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UK needs active trade agenda post-Brexit, but meaningful trade discussions with non-EU nations uncertain until UK-EU deal is confirmed

6 March 2018

Jurisdictions: United Kingdom

By Lourdes Catrain and Warren Maruyama

As the UK urgently negotiates a bespoke trade agreement with the EU, it must also look to retain over 40 free trade agreements with non-EU nations. This is a complicated process, with many parties involved and there are serious concerns that the continuing lack of clarity around what terms the UK would pursue and what terms it can secure in its future relationship with the EU will hinder the process. 

Any meaningful discussions or dialogue with non-EU nations will be difficult until UK-EU relationship is confirmed and the UK formally exits the EU; even with the “scoping” talks the UK is currently engaging with various nations including the US.

The nature of the future UK-EU relationship is of particular significance as it will determine the nature of, for example, any UK-USA trade relationship. If the UK were to maintain adherence to the EU’s food and agriculture regulatory regime, then that would make any free trade agreement with the United States extremely difficult for the USA’s agricultural sector. However[LC1] , if the UK were to aim for and successfully strike a bespoke free trade agreement with the EU then that would allow for complementary FTAs with nations such as the United States to be made.

The UK government must be forceful and creative with its trade negotiations on goods and services with the EU.  It has no choice but to push the envelope when it comes to financial services: even the strongest FTA financial chapters in existing U.S. and EU FTAs, which are the most advanced in this area, fall far short of passporting and that clearly the UK would need to push for a bespoke agreement.

A no deal situation would be bad for both the UK and EU.  The 27 member states would suffer if trade negotiations were not conducted in a reasonable manner. Companies in EU nations, as well as in the UK, would suffer from the imposition of tariffs between the UK and EU.

In theory the process of retaining EU FTAs post-Brexit could be a simple one if partner nations allowed for inheritance of accompanying rights and obligations with certain adjustments, notably on rules of origin.  However, in practice the process will have its own complications and a lengthier timeframe than might be first expected if either side seeks to “adjust” the terms of existing agreements. When it comes to trade it is clear that countries act in their self-interest, so if retaining the same deal is good for the partner nation then it is likely there will be a convergence of interest, for example around market access to the UK.

Too often the discourse in the UK is around the opportunities of global trade rather than the trade-offs that any such trade deals would lead to. Often during trade talks the toughest negotiations for any Government are with its domestic stakeholders rather than with external nations and detailed preparations of specific proposals and priorities for individual industry sectors are critical for a successful outcome.  

There are, of course, potential upsides for the UK from striking trade deals with nations worldwide, but it requires a sophisticated approach. The UK Government will need to be hard headed and realistic in their on-going and future talks with EU and non-EU nations alike. They need a bold and active trade agenda post-Brexit to realise the benefits of its new-found commercial autonomy, but significant challenges and obstacles still lie ahead.