Brexit Notes blog, UK WTO & 3rd countries

Brexit Notes – UK minister: rollover of EU FTAs with rich countries ‘will be difficult’

The Department for International trade is working hard behind the scenes to try to ‘roll over’ as many EU free trade agreements as possible for Brexit date. Several months ago, DIT officials were often heard making optimistic statements about the likelihood of having these agreements ready by next March. How the government’s tone has changed!

A hearing at the House of Commons in Westminster this week offered a more realistic assessment than previously of where the UK stands in the process of trying to replicate as many agreements with third countries as possible. It is currently working on 40 agreements. Trade minister George Hollingbery said: “It is absolutely our intention to be delivering on that.”

Should the UK and the EU agree on a withdrawal agreement and a status-quo transition period until late 2020 –  as is their intention – life will become easier for the DIT. If there is a deal, the EU will ask third countries to continue to treat Britain as if it were still a member of the bloc for the sake of their joint trade agreements. The UK hopes this will induce them to fall into line. This would also leave more time to finalise talks with said countries.

But Brexit negotiations have been mired in deadlock. Policymakers are starting to factor in the prospect of the UK potentially ‘crashing out’ of the EU next March. So the UK’s aim is to have as many agreements as possible lined up for Day One of Brexit to minimise disruption.

The DIT is evasive in answering questions on how many deals it could have lined up by next March. “We are confident that we can deliver these agreements with the implementation period,” said Paul Walkers, a DIT official in charge of trade agreements with developing countries.

Speeding up

Consultations with third countries started about a year ago. The pace of discussions seems to have accelerated recently.

Talks on trade continuity with Norway and Switzerland, major trading partners that are not members of the EU but are deeply aligned with the EU, are led by the Department for Exiting the EU. Switzerland and Norway have indicated they would not seek to rock the boat with Britain next year. The Helvetic government has also made clear, however, that it would need to follow the EU and wouldn’t be in a position to replicate existing arrangements, which are very close to full membership of the bloc’s single market, in a ‘no deal’ scenario.

FTAs with emerging economies

The DIT has made some progress in getting other third countries to commit to a deal. The most advanced discussions are with the Southern African bloc SADC. Last week, the governments on both sides announced that they would be ready to have a deal for 30 March (see Chris Horseman’s article here). Outstanding issues include finding a solution on rules of origin for the FTAs and agreeing on quotas for imports of agriculture products into the UK.

In August, the other UK trade minister, Rona Fairhead, travelled to Peru. In a press statement, she said: “Both parties welcomed the progress made so far in discussions to ensure continuity of the preferential terms of the trade agreement between the EU and Peru, Colombia and Ecuador, which helps facilitate trade between the two countries, as the UK leaves the EU.”

In sub-saharan Africa, the UK is having conversations on six other agreements and Economic Partnership Agreements. Compared to SADC “we are not far behind”, the DIT’s Walkers said.

But the picture on EPAs, big region-to-region pacts concluded with the EU between 2014 and 2016, is complicated. Not all EU EPAs have been ratified yet – for example, the one with East Africa. Some members of the bloc – such as Kenya – want to go ahead with their deal with the EU, but formally need to wait for others to come on board.

The UK is also talking to Nigeria, a country that has dragged its feet in ratifying a West African EPA with the EU. Nigeria appears to be ready to discuss a special deal with Britain – presumably in return for better terms. This summer, Ghana ratified that EPA.

The EU is trying to get members of the various EPA blocs to stay together as one group. The DIT is ready to be more flexible and to go bilateral.

On EPAs, Hollingbery said: “There are issues with some of them.” He added: “It is not an absolute given that we can get them all transitioned.”

Rich-country deals “difficult”

There are other economically significant agreements that the UK is seeking to roll over with some of the world’s richest economies: a 2011 FTA with South Korea, and the deal with Canada, CETA, which has been in force for almost a year. The UK and Japan also want to continue to implement the EU-Japan Economic Partnership Agreement. The latter is not yet in force, but is due to be ratified before year-end.

On agreements with what he termed “highly developed economies”, Hollingbery said: “It’s going to be difficult. There are offensive and defensive interests. And it will be more challenging.”

Our understanding is that Canada wants to renegotiate CETA. Japan wants better guarantees for the movement and visas of Japanese workers. Hollingbery seems relatively sanguine about the prospect of not having a deal in place with these countries by next March: “UK businesses have not come to rely on [these agreements] as much as on others.”

What remains is hope. “I believe that we will see, as we come closer to reality of exit date [sic], a great many of these relationships rolled over because they are crucial to our partners,” said Hollingbery.

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