LONDON (Reuters) - Britain will need a transitional trade agreement with the European Union, and the government should set out plans for it before beginning formal divorce talks with the bloc, members of parliament’s upper house said on Tuesday.
Prime Minister Theresa May plans to trigger Article 50 of the EU’s Lisbon Treaty, beginning the two-year withdrawal period, by the end of March and wants to seek a unique deal with the EU rather replicate any existing third-country agreements.
Banks and businesses have repeatedly argued the government should agree a transition period to avoid a damaging “cliff edge” or abrupt exit from the bloc before Britain has finalised its future trading terms.
“It is unlikely that a bespoke EU trade agreement can be agreed within Article 50’s two-year period, so a transitional deal is vital for protecting UK trade, and jobs that rely on trade,” said Sandip Verma, chair of the House of Lords’ EU External Affairs Sub-Committee.
The committee said in a report the government should set out at the start of negotiations a clear plan for a transitional agreement, which it said would allow talks to be carried out in a less pressured environment.
The government should consider remaining a member of the EU’s customs union as an interim arrangement, it added.
The committee said it had seen no evidence that trade on terms equivalent to full membership of the EU’s single market could be achieved by Britain, particularly in services, which account for around 80 percent of Britain’s economic output.
May and her trade minister Liam Fox have said they want to agree new trade agreements with countries around the world as soon as possible after Brexit and have begun informal talks with several.
But the committee said the government should prioritise securing its future relationship with the EU and its new membership terms, or “schedules” at the World Trade Organisation.
“Deals with non-EU countries are contingent on the outcome of these negotiations, and need to be sequenced accordingly,” said Verma.
Editing by Stephen Addison