Written submission from Dr Kwok Tong Soo (EUT0031)
Business and Trade Committee
UK Trade With The EU
Written evidence submitted by Dr Kwok Tong Soo, Lancaster University
May 2026
Dr Kwok Tong Soo is a Senior Lecturer in Economics at Lancaster University, and currently Director of Teaching in the Department of Economics. He has research interests in International Trade, Regional and Urban Economics, and the Economics of Higher Education. This evidence is based on his academic knowledge and understanding of the issue and is given in a personal capacity[1].
Where specific products or services are referenced, this is for illustrative purposes only and does not constitute endorsement.
The UK-EU Joint Summit in May 2025 set out shared commitments to deepen cooperation between the UK and the EU. This evidence argues that the most promising path forward is targeted cooperation in a small number of defined sectors: defence, biotechnology, and artificial intelligence. These sectors were chosen because potential gains from cooperation are large for both sides, the UK brings genuine and recognised strengths to each, and regulatory frameworks are sufficiently early-stage that joint standard-setting remains achievable, avoiding the “cherry-picking” charge by offering the EU co-authorship of emerging frameworks rather than access to existing ones.
The first part of this evidence provides a brief overview of alternative cooperation models, including the Norwegian EEA approach and the Swiss bilateral model, highlighting the key features of each and the political constraints that make wholesale adoption of either unsuitable for the UK. The second part develops the case for targeted sectoral cooperation, arguing that this represents the best achievable outcome within current political constraints on both sides.
Success will require appropriate joint governance mechanisms capable of managing the inevitable overlaps between sectors and adapting to technological change. It will also require sustained investment in rebuilding UK-EU trust, both as a precondition for effective cooperation and as an outcome of it. Sectors that deliver visible, mutual benefit can create the political foundations for deeper cooperation over time.
There are several alternative cooperation options: (1) The Norway model (EEA or European Economic Area); (2) The Swiss model (EFTA or European Free Trade Area plus bilateral agreements); (3) A Customs Union; (4) Rejoining the Single Market; (5) Creating single markets in defined sectors; (6) reining back economic cooperation and increasing economic divergence.
If we take as our starting point that economic cooperation leads to gains, this is balanced by a political feasibility constraint. This leads to a “second best” argument: What is the best that can be achieved given the constraints we face? As the theory of the second best indicates, when first-best is not available, the second-best outcome may involve further deviations from the first-best[2].
To simplify, Norway essentially adopts EU regulations, but without having a vote on these regulations. This would be unattractive to the UK public. More generally, it would be better for the UK to return to the EU Single Market if it prioritises deep integration with the EU, as this allows the UK to influence EU policies. Similarly, if the UK prioritises independence or autonomy, then a customs union with the EU would be preferable to the Norway model, as this allows the UK greater flexibility in policymaking.
Again to simplify, Switzerland has a network of overlapping bilateral agreements with the EU, covering a wide range of sectors. Although the most recent agreement Bilateral III has consolidated many of these bilateral agreements, it remains a source of discontent in the EU. The Swiss model is in many ways similar to a more flexible version of the Norway model, but with higher coordination costs because of the bilateral agreements. Therefore it is likely to be inferior to a customs union or rejoining the EU single market.
A Customs Union involves removing trade barriers between countries, and adopting a common external tariff on goods coming from outside the union. It generally applies only to physical goods trade. This offers more policy autonomy than rejoining the EU single market, while giving up some of the economic benefits.
The EU single market goes much further than a Customs Union, as in addition to goods trade, it also includes services trade, investment, and movement of people. Although rejoining the EU single market offers the most potential for economic gains, it is also the most politically infeasible of the options available.
For reasons that will be explained in more detail in Section 2 below, this option offers the best chance of successful cooperation between the UK and the EU.
If we take as our starting point that economic cooperation is generally beneficial, then the idea of reining back economic cooperation is likely to lead to an inferior outcome.
The idea is, unlike the Swiss model, which has bilateral agreements in many markets, to focus on a small number of sectors. These are sectors which are of critical importance, and sectors in which the UK is a global leader. One of the EU’s concerns has been that the UK should not enjoy single-market benefits in chosen sectors (“cherry picking”) without broader obligations. For example, this is reflected in the EU’s position on financial services equivalence, and its resistance to a bespoke post-Brexit UK deal.
These sectors would include defence, biotechnology, and artificial intelligence. These are areas where mutual dependency between the UK and EU is clear and growing, the cost of divergence is high for both sides, and geopolitical pressures create shared urgency. Moreover, because biotech and AI are relatively new, regulatory frameworks in these sectors are newer and more malleable compared with regulations in other sectors such as financial services and agriculture. This allows the UK and EU to act as co-authors of emerging standards rather than the UK simply adopting EU rules. This positions the UK as a strategic partner rather than a rule-taker, addressing the EU’s legitimate concern about asymmetric benefit.
The UK has a strong position in both AI and biotech. We are world-leading in AI research and scientific influence, with high-impact research groups like DeepMind, world-class universities at Oxford, Cambridge and UCL, and we have a dense ecosystem of AI startups and strong public research institutions like the Alan Turing Institute. DeepMind’s outputs, including AlphaFold’s protein work, have produced globally consequential breakthroughs[3]. Equally, the UK’s AI Security Institute has been described as “the gold standard of governance institutes worldwide”, and will be a significant asset when negotiating frameworks with the EU[4].
On biotech, the UK is Europe’s leading national biotech market, representing 30% of all European venture financing in 2025[5]. The UK has a rich ecosystem of biotech companies, ranking third globally and first in Europe. In 2024, UK universities produced 399 pharmaceutical spinouts[6]. The UK is especially strong at the intersection of AI and life sciences (AlphaFold being the globally famous example), which is a strategically valuable frontier in both fields.
The argument becomes: These are not sectors the UK is cherry-picking for convenience; they are sectors where UK-EU cooperation would create a combined capability that neither could achieve alone, and that both need to compete with the US and China.
Defence is probably the most challenging of the three sectors discussed, as it is difficult to separate defence procurement from operations. There may be advantages to keeping defence cooperation focused on the industrial side (such as joint manufacturing and shared supply chains), and standards and interoperability (such as common communication protocols, compatible ammunition, and shared maintenance infrastructure, such as NATO STANAGs[7]). Such cooperation could sit alongside other UK-EU defence partnerships and NATO.
Any sectoral cooperation framework needs to address the boundary problem: Where does one sector end and another begin? This is also a dynamic problem: Even if a clean boundary is drawn today, technological evolution will redraw it over time.
An architecture that may be effective in addressing the boundary problem is a Joint UK-EU Sector Committee that serves as the institutional backbone, providing continuity, dispute resolution, and the ability to adapt to changing conditions. The committee should have standard-setting and advisory powers, with scope expansion possible only by formal ministerial agreement on both sides. It could make use of existing frameworks as anchors where available to avoid reinventing governance structures from scratch, outsourcing any disputes over definitions to multilateral bodies where possible, for example the OECD AI Principles, the European Medicine Agency, and NATO standards. Any overlapping zones can be explicitly acknowledged, removing the pretence of clean boundaries and managing the ambiguity openly. Also, the joint committee should have a focus on what cooperation is trying to achieve rather than which technologies are covered, to avoid the boundary problems inherent in fast-moving fields[8]. There are historical precedents that support this architecture, including CERN, the European Space Agency (ESA), and the G20 Financial Stability Board (FSB).
Trust between the UK and EU is the precondition for everything else. Without trust, even a well-designed joint committee becomes an adversarial forum. The May 2025 UK-EU Summit represented genuine progress in building trust between both parties. Crucially, the Common Understanding reflected exploratory talks that will need to be fleshed out in further negotiations, meaning the summit opened doors rather than walking through them.
As the Committee will be well-aware, trust between governments is multi-dimensional, including (1) institutional trust and honouring commitments, for example by following up on the May 2025 summit with consistent behaviour; (2) personal and bilateral relationships, for example investing in the human infrastructure of the relationship, possibly including secondments between the UK civil service and EU institutions; (3) political trust and domestic credibility on both sides; if deeper UK-EU cooperation is seen as one political party’s project that a future government will reverse, the EU may have rational grounds for not investing too deeply in the relationship; (4) strategic trust, in the form of shared assessments of threats and interests.
There are many possible ways to build trust, including (1) regular bilateral summits such as the May 2025 summit; (2) parliament-to-parliament links, perhaps through a joint committee of parliamentarians; (3) embedding UK experts in EU processes, such as Horizon, Copernicus, and the AI Safety Institute; (4) consistent behaviour on Northern Ireland including implementation of the Windsor Framework; (5) youth mobility as a longer-term cultural investment, through the Youth Experience Scheme and Erasmus+ association.
Nevertheless, trust-building has a ceiling, unless the underlying question about the UK’s long-term relationship with the EU is addressed more honestly in domestic debate. The ideal would not necessarily be rejoining the EU, but a durable, domestic political consensus that the UK is a committed, reliable European partner with a long-term strategic investment in EU success. Only then can the full potential of sectoral cooperation be realised.
3.1. The UK should pursue closer cooperation with the EU in three defined sectors: defence, biotechnology, and artificial intelligence. These sectors were selected because they represent areas of large mutual gain, genuine UK leadership and European and global level, and early-stage regulatory frameworks where the UK and EU can act as co-authors of emerging standards, positioning the UK as a strategic partner and addressing the EU’s legitimate concern about asymmetric benefit.
3.2. Cooperation should be sequenced deliberately, beginning with AI safety and biotechnology before extending to defence. These two sectors share regulatory logic, carry lower sovereignty sensitivity, and offer the clearest mutual benefit. Early success in these areas will build the trust and institutional track record necessary for deeper defence cooperation, which raises more complex questions of operational interdependency and national sovereignty.
3.3. A Joint UK-EU Sector Committee should be established as the institutional backbone of cooperation. Its mandate should be defined by governance objectives rather than specific technologies, to avoid the boundary problems inherent in fast-moving fields. It should have standard-setting and advisory powers, with scope expansion possible only by formal ministerial agreement on both sides. Existing multilateral frameworks should be used as anchors wherever available, to avoid reinventing governance structures from scratch.
3.4. The UK government should treat trust-building as a deliberate policy objective, not a byproduct of negotiation. Concretely, this means: consistent and visible implementation of existing agreements, particularly the Windsor Framework; annual UK-EU summits with published tracking of commitments made and delivered; investment in people-to-people links through the Youth Experience Scheme and Erasmus+ association; and sustained engagement with EU institutions directly, not only through bilateral relationships with member states.
Association of the British Pharmaceutical Industry (ABPI) (2025), UK tumbles down global rankings for pharma investment and research. Available at: https://www.abpi.org.uk/media/news/2025/september/uk-tumbles-down-global-rankings-for-pharma-investment-and-research/ (Accessed: 13 May 2026).
Lipsey, R.G. and Lancaster, K. (1956), “The General Theory of Second Best”, The Review of Economic Studies, 24 (1): 11-32. Available at: https://doi.org/10.2307/2296233 (Accessed: 18 May 2026).
Shimabukuro, J. (2026), Top 10 countries in AI R&D (Feb. 2026), ETC Journal, 22 February. Available at: https://etcjournal.com/2026/02/22/top-10-countries-in-ai-rd-feb-2026/ (Accessed: 13 May 2026).
UK Bioindustry Association (2026), UK biotech finishes on high despite challenging 2025, BIA report finds. Available at: https://www.bioindustry.org/resource/uk-biotech-finishes-on-high-despite-challenging-2025-bia-report-finds.html (Accessed: 13 May 2026).
Wilkinson, R. and Krasodomski, A. (2025), The UK can cement its place in the global AI race by nurturing talent, Chatham House Expert Comment. Available at: https://www.chathamhouse.org/2025/07/uk-can-cement-its-place-global-ai-race-nurturing-talent (Accessed: 13 May 2026).
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[1] Lancaster University webpage for Dr Kwok Tong Soo.
[2] Lipsey and Lancaster (1956).
[3] Shimabukuro (2026).
[4] Wilkinson and Krasodomski (2025).
[5] UK Bioindustry Association (2026).
[6] Association of the British Pharmaceutical Industry (ABPI) (2025).
[7] Standardisation Agreements.
[8] For example, “this agreement covers algorithmic systems used in high-risk public decisions, and safety evaluation methods for frontier models”, instead of “this agreement covers AI”.