As the European Union and the UK reassess their post-Brexit trade relations, a new possibility has emerged: the UK’s potential inclusion in the Pan-Euro-Mediterranean Convention (PEM). Maroš Šefčovič, the EU’s new trade chief, highlighted the idea during discussions at the World Economic Forum in Davos, describing it as part of a “reset” between the UK and EU. The proposal, while preliminary, could significantly reshape trade dynamics by reducing barriers and facilitating smoother supply chains.
What is the Pan-Euro-Mediterranean Convention?
The PEM, launched in 2012, is a trade agreement that harmonizes rules of origin across 25 countries in Europe, North Africa, and the Mediterranean. Its core aim is to simplify the use of materials and components from multiple member countries in manufacturing, allowing them to qualify as domestic goods under tariff-free trade agreements. For instance, a machine produced in Switzerland using EU-sourced parts is considered “made in Switzerland” when exported to Turkey, thus benefiting from reduced or zero tariffs. Countries such as Norway, Turkey, Ukraine, and Morocco are among PEM’s current signatories. Remarkably, the UK remains outside this framework despite its geographical proximity and economic ties to the region.
A Missed Opportunity Post-Brexit?
The UK government initially chose not to pursue PEM membership during post-Brexit negotiations. However, businesses across sectors have voiced concerns about the customs barriers that have disrupted supply chains. Joining PEM could address these challenges by aligning the UK with shared trade rules, thereby reducing red tape and cutting costs.
William Bain, head of trade policy at the British Chambers of Commerce, emphasized the practical benefits of PEM membership, stating that it “would reduce paperwork and costs for many UK firms as it would align rules and regulations on both sides in relation to the sourcing of components and raw materials used in exports.”
Government Stance and Business Consultations
While the UK government has begun consultations with businesses to evaluate the benefits of joining PEM, no definitive decision has been made. A Number 10 spokesperson clarified that PEM does not equate to a customs union or single market membership, both of which remain “red lines” in the UK’s post-Brexit policy. However, the idea has not been ruled out entirely, suggesting potential flexibility.
Europe Minister Nick Thomas-Symonds echoed this position, stating, “We don’t currently have any plans to join PEM,” but leaving room for future considerations.
Implications for Trade and Industry
Under the current Brexit deal, UK goods exported to the EU are tariff-free only if they meet specific rules of origin requirements, primarily involving British or EU materials. However, industries relying on components from non-EU countries, such as Turkey, face tariffs when exporting to the EU.
For example, a UK clothing manufacturer using Turkish textiles would incur tariffs when exporting garments to the EU. Membership in PEM would resolve this issue, enabling such exports to move tariff-free, aligning the UK with a broader regional network.
Youth Mobility: Building Bridges for the Future
Šefčovič also raised the idea of a youth mobility scheme allowing 18 to 30-year-olds from the EU to work, study, and travel in the UK, with reciprocal arrangements for UK nationals. While the scheme has faced resistance in the UK, Šefčovič clarified that it does not equate to the free movement of people.
“It is not freedom of movement,” he said, adding that the proposal aims to “build bridges for the future for the European Union and the UK.”
Could PEM Membership Benefit UK Businesses?
The potential for the UK to join the Pan-Euro-Mediterranean (PEM) Convention has sparked debate about its benefits for British businesses. While trade experts agree it could help certain sectors, opinions differ on the scale of its impact.
The Centre for Inclusive Trade Policy concluded in research published in 2024 that PEM would not be “a gamechanger” for UK exports to the EU. Their findings revealed that the share of ingredients in UK-manufactured products sourced from PEM countries is relatively small, typically ranging from 1.1% to 2.8%.
David Henig, a former UK trade official now working with the European Centre for International Political Economy, believes PEM membership could make a meaningful difference for industries with complex supply chains, such as automotive manufacturing, chemicals, and food production. “It allows you basically not to worry about sourcing bits and pieces from around Europe, combining them, and sending them around the region,” Henig explained. “There’s really very little downside to it.”
While the overall economic benefits may not be transformative, the practical advantages for specific sectors that rely heavily on interconnected supply chains could still make PEM membership a valuable step.
Will Keir Starmer’s Government Commit to PEM?
Despite its potential benefits, joining the PEM Convention does not appear to be an immediate priority for the UK government under Prime Minister Keir Starmer. Speaking on BBC Radio 4’s Today programme, Housing Minister Matthew Pennycook stated, “As for this particular arrangement, no, we’re not seeking to participate in it at the present time.”
However, other members of the government have shown more openness to the idea. Business Secretary Jonathan Reynolds acknowledged the potential value of PEM, describing it as “a wider set of arrangements that do help in some sectors.” He emphasized that PEM is “obviously not a customs union,” a red line for the UK government, which has consistently ruled out rejoining the EU customs union or single market. This cautious yet open-ended approach reflects the government’s attempt to balance domestic political sensitivities around Brexit with the practicalities of improving trade relations with Europe.
What Does This Mean for EU-UK Relations?
Maroš Šefčovič described the prospect of PEM membership as part of a broader improvement in EU-UK relations. He pointed out that the “ball is in the UK’s court” to formulate its approach. Discussions also extend beyond trade to include youth mobility and food standards, signaling a potential recalibration of post-Brexit agreements.
Šefčovič acknowledged the need to review the veterinary agreement between the UK and EU, which currently imposes uneven checks on food imports and exports. “Single market treatment for UK food and farm exports would mean we would have to have the same rules and upgrade them at the same time,” he said, emphasizing the need for “dynamic alignment.”
Šefčovič’s suggestion of PEM membership comes at a time when both Brussels and London are seeking to rebuild economic and diplomatic ties. A first post-Brexit EU-UK summit is planned for the first half of 2025, signaling a potential thaw in relations nearly five years after the UK formally left the EU.
The return of Donald Trump to the White House has added urgency to these discussions. Both the EU and UK face renewed global challenges, underscoring the importance of alliances with like-minded democracies. For the UK, strengthening economic ties with the EU could help mitigate some of the economic fallout from Brexit while providing a counterbalance to the uncertainty surrounding US trade policies under the Trump administration.
However, the UK government remains wary of being perceived as reversing Brexit. Any deeper economic integration with the EU risks political backlash, particularly from pro-Brexit factions. For instance, the government has ruled out rejoining the single market or a customs union—moves that could significantly boost the UK economy but are seen as politically untenable.
Even smaller initiatives, like a youth mobility scheme proposed by the EU, have been rejected. The scheme would allow young people aged 18 to 30 to travel, work, and study between the UK and EU member states, but the UK government has flatly refused to consider it, citing its commitment to ending free movement.
Against this backdrop, PEM membership could represent a low-risk way to improve trade relations. As Henig noted, “There’s really very little downside to it.” For the EU, the proposal signals a willingness to find pragmatic solutions to post-Brexit challenges, even if larger structural issues remain unresolved.
Broader Implications for the UK Economy
The reluctance to pursue more ambitious agreements with the EU reflects a broader tension in UK economic policy. On one hand, businesses continue to struggle with the increased trade barriers introduced by Brexit, which have disrupted supply chains and raised costs. On the other hand, the government remains committed to preserving its post-Brexit identity, even if it limits economic opportunities.
While joining PEM would simplify trade for sectors reliant on complex supply chains, it would not address the wider challenges posed by the UK’s decision to leave the single market. Many experts argue that more significant steps, such as aligning with EU food standards or negotiating a veterinary agreement, would yield greater benefits for the UK economy. However, these measures require a level of regulatory alignment that the government is reluctant to accept.
The UK’s current stance also risks further alienating its European partners. As Šefčovič pointed out, proposals like the youth mobility scheme were intended to “build bridges for the future,” but the UK’s rejection of such initiatives has created frustration in Brussels.
Conclusion: A Step Forward, but Not a Leap
The idea of the UK joining the Pan-Euro-Mediterranean Convention represents a small but meaningful opportunity to improve trade relations with the EU. For certain industries, PEM membership could reduce bureaucracy, cut costs, and restore some of the supply chain efficiency lost after Brexit.
However, the broader impact of PEM on the UK economy would likely be limited. The government’s reluctance to pursue deeper integration with the EU reflects a cautious approach aimed at avoiding political controversy, even if it means missing out on larger economic benefits.
As EU-UK relations continue to evolve, the focus will likely remain on pragmatic, incremental measures rather than sweeping agreements. While PEM membership may not be a “gamechanger,” it could serve as a symbol of renewed cooperation—an important first step in what remains a complex and uncertain post-Brexit relationship.
The UK government faces pressure from opposition parties and businesses to seize opportunities to refine its post-Brexit agreements. Dame Emily Thornberry, chair of the Commons Foreign Affairs Committee, criticized the original Brexit deal for its “holes” but highlighted mechanisms within it to improve trade ties.
“Within the constraints of the vote to leave the European Union, we need to do everything we can to get rid of barriers to trade with our nearest neighbors,” she said.
While no final decision on PEM membership has been made, the prospect of joining offers a pragmatic path to addressing the economic disruptions caused by Brexit. With consultations ongoing, the UK’s next move could set the tone for a new chapter in its relationship with the EU—one focused on practical collaboration rather than ideological divisions.
As Šefčovič aptly noted, relations between the EU and UK are “definitely in a better place,” leaving open the possibility of deeper cooperation in the future.