The UK Government has begun to outline British objectives for a trade deal with the EU based on alignment and “mutual recognition” of each other’s regulatory regimes in sectors such as chemicals and automobiles and "managed divergence" in other areas of regulation. This approach has been rejected by the EU. Business groups, trade unions and the opposition Labour Party, meanwhile, have agreed on a broad approach to keeping the UK in customs union with the EU.

On February 21, 2018, the UK issued a draft text proposing amendments to the EU position paper on the transitional arrangements to implement Brexit and setting out the British Government’s approach to that implementation period which will be set out in the withdrawal agreement between the UK and the EU. This document included the following proposals:

(1) the UK to be consulted by the EU with regards to representation in relevant international organizations, such as the WTO; (2) once an agreement between the UK and the EU is reached in the area of foreign policy, security, and defense, the transitional arrangements will no longer apply to the UK on the date that agreement comes into force; and (3) that bilateral agreements between the EU and third countries would continue to apply to the UK during the implementation period, although this would require agreement from both the EU and the third countries concerned.

The draft text also set out areas for further discussion, including the establishment of a Joint Committee to make certain decisions to ensure the effective operation of the implementation period and the withdrawal agreement. The proposed functions of the Joint Committee would include: (1) determining whether new acts are within the scope of the transitional arrangements; (2) determining whether any further adoptions to new acts are necessary; and (3) resolving any other issues concerning the proper functioning of the transitional arrangements.

With regard to the end date of the implementation period, while the UK agreed with the EU that a two-year period should be adequate, the UK wants to discuss the assessment that supported the two-year timeline with the EU, as the period “should be determined simply by how long it will take to prepare and implement the new processes and new systems that will underpin the future partnership.”

Discussions between the EU and UK on these issues will continue, with the hope of reaching agreement by the European Council meetings on March 22-23, 2018.