There’s a strong remain narrative a no-deal or WTO Brexit will mean the UK loses hundreds of EU trade agreements and will only trade on WTO terms, but is this an accurate assessment?
As a member of the EU the UK devolved all trade negotiations to the EU. What this means is the EU has negotiated dozens of Trade Agreements (TAs: generally small agreements) and 40 Free Trade Agreements (FTAs: huge agreements covering 90%+ of a countries trade in goods zero rating most tariffs) with countries like South Korea, Japan and Canada on the behalf of all 28 EU members.
When the UK leaves the EU technically all those important TAs and FTAs no longer apply and the UK reverts 100% to World Trade Organisation terms (WTO terms) and the UK is thrown into disarray on recognizing other countries standards and workers qualifications etc…
What Does WTO Terms Cover?
In simple terms the WTO is a base set of trade agreements in both goods (see The General Agreement on Tariffs and Trade (GATT)) and services (see The General Agreement on Trade in Services (GATS)) so all 164 WTO members can trade smoothly, but they don’t cover everything we have as an EU member.
The EU doesn’t have FTAs with the two largest economies the US and China and the tariffs on the trade of goods between the EU-US and EU-China are set under WTO terms: they use their respective WTO tariff schedules.
Despite no FTAs this doesn’t mean EU-US and EU-China trade ONLY on WTO terms, in tariff terms it’s 100% WTO terms, but on top of this are dozens of small TAs including Mutual Recognition Agreements (MRAs: countries agree to recognize each others standards) to cover standards, regulations and the recognition of each countries qualifications.
Technically when the UK leaves the EU all those EU-US and EU-China TAs, MRAs are no longer valid which sounds like a Brexit disaster for maintaining current trade terms with the two largest economies on the planet.
However the UK government is negotiating to ‘rollover’ all EU agreements (FTAs, TAs, MRAs) into UK agreements on or as close to Brexit day one as possible.
For example the EU has close to 150 agreements (not all implemented) with the US covering a variety of trade and other issues. If these aren’t rolled over to UK-US agreements on Brexit day one it causes disruption related to those agreements.
See Existing free trade agreements if there’s no Brexit deal for more details.
As a member of the EU, the UK currently participates in around 40 free trade agreements with over 70 countries. These free trade agreements cover a wide variety of relationships, including:
- Economic Partnership Agreements with developing nations
- Association Agreements, which cover broader economic and political cooperation
- trade agreements with countries that are closely aligned with the EU, such as Turkey and Switzerland
- more conventional free trade agreements
As an EU member the UK government can’t legally sign it’s own TAs, FTAs, MRAs until we leave the EU, theoretically leaving a huge black hole in regulations and standards, it could be a mess!
Memorandum of Understands to Fill the Legislative Black Hole
Fortunately there’s mechanisms to deal with this, two parties (two countries) can sign bilateral Memorandum of Understands (MoUs: a lose temporary agreement until full agreements are negotiated/signed) to maintain current terms to fill the black hole period. In simple terms the UK and it’s many partners make an agreement to keep the status quo (the current trade terms) until they negotiate new TAs, FTAs, MRAs to avoid too much disruption.
It’s a lot of work for the UK government and there’s no guarantees they’ll achieve enough MoUs for Brexit day one to avoid major disruption. The disruption does work both ways, countries which say ‘no thanks’ to rolling over EU agreements revert fully to WTO terms and it will likely result in lower trade/cooperation between those countries and the UK: there’s a LOT at stake.
UK Governments Progress on Securing Brexit Agreements
As you might expect many of the UKs trade partners won’t agree to MoUs until they have to, but they are slowly trickling in.
How we would ensure continuity for the UK’s existing free trade agreements if the UK leaves the EU in March 2019 with no deal.
UK and Palestinian Authority Sign Trade Continuity Agreement
The agreement simplifies trade and will allow businesses to trade as freely as they do now once the UK leaves the EU.
Trading on these preferential terms, rather than on World Trade Organization terms, will continue to deliver significant savings and help to further strengthen the bilateral trading relationship.
The agreement allows Palestinian businesses to continue access to the UK market tariff-free which will continue to benefit Palestinian producers in priority sectors, including exporters of fruit, nuts and vegetable fats including dates and olive oil.
Today’s signing reflects the importance of bilateral relations between the UK and the Palestinian Authority. The Agreement demonstrates the UK’s commitment to strengthening bilateral cooperation, promoting Palestinian economic growth, and maintaining the UK’s strong commitment to a two-state solution.
UK and Israel Sign Trade Continuity Agreement
A trade continuity agreement will see British businesses and consumers benefitting from continued trade with Israel after we leave the European Union.
International Trade Secretary and President of the Board of Trade, the Rt Hon Dr Liam Fox MP, signed the UK-Israel agreement in Jerusalem today (Monday 18 February) with Minister of Economy and Industry, Eli Cohen.
The news has been welcomed by business groups including the Israel Britain Chamber of Commerce, who say it will help to support jobs and ensure continuity for both British consumers and businesses who will be able to continue trading without disruption.
The agreement simplifies trade and allows businesses to trade as freely as they do now, without any additional barriers or tariffs.
Trading on these preferential terms rather than on World Trade Organization terms will deliver significant savings and help to safeguard British jobs.
This will help to further strengthen the trading relationship between the UK and Israel, which was worth £4 billion in the year ending 2018 Q3.
UK and USA Agree to Continue Mutual Recognition Agreement
The UK and USA sign an agreement to continue existing arrangements which help facilitate goods trade between the two nations.
An arrangement which helps boost British trade with the US will continue when the UK leaves the European Union, supporting jobs in both countries.
The agreement will maintain all relevant aspects of the current EU-US MRA when the EU-US agreement ceases to apply to the UK. It helps facilitate goods trade between the two nations and means UK exporters can continue to ensure goods are compliant with technical regulations before they depart the UK, saving businesses time, money and resources. American exporters to the UK benefit in the same way.
Total UK-US trade in sectors covered by the deal is worth up to £12.8 billion, based on recent average trade flows. Of this, the UK exports covered are worth an estimated £8.9 billion- more than a fifth of total UK goods exports to the US. Today’s signing marks a crucial step in the important trading relationship between the UK and America, the world’s largest economy.
The agreement benefits a range of sectors, including pharmaceuticals. Pharmaceuticals account for around £7.7 billion of UK exports to the US – nearly 18% of total UK goods exports to the US. Other industries that will benefit include the tech sector and telecommunications equipment suppliers.
UK and Faroe Islands Sign Trade Continuity Agreement
A trade continuity agreement will see British businesses and consumers benefitting from continued trade with the Faroe Islands after we leave the European Union.
Trade Policy Minister, George Hollingbery signed the UK-Faroe Islands agreement in London yesterday (Thursday 31 January) with Faroese Minister for Trade and Industry, Poul Michelsen. Fisheries Minister George Eustice attended the ceremony, highlighting the importance of the UK’s relationship with the Faroe Islands and the importance of Faroese exports for the UK processing sector.
With almost £200 million worth of fish and crustaceans brought into the UK from the Faroe Islands in 2017, this agreement will allow imports to continue tariff-free and enable businesses to trade as freely as they do now.
Trading on these preferential terms will secure savings and help to safeguard access to fish products from the Faroe Islands.
Consumers in the UK will potentially benefit from greater choice and lower prices for fish and seafood such as Atlantic salmon, haddock and halibut.
This will ensure fresh, quality and affordable produce is readily available for British retailers and consumers.
UK and Chile Sign Continuity Agreement
The news has been welcomed by the Wine and Spirit Trade Association, which confirmed that this is important to protect parts of the UK’s wine industry, which contributes almost £19 billion to the UK economy supporting around 190,000 jobs.
This trade continuity agreement has been agreed as we prepare to leave the EU on 29 March, and we expect to sign a number of other agreements due to be agreed in the coming weeks.
This certainty will help to further strengthen the trading relationship between the UK and Chile which was worth £1.8 billion and grew by 11% in 2017.
UK manufacturers benefit from preferential access to the Chilean market to sell their goods, and UK consumers benefit from lower prices on Chilean goods, such as wines, fruits and nuts and other products.
Trade in goods and services between the UK and Chile has grown by 9% per year on average since the agreement was provisionally applied in 2003. UK exports to Chile have grown by 16% on average each year and a total increase of 351% since the agreement was provisionally applied.
The agreement also protects intellectual property rights and maintains preferential market access for trade in services.
UK and Australia Agree Continuity of Mutual Recognition Agreement
An arrangement which helps boost British trade with Australia will continue when the UK leaves the European Union, supporting jobs in both countries.
The Mutual Recognition Agreement on Conformity Assessment (MRA) was signed by the International Trade Secretary and the Australian High Commissioner to the UK in London today (Friday 18 January).
The agreement maintains all relevant aspects of the current EU-Australia MRA. It helps facilitate trade flows between the two nations and means UK exporters can ensure goods are compliant with Australian technical regulations before they depart the UK, saving businesses time, money and resources. Australian exporters to the UK benefit in the same way.
Total UK exports in sectors covered by the deal are worth an estimated £2 billion. Today’s signing marks a crucial step in the important trading relationship between the UK and Australia, one of the world’s fastest growing economies.
Today’s signing will ensure UK and Australian businesses can continue to benefit from existing arrangements for mutual recognition as they do currently, even if the UK leaves the European Union without an agreement.
On top of this, the UK and Australia have both committed to seeking a new ambitious, comprehensive free trade agreement that will allow UK and Australian companies to enjoy an even closer trading relationship after the UK leaves the European Union.
UK and Switzerland Agree to Transition Trade Agreement After Brexit
The UK government and the Swiss Federal Council have approved the transition of a trade agreement, allowing businesses to continue trading freely after the UK leaves the European Union.
This is the first and one of the most significant existing trade agreements to the UK to have been agreed as part of the government’s preparations to ensure continuity for businesses and consumers as we leave the EU.
There are around 40 existing EU trade agreements that the UK government is seeking to provide continuity for and a number of other agreements are at an advanced stage.
The agreement replicates the existing EU-Switzerland arrangements as far as possible and will come into effect as soon as the implementation period ends in January 2021, or on 29 March 2019 if the UK leaves the EU without a deal. It has now been initialled by both countries.
Joint statement on UK and Eastern and Southern Africa EPA
Joint meeting of the UK and Eastern and Southern Africa states (ESA) on a future UK-ESA Economic Partnership Agreement (EPA) to ensure trade continuity.
This significant progress will ensure continuity of trade relations between the UK and ESA States once the EU-ESA EPA no longer applies to the UK, meaning that the parties will maintain the current market access and replicate the effects of the existing EU-ESA EPA. This confirmation, and the future UK-ESA EPA, are without prejudice to the terms of the EU-ESA EPA.
UK-Southern African trade: boosting UK and African economies
A UK-Southern African Economic Partnership Agreement will be ready as soon as the EU deal no longer applies to the UK.
The UK-Southern African Economic Partnership Agreement is a key element of a package of measures to boost African growth outlined by the Prime Minister, who highlighted that Africa’s long-term success matters to the UK, so it is in the world’s interest to help secure African jobs and growth.
Trade Minister George Hollingbery, who is joining Theresa May for her Africa visit, met with his counterpart from Botswana, who represented the trade ministers from the 5 Southern African Customs Union countries (South Africa, Botswana, Lesotho, Namibia and Eswatini (Swaziland)) and Mozambique.
Progress on UK FTAs
This step reinforces existing commitments by both countries to begin negotiations for a future free trade deal after the UK has left the EU.