Contact us: +44 (0) 20 3033 3870

Securing international trade agreements: will it be easy post-Brexit?

4 November 2016

2015_07_31_Mombasa_Port_JPEG_RESIZED_0018

The UK has a positive attitude about the chances of trade agreements with countries such as Canada, with whom the EU has just signed the CETA agreement. Many British public figures state that forging in-depth trade relationships with international partners will actually be easier once the UK finally leaves the EU. However, the near-collapse of the CETA agreement last month between Canada and the EU begs the question of whether the process will be so straightforward. The US has already stated it is not interested in negotiating a separate TTIP agreement with the UK, and the CETA negotiations took seven years to complete, indicating the complexities of such a process. It certainly raises the question of whether an individual country will succeed where a unified group of major economies nearly failed.

Brexit and easy negotiations

On the surface, it may be tempting to accept the narrative that international trade agreements, whether they are being forged with the EU or other international partners, will be easier without the EU rules constraining the country.

However, constraints do exist and limit what can and cannot be done during the negotiations. The negotiating team is appointed by the European Commission, and the mandate for its work is given by the Council. The 27 Member States will have a lot of influence before and after the negotiations. They will influence the drafting of the mandate and push to ensure their interests are incorporated. National governments will also be in the position of power when the time comes to ratify the agreement as the refusal by Wallonia to ratify CETA has demonstrated. However, they will have a limited say during the negotiations process itself.

The mandate can also be prescriptive, outlining the objectives of the negotiations and setting out the ‘red lines’. In the instance of the TTIP mandate, the document included the objectives of facilitating and respecting the international environmental and labour agreements as well as protecting the environment, labour and consumers. In essence, the mandate is binding the negotiators to a particular stance, goals, and certain minimum standards that need to be met in the end. Ultimately, it is still the member states who set the framework for negotiations. It also means that due to its singular position, the EU is able to speak in a united voice and use the size of its market as a leverage.

One for all

Despite this unified approach by the EU, CETA still has a way to go and TTIP negotiations are on the verge of collapse. What’s more, the UK would not wield the same power in the negotiations as the EU, being economically smaller. This implies that the UK would not have the tools necessary to make forging international agreements of a similar calibre as CETA and TTIP easier. In addition, major agreements incorporate a very wide range of issues that can include environmental, social, and financial interests, and which may be interconnected. This can make finding the balance between different interests more difficult, which explains why it takes so long to complete the negotiation process. This is why the US has previously stated that it is not interested in having separate TTIP negotiations with the UK once it leaves the EU.

Not so simple after all

It is then unclear why some believe that the post-Brexit environment will be conducive to forging major trade deals. Turning to the negotiations with the EU specifically, talks will likely involve an additional emotional element. Attitudes towards the UK’s decision to leave may impact the level of detail and the terms of the negotiating mandate or it may affect how soon the final agreement will be ratified by national parliaments. Presumably, the terms will be strict and demanding with the talks likely taking many years to complete.

Negotiations with the WTO, if this option is chosen, will also require the drawing up of new tariff, quota and subsidy rules that will apply to the UK, which will have to be negotiated on and approved by all 163 WTO members, which will be extremely time consuming.

Negotiating bilateral agreements with the likes of the US and Canada has already demonstrated the perils and complexities of the process and there is little reason to think that the UK will do better on its own. In best case scenario, the UK would match the seven years that it took the EU to finish the deal. In worst case, it could take much longer. In addition, just like in the case of the EU, there will be rules and regulations the UK will have to comply with, which may also mean either meeting higher standards of the potential trading partner or lowering its own standards to accommodate them.

Lastly, while the UK is in the process of shaking off the EU rule book, lobbyists straddling the entire spectrum of interests will descend on London to ensure the international trade agreement will take their wishes into account, certainly affecting the length and complexity of negotiations, just as they already do now.

The long road of negotiations

History shows that there is strength in numbers, and experience dictates that this applies to international trade. The CETA and TTIP negotiations have shown that nothing is certain despite a good start. Smaller leverage, a smaller economy and fewer resources to negotiate: these are some of the hurdles the UK will face in the long run. It seems implausible that exiting the EU will raise the UK’s ability to complete international trade agreements in a faster manner, and the first test of this will come in form of the EU-UK negotiations next year.

 

Image Credit: Meaact Photo/Stuart Price

Darius_Mikulenas_EU_Policy_Analyst
Darius Mikulenas
EU Policy Analyst

Darius Mikulenas leads on the Transport, Security and Defence portfolio for the DeHavilland EU team. Darius has experience working with an industry association representing the Waste-to-Energy sector in Brussels.