A new Centre for European Reform analysis ‘Brexiting Swiss-style: The best possible UK-EU trade deal’ has found that between joining the EU in 1973 and the turn of the millennium, Britain’s trade barriers in goods and services fell 2.5 times faster with the EU than with the US or Japan. However, since 2000 trade barriers between the UK and the EU have barely fallen at all.

The first priority for Theresa May’s government must therefore be to prevent barriers rising after Brexit. Britain will not lose much from future moves to reduce trade barriers within the EU.

Since Britain voted to leave the EU, the 27 have made ‘no cherry-picking’ their mantra. The UK will not be allowed to pick the parts of the single market it likes (such as free trade and unrestricted investment) and avoid the parts it does not (such as free movement and the supremacy of EU law). For her part, Theresa May insists that free movement and the supremacy of the European Court of Justice (ECJ) will end.

Given these constraints, Britain’s best hope is a comprehensive trade agreement focussed on goods and those services, such as aviation, where both sides have a strong incentive to maintain the freest trade possible. The regulation of the EU’s goods markets tends to be less contentious than services or labour markets. In recent years, the most contentious ECJ cases involving Britain concerned financial regulation or the free movement of people. The 27 will not be willing to allow financial services access without closely aligned rules and the power of the ECJ to arbitrate disputes with the UK government.

A Swiss-style agreement represents the limit of market access that the EU has been willing to accept without the full supremacy of EU law. The Swiss-EU bilateral agreements show that compromises between sovereignty and economic integration are possible. Bilateral committees in the sectors where the Swiss and EU co-operate closely determine whether the Swiss should update their regulations to match those of the EU. The European Court of Justice does not adjudicate disputes (although Swiss updates to their regulations must take account of ECJ case law).

Commenting, the report’s author John Springford said:

“Something similar to the Swiss deal, but without free movement, would be the very best that Britain can hope for. The EU might not be prepared to offer the UK such a deal, since the Swiss have accepted free movement as the price of single market participation in goods, and the EU want the Swiss to download EU law more rapidly.

But such an outcome would have significant economic costs for Britain, given its advantage in financial and business services. The UK’s manufacturing sector is less productive and adds less value than that of Switzerland; the 27 might demand a lower price for market access. A Swiss-style Brexit provides a middle way between two extremes: severe trade disruption and full sovereignty on the one hand, and continued single market membership and the wrath of Brexiteers on the other.”