Britain's trade options after Brexit

Britain is calling for a close relationship with the EU after Brexit, but is constrained by its own and the bloc's red lines -- and the absence of time to negotiate a deal. The EU has proposed replicating its free trade agreement with Canada, or Norway's access to the single market, but Prime Minister Theresa May is pressing for a bespoke arrangement. She will finally seek to agree a way forward among her divided ministers at a meeting on Friday, although the real battle remains to get an outline deal with the EU by October, ahead of Brexit in March 2019. May has promised to end freedom of movement, allow Britain to strike external trade deals and end jurisdiction of the European Court of Justice. But these goals have been made difficult by her promise to the EU that there will be no border checks between Northern Ireland and EU member Ireland. - The Norway option - Energy-rich Norway opted against EU membership in 1994 and instead chose to join the European Economic Area (EEA), enjoying all the benefits of the EU's single market without, however, having a say in its rules. It must allow the free movement of goods, capital, services and persons with its fellow members -- the EU's four freedoms that the bloc insists cannot be compromised. The big advantage for Britain in such a scenario would be that its financial hub in London remains undisturbed. But critics say it would leave Britain a hostage to EU rules, and also fall foul of the promise of the Brexit campaign to limit migration. - Canada 'plus plus plus' - The EU's recent accord with Canada, the Comprehensive Economic and Trade Agreement (CETA), is considered a blueprint for the EU's trade deals going forward and was a model for the most recent talks with Japan. The deal touches on all aspects of the economy, including health and safety norms, and not just the usual cuts to tariffs and import quotas. Both parties negotiate, sector by sector, an agreed level of regulatory cooperation, with London especially keen for closely aligned norms for finance, aviation and autos. In reality, it would mean a significant distancing between the UK and Europe, which are now perfectly aligned with zero tariffs. Future trade barriers could increase costs for certain sectors and may require customs checks, which poses a problem for the Irish border. - May's compromise - May has drawn up a new customs proposal where Britain would be able to set its own tariffs on goods coming from outside the EU but also enforce those of the bloc, using technology to decide which one applies based on the product's final destination. It would also mirror EU regulations on those products, again to reduce the need to border checks, although details remain scant. The Centre for European Reform think tank has proposed a similar so-called Jersey option, which replicates to some extent the arrangement the Channel Islands have with the EU. It suggests Britain follow the rules of the customs union, single market rules for goods and the EU's VAT regime, but seek to negotiate controls on migration in exchange for some restrictions on services. However, it is unclear whether Brussels would accept this -- and eurosceptics seeking a clean break with the EU are likely to oppose it. - WTO rules - If no other deal is agreed, Britain will inevitably revert to "third country" status in the eyes of the EU, with trade relations administered according to the rules of the World Trade Organisation. The EU's default position at the WTO involves tariffs and increased barriers that could cripple the seamless supply chains that connect Britain and the EU. While the EU's average tariff rate for third countries is low ? around 1.5 percent -- they are bigger in certain strategic sectors: for cars, the rate is 10 percent. It is unlikely that British products could enter the EU without further checks at the border, while the situation would grow worse as regulatory differences widened over time. How to keep trade flowing after Brexit is a big headache