The priority in the short-term is simply hanging on to what we already haveby Allie Renison / November 6, 2018 / Leave a comment
When it comes to sorting out the UK’s post-Brexit trade arrangements, we are doing an awful lot just to stand still. Across a number of fronts, we’re expending every effort simply to achieve the “prize” of continuity.
This is true of the Brexit negotiations themselves. While our new relationship with the EU will change—or come with a “different balance of rights and obligations” as the prime minister put it—keeping trade with the bloc as frictionless as possible is still among the government’s principal stated aims.
But it is particularly true when you look at our trade arrangements with the world at large. Through our EU membership, we’ve been party to preferential trade deals with numerous countries across the globe. It’s now the Department for International Trade’s job to “roll over” these existing arrangements, so we don’t lose them upon leaving the EU. This is vitally important but it will not be easy.
Not being able to roll over these agreements would mean losing preferential access to Mexico and Chile, South Africa and South Korea among others. While our commerce with these countries isn’t wholly reliant on EU-brokered access, the deals still present a boon for businesses exporting to them. So while it was the prospect of negotiating brand new trade deals that whetted the appetite of many ahead of the referendum, for businesses and for Liam Fox, the International Trade Secretary, the focus is first and foremost on holding onto what we have.
Contrary to some criticisms, this doesn’t mean that Brexit is some kind of damage-limitation exercise. Addressing the potential risks naturally takes priority at the moment—a complex supply chain in the hand is worth two in the bush, at least in the short term. This has also been a feature of debate across the pond, where the prospect of new tariffs and the loss of existing trade deals like NAFTA has grabbed attention far more than any new trade agreement ever would. Though the US-EU trade negotiations under the Transatlantic Trade and Investment Partnership (TTIP) piqued interest, it never galvanised the business community like the threat of damage to America’s existing trade relationships has managed to.
“A complex supply chain in the hand is worth two in the bush”
But the problem for the UK is, maintaining the deals we currently have in place poses a unique challenge. Not only will we be negotiating on multiple fronts, but the timing and sequencing of these negotiations is complicated further by our ongoing talks with the EU.
The longer it takes to flesh out our new relationship with Europe, the harder it is to make inroads on replicating our agreements with third countries. Knowing what our baseline is with the EU—not only the general direction of travel but the written details—is essential for these agreements in at least two key areas, tariff rate quotas (TRQs) and rules of origin (RoO’s). Here, simply replacing “EU” with “UK” doesn’t work, as after Brexit the UK is expected to have its own set of TRQs and RoOs, separate from the EU’s. It remains highly unlikely that the minutiae which will eventually emerge from our negotiations with Brussels are going to be clear by March next year.
So it will only be once the UK is (hopefully) into its transition period and actually fleshing out the substance of its future relationship with the EU that the entire rollover process with third countries can proceed in full. While these aren’t supposed to amount to full-fledged negotiations, the remorseless logic of game theory means it is hard to see the government not facing some disquiet. Some countries are already demurring from even agreeing a negotiating approach with the UK, both out of necessary caution as they wait to see what the UK-EU landscape is first, but also with an eye to what further concessions they might be able to extract.
There is a view that considers all this an opportunity for British officials to cut their negotiating teeth with the rest of the world. The former trade minister Mark Price once tweeted that any attempt by countries to renegotiate terms could see them simply lose preferential terms with the UK altogether. Would this actually be our response? Welcome to realpolitik 101. At the very least, rolling over all these agreements presents a bandwidth challenge to government, particularly in areas that overlap with EU negotiations, as well as raising issues around policy ownership across Whitehall departments.
The solution to all this uncertainty and protracted process does not lie in simply going over to WTO terms, either. While that might mean we find out what UK’s end state with the EU looks like more quickly, it doesn’t provide for a similarly speedy rolling over process. Furthermore, the government’s own no-deal notices make clear that if the UK leaves the EU without a deal, any (likely) gap before we manage to rollover agreements with other countries would see us lose access on existing terms.
It’s clear that we are into worrying “who blinks first” territory. Given that Britain is the one asking for continuity, you have to wonder whether we are really negotiating from a position of strength.