Britain would stick to EU rules on goods by adopting a ‘Common rulebook’ with Brussels, but in the services sector.
Theresa May says this would allow the UK strike free trade deals globally, but the scope would be limited by commitments to the EU.
The blueprint should minimise the need for extra checks at the borders – protecting the ‘just in time’ systems used by the car industry to import and export parts.
The UK Parliament could choose to diverge from these EU rules over time.
But there is an admission that this would ‘have consequences’.
Britain would set up something called a Facilitated Customs Arrangement.
This would see the UK effectively act as the EU’s taxman – using British officials to collect customs which would then be paid on to the bloc.
The borders between the UK and EU will be treated as a ‘combined customs territory’.
The UK would apply domestic tariffs and trade policies for goods intended for the UK, but charge EU tariffs and their equivalents for goods which will end up heading into the EU.
Mrs May says her plan will prevent a hard Irish border, and mean no divergence between Northern Ireland and mainland Britain.
There would be no need for extra border checks, as tariffs on goods would be the same.
Single market origin rules and regulations would also be sufficiently aligned to avoid infrastructure.
Britain would strike a Canada-style free trade deal with the EU, meaning goods can flow both ways without tariffs.
As it is a simple free trade deal, Britain would not be bound by the rules and red tape drawn up in Brussels.
The arrangement would be a relatively clean break from the EU – but would fall far short of full access to the single market.
Eurosceptics have suggested ‘Canada plus’ in key areas such as services and mutual recognition of standards.
The UK would have broad scope to strike free trade deals around the world.
Technology would be used to avoid extra customs checks on the borders.
As a result goods travelling into the UK from the EU and vice versa would be tracked and customs paid without extra checks.
The EU has suggested this is ‘magical thinking’.
The EU says the Canada model would mean border controls are required between Northern Ireland and the Republic to protect the single market and customs union.
It insists Northern Ireland must stay in the bloc’s customs jurisdiction in order to prevent that.
Mrs May has signalled she agrees with the analysis – seemingly the reason she is reluctant to go down this route.
But Brexiteers point out that there is already a tax border between the UK and Ireland, and say technology and trusted trader schemes can avoid the need for more infrastructure.