operation of this Agreement has advanced far enough to justify envisaging full acceptance by Turkey of the obligations arising out of the Treaty establishing the Community, the Contracting Parties shall examine the possibility of the accession of Turkey to the Community” (emphasis added).

AUSTRALIA AND THE “MOTHERLAND”

Great Britain has achieved much over the last 232 years, but one of its finest achievements has been the creation of modern Australia. Although initially established as a penal colony, Australia brought generations of migrants from the United Kingdom (including Ireland) and built a society which in many ways replicated the traditions and values of Britain.

Early Australian settlers did not see themselves as Australians in the way Australians do today, but as Britons living in Australia. It was not surprising, then, that when Great Britain went to war in South Africa at the end of the nineteenth century, Australian regiments rallied to the cause. New Zealanders similarly served in the Boer War. When the First World War broke out, Australia was there from the outset. Just before the war, the then Australian opposition leader and future prime minister, Andrew Fisher, said that his country would defend Britain to “the last man and the last shilling”. And so it did. More than 60,000 Australians were killed in the First World War, largely on the Western Front; some 8,800 were killed at Gallipoli. A further 156,000 were wounded, gassed or taken prisoner. As a proportion of the population, Australia had the second highest casualty rate of all Allied countries, although it had not introduced conscription.

It was a similar picture for New Zealand, which was also involved from the outset of the First World War. Out of a population of just over one million, more than 100,000 New Zealanders served as troops and nurses, suffering a 58 per cent casualty rate (16,697 dead), the highest of the war, and another thousand would die of their wounds after the conflict had ended.

On the day Britain declared war on Germany in September 1939, the then Australian prime minister, Robert Menzies, said that “as a consequence Australia is now at war”. And the then New Zealand prime minister, Michael Joseph Savage, similarly declared, “It is with gratitude in the past, and with confidence in the future, that we range ourselves without fear beside Britain, where she goes, we go! Where she stands, we stand!”