UK privately not ruling out joining Europe trade scheme in EU Brexit reset ...Middle East

The UK is privately not ruling out joining an EU international trading partnership as the bloc tries to cajole Britain into setting out what it wants from the Brexit reset.

Maros Sefcovic, the European Union’s chief negotiator on post-Brexit relations, has said that Brussels “could consider” allowing the UK to join PEM, a pan-European customs scheme that would lower trade barriers between Britain and the bloc as well as other nations.

Speaking to the BBC at the World Economic Forum in Davos, Sefcovic said that while nothing is certain, the EU would consider allowing the UK to join the Pan-Euro-Mediterranean Convention.

The convention, which is organised by the European Commission, simplifies the trade of goods between the EU, some non-EU European countries and some countries in Africa and the Middle East.

The UK government is remaining muted on Sefocovic’s comments, but declined to rule out joining PEM when asked by The i Paper. It is refusing to say if it would breach the government’s red lines on post-Brexit relations.

However, it also says that joining PEM is not something they are planning for right now. Minister Matthew Pennycook told the BBC the government wasn’t looking at joining “at (the) present time”.

The prospect of joining PEM is already being criticised by Brexiteers with Reform deputy leader Richard Tice arguing it would damage relations with the Trump White House. “It’s obvious that Labour would rather cling to their europhile tendencies over prioritising our closest allies,” he told the Express.

“We now have the most pro-British president (Trump) for along time and someone who is prepared to make a deal with the UK.”

But both government sources and trade experts have been quick to point out that it is not a customs union nor an EU scheme.

The Pan-Euro-Mediterranean Convention establishes common rules of origin for trade between the EU and other countries.

Despite the objections from Brexiteers, the government is correct when it says that PEM is neither an EU scheme nor a customs union. It is however run by the European Commission, the executive branch of the EU.

It does, however, simplify the rules of origin for goods fully or partially made in countries who are signed up to the convention.

In practice, that means that anything either manufactured or completed in the UK – as many goods are in a global supply chain – could be exported more easily to lots of countries in the neighbourhood, including the 27 EU member states.

The 25 Contracting Parties to the PEM Convention are:

Sources in London and Brussels say that Sefcovic’s comment might be read as the EU making a move ahead of the UK-EU summit later this year, proposing something that is relatively easy to do and for which there would broadly be support.

EU officials and lobbyists in Brussels have been frustrated at the British government’s perceived reluctance to say exactly what they want from the so-called Brexit reset despite the warm words from Keir Starmer’s government.

Simon Usherwood, Professor of Politics and International Studies at the Open University, said: “The simplest explanation for these comments is that the EU Commission wants something to show at the summit in the face of inertia in the UK.”

There had been high hopes that Keir Starmer’s government would go out of its way to restore trust been London and Brussels.

And while his trips to the continent and warmth to the EU have been well received, there is still significant scepticism British politicians in Brussels, with many EU official still furious that the UK has failed to fully implement the Brexit deal agreed in 2019.

While many sources from EU institutions and member states have taken a hard line on there being “no new deal until the UK obeys the current one,” as one EU Council source said, PEM could be an easier sell, even for Eurosceptics in London and UK-sceptics in Brussels.

David Henig, Director of the UK Trade Policy Project at the European Centre for International Political Economy says: “PEM would facilitate UK participation in Europe-wide manufacturing supply chains.

“It would help both exporters and importers of goods, and is supported by non-EU countries like Switzerland and Morocco. It is not an economic game changer, but it is something the UK should do.”

The Brexiteer concern will be that this is the thin end of the wedge, the first step in pulling the UK back into the EU’s regulatory sphere through a full customs union or membership of the European Economic Area (EEA).

However, sources in Brussels are sceptical that even if this was their plan, any UK government would be willing to go further than something like PEM.

Another fear from hardline leavers will be that moving closer to the EU at this moment in time could throw a spanner in relations between the UK and the US, especially with Donald Trump now back in the White House.

Trump, who seems to have brought his hostility to the EU back to the White House for his second term, has been threatening harsh tariffs on the EU, which the UK had hoped it could avoid.

However, if Trump believes that Starmer is seeking to pick sides with the EU, it might put Britain in the firing line in a US-European trade war.

Any suggestion of the UK moving towards a customs union with the EU would naturally complicate a full-fat trade deal with the US.

On both of these points, Usherwood says that PEM is unlikely to shift the dial. “If I were being cynical, then would suggest that PEM is suitably unknown and complicated that Trump can’t huff and puff about it. And it’s still the case that the US doesn’t seem to want an actual trade deal.”

Will it happen?

It does seem that the EU is broadly happy with allowing the UK to join PEM. However, they are still sceptical that British politics is in a healthy enough place to take this relatively small step in the Brexit reset.

What the UK joining the European trade scheme would mean for Starmer's Brexit reset

“The EU, including the parliament, is sympathetic to it,” says a senior parliamentary source. “But it’s difficult to see it as more than wishful thinking. It makes sense for the UK and for the EU but I’m not sure political reality in UK allows for it.”

An EU diplomat: “Given the state of the big economies either side of the channel it makes sense, right? No quotas, no tarrifs, no paperwork.

“It would minimise friction in the supply chains between the biggest trading blocks in Europe  at a moment the trade outlook in and with the rest of the world isn’t exactly rosy”.

But they added: “The UK’s economic logic has been sacrificed on the anvil of sovereignist ideology before”

The UK government was approach for comment but declined to give a statement on-the-record.

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