The authoritative source for independent research on UK-EU relations

29 Apr 2021

Economy

For those interested in the UK’s post-Brexit trade negotiations, much of the focus last week will have been on the continuing negotiations with Australia, which appear to be heading towards a successful conclusion this summer.

On 19 April, the Secretary of State for International Trade, Rt Hon Elizabeth Truss MP, also announced a trade deal with Serbia, albeit to rather less fanfare –  perhaps unsurprising as overall trade with Serbia only amounts to approximately £682 million.

Yet, the conclusion of that agreement also takes us closer to the endpoint of the Government’s post-Brexit trade continuity programme.

As part of the Withdrawal Agreement, the Government negotiated a continuance of the application of the EU’s trade agreements during the ‘transition period’.

However, from 1 January 2021, the various trade agreements negotiated between the EU and third countries have no longer applied to the UK.

For the past few years, the Department for International Trade (DIT) has been seeking to reproduce the effects of the trading arrangements which previously applied, to ensure continuity for business and consumers.

The trade continuity programme appears to have been one of the Government’s great success stories. Initially, the plans to replicate all of the EU’s trade agreements appeared bold and provoked some derision – including a letter published by the Financial Times arguing that they were ‘as grounded in reality as the tales of Baron Munchhausen.’

Commentators contended that parties would wish to re-open parts of agreements and, in a report published in February 2018, the Commons International Trade Select Committee warned of the risks that trade with 70 nations could fall ‘off a cliff edge’ if the Government did not act quickly to roll-over the EU’s trade deals.

However, as Sam Lowe has recently noted, of the around 40 EU trade deals in existence when the transition period ended, the only ones the UK hasn’t yet replicated are those with Algeria, Bosnia and Herzegovina, and Montenegro.

In its press release announcing the UK-Serbia agreement, the DIT indicated that the Government has now concluded trade deals ‘with 67 countries plus the EU, that account for £891 billion of UK bilateral trade in 2019.’

The trade continuity programme was also one of the issues that provoked Parliament into establishing a new treaty scrutiny system in the House of Lords (discussed here and here).

Each of the rolled-over trade agreements was examined and reported on by either the European Union Select Committee or, subsequently, the International Agreements Committee (IAC).

They considered, amongst other things, whether the replacement trade deals differed significantly from the precursor agreements.

So, was the initial scepticism justified? It is true to say that some of the larger deals, including those with Canada, Mexico, Singapore and Turkey were agreed rather late in the day (the last of which necessarily, as Turkey is in a customs union with the European Union).

Moreover, the UK-Japan Comprehensive Economic Partnership Agreement does not purport to be a straight exercise in replication.

As for the other agreements, much of the devil is in the detail. While they are described as roll-over agreements, not every agreement is identical in its terms with the underlying EU Agreement.

Many of these differences are acknowledged in the Parliamentary Reports published by the DIT to accompany the agreements.  Others have been highlighted in reports by the IAC.

It is notable that a number, including deals with many of the UK’s larger trading partners, e.g., South Korea, Israel, Turkey, Mexico and Canada are subject to some form of review or future renegotiation – including, in some cases, on the extended cumulation provisions which allow for EU content to be treated as UK content (to assist UK producers to meet rules of origin provisions contained in the rolled over agreements).

The IAC’s recent report on the Agreement on Trade Continuity with Mexico highlights clearly some of the issues that can arise.

The report notes that the UK-Mexico Agreement ‘is based on a soon-to-be obsolete agreement and is more limited in scope than the EU’s new Association Agreement’. As a result, ‘the UK-Mexico Agreement is only designed to be temporary’.

It requires the parties to start negotiations on a more comprehensive agreement within one year of the date of entry into force and aim to complete them within three years.

The report concludes that the provisional trading relationship is unbalanced, excludes services, and only provides for extended cumulation for up to three years (subject to extension).

A final criticism, which can often be heard whenever a new roll-over deal is announced on social media, is that the Government has a tendency to overstate its successes.

The most well-known example was a claim by DIT on Twitter that soy sauce would become cheaper after the conclusion of the UK-Japan trade deal, which quickly unravelled.

But, more prosaically, most announcements claim to ‘open up new opportunities’ – when in reality Ministers should feel happy that they have (mostly) managed to preserve trading arrangements previously negotiated by the EU.

None of this is to downplay the hard work of the UK civil service over the past few years. The trade continuity programme was ambitious, and its conclusion is a significant achievement.

However, as attention shifts from the trade continuity programme to the Government’s proposed new Brexit trade deals with Australia, New Zealand and the United States (as well as the UK’s proposed accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership), these upcoming reviews and renegotiations with some of our larger trading partners ought not to be forgotten, as they may require as much scrutiny as some of the new agreements that could be agreed later in the year.

By Alexander Horne, barrister and former legal adviser to the House of Lords European Union Committee and the International Agreements Committee.

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