Insight
Of transition and trade deals by Sam Lowe 16 January 2018
The UK will not be able to replicate the EU’s free trade agreements ready for March 30th 2019. The only solution is to ask the EU for help. Because of Brexit, the UK will no longer benefit from over 40 EU free trade agreements (FTAs) as of March 30th 2019. This is set to be the case whether the UK enters an interim ‘status quo’ transition agreement or not. These FTAs are with countries receiving 11 to 15 per cent of UK total exports, including Switzerland, Turkey and Canada (see Chart 1). While this does not sound like much, it should be understood in the context of the EU (43 per cent) and US (18 per cent) eating up the majority of UK exports, leaving little left for the rest. Avoiding the cliff edge is not something the UK can do by itself. Ministerial proclamations that the UK will have these agreements replicated ready for exit day should not be taken seriously. With every best intention there is simply too much to do, and the urgency is solely the UK’s. Expediting the process will not be a priority for the EU’s FTA partners, whose exporters will still be able to sell into the UK under the same conditions as now throughout the transition period. While the UK faces an imminent cliff edge, countries with a trade agreement with the EU do not. And it requires two to tango. The best option is for the UK to convince the EU to assist it in fudging an interim solution – an example of which is given below. This will not be easy. The short-term cost to the EU of not helping is relatively small. This should not stop the UK from formally asking. The trouble with transition While the transition agreement is still subject to negotiation, the Commission’s draft proposal states that once the UK has withdrawn from the EU it will “no longer benefit from the agreements concluded by the Union”. This is not pernicious, simply a statement of fact: the UK will no longer be an EU member, therefore the EU’s international treaties will no longer apply to it. The proposal further specifies that the 27 will only assist the UK in finding a way to extend the agreements during the transition period if it is deemed to be in the interest of the EU. CER INSIGHT: Of transition and trade deals 16 January 2018
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