The UK government believes that it will be able to replicate existing preferential trade arrangements with non-EU countries following Brexit, and that the process of seeking continuity will be a technical one, not a renegotiation. Is this reality or is the government overconfident?
In the Agility Mid-Year Emerging Markets Review 2017, compiled by Ti in partnership with Agility, it states that the UK government will attempt to take a copy-and-paste approach to its non-EU trade arrangements. It is argued that for some emerging markets, this would provide welcome stability, but for others, it is possible that trade disputes may arise over tariffs on certain products (most likely agricultural goods), while tariff rate quota arrangements could also necessitate three-way negotiation between the UK, EU and third parties. In other words, replication may not be as straightforward as it seems.
The UK, through the EU, currently has more than 750 international arrangements with 168 non-EU countries, include 295 relating to trade.
In a research paper, the UK Trade Policy Observatory of the University of Sussex suggests that replication may not simply be a technical exercise: “The post B-day [Brexit day] relationship with countries that have FTAs with the EU may paradoxically be easier because they may be more relaxed about informally discussing allowing the existing bilateral arrangements to continue beyond B-day while a formal FTA or similar agreement is drawn up. Such goodwill is likely to be a function of political factors as well as of whether or not the partner country involved thinks it will benefit from reverting to MFN. Hence the final outcomes are likely to vary across partners.”
In a BuzzFeed article, Allie Renison, head of Europe and trade policy at the Institute of Directors, comments: “The question over how much politics enters the fray in converting these agreements depends on the degree of integration the third countries have with the EU.
“Most of its existing trade agreements should be a more technically straightforward case of replication with the third country, particularly the older ones where the scope is limited.
“However, Turkey and the EEA countries (Norway, Iceland, and Liechtenstein) are bound to be more difficult and would be more likely to warrant the involvement of the EU, because of the customs union Turkey has, and the EEA agreement – where our relationship to the EU’s customs union and EEA law going forward is still far from clear.”
In the same article, Sam Lowe, a London-based trade analyst, states: “It is far from merely a technical process. While countries have so far appeared keen to use the existing EU agreement as a template, many will push for further concessions from the UK – indeed, in my opinion, it would be negligent on their part if they didn’t; they are unlikely to ever have this much leverage over the UK again. We have already seen this happening with South Africa pushing for a renegotiation of agriculture quotas and food hygiene standards.”
In a joint news conference with British Prime Minister Theresa May on September 18, Canadian Prime Minister Justin Trudeau remarked that Canada’s existing trade agreement negotiated with the EU, CETA, would “form the basis for the way we move forward in the post-Brexit world”. He called for a “seamless transition”, but also noted that “there will obviously be opportunities for us to look at particular details that could be improved upon for the specific needs and opportunities in the bilateral relationship between the U.K. and Canada.”
Evidently, this model of wanting to ‘tweak’ existing agreements seems to be catching on.
As concluded in the Agility Mid-Year Emerging Markets Review 2017, the situation is fluid and uncertain. It may be that even relatively small emerging economies may be able to punch above their economic weight and sign highly favourable trade deals with the UK if British politicians are desperate to make Brexit appear a success.
Source: Transport Intelligence, September 19, 2017
Author: David Buckby
In partnership with Agility, Ti is asking supply chain professionals to give their view on Brexit’s impact on emerging markets in this year’s Agility Emerging Markets Logistics Index survey. The results will be published freely alongside the rest of the Index at the start of next year, revealing the views of the industry on the most pressing supply chain issues in emerging markets.
