By Dr Clair Gammage, Lecturer in Law (University of Bristol Law School).
In the Prime Minister’s speech of 17 January 2017, in which the Brexit trade negotiation strategy was announced, Theresa May was keen to reassure the world that a ‘Global Britain’ would rise from the ashes of the now infamous June referendum. Outlining twelve core objectives to be pursued in the process of withdrawal from the EU once Article 50 has been triggered, May revealed little substantive detail about what the UK wants from the EU and, indeed, from the rest of the world. Underpinning the strategy is the first objective of “certainty” – certainty for industries, for workers, and for the general population. We now know that the European Communities Act will be repealed but EU law will be translated into the UK legal system. Of course, it is then the choice of Parliament to decide which laws stay and which laws go – presumably depending on the extent to which those laws reflect our Global British values according to the legislature. Will the first objective of “certainty” allay the fears of industry, the public sector, and the general population? The answer to this question rests entirely on the way in which the negotiations are handled from this moment on. So, what does the speech tell us in terms of the post-Brexit trading strategy?
There are two key aspects of the trade strategy going forward: withdrawal from the EU and a renegotiation of our terms with the EU; and, the UK’s trading relationship vis-à-vis the rest of the world which will take the form of WTO compatible free trade agreements (FTAs). FTAs are economic spaces in which the countries to the arrangement reduce tariffs on substantially all the trade that falls under the agreement but each individual member retains its own external tariff with other countries on those goods. The first and second limbs of the trade strategy are interrelated and once Article 50 has been triggered a new form of foreign policy-making that I have (rather tongue-in-cheek) coined “Global Britain external relations law” will begin to manifest.
Withdrawal from the EU
The Prime Minister has emphasised what our trading relationship with the EU will not look like post-Brexit: it will not be partial membership of the EU and it will not be associate membership of the EU. Crucially, it will not be “anything that leaves us half-in, half-out”. Furthermore, May reassures us that “no deal for Britain is better than a bad deal”. In telling us what the relationship will not be, a substantial amount can be inferred about what it might be.
There are key indicators of the priority areas for trade in May’s speech. Keen not to undermine the effectiveness of the Single Market, one possible scenario is to negotiate a customs agreement with the EU. A customs agreement, unlike a FTA, requires the liberalisation of substantially all trade between its Members and the adoption of a common external tariff by those Members. The EU is a customs union which begs the question why the UK would want to withdraw, only to go back in again? The answer lies in the historical transformation of the EU from its origins as an economic bloc with a focus on securing peace in the region, to a complex arrangement that we know the EU as today in which legal, political, economic, and cultural values and systems become increasingly interconnected. A long-standing critic of the perceived ‘democratic deficit’ of the EU, the process of Brexit will result in withdrawal from the political and legal institutions, much to the delight of those who believe that EU politico-legal frameworks make for uncomfortable bedfellows with UK values.
In short, the withdrawal and renegotiation of a customs agreement with the EU means that the UK can choose the sectors it wishes to liberalise with the EU and exclude other sectors. It will be a bespoke agreement which will enable the UK to enjoy concessions on trade without the obligations to allow migrants to cross our borders, for example. Some might argue that the “freest possible trade” without free movement is simply not possible, but nevertheless freedom of movement is one of the Prime Minister’s “red lines” not to be crossed.
In 1995, Turkey concluded its customs agreement with the EU, in which only trade in goods has been liberalised. However, Turkey made significant concessions in concluding this agreement and some have argued that it is not WTO compliant because it does not liberalise trade in most agricultural products. There is concern that the EU-Turkey trade model is not an appropriate “template” for future trade between the UK and the EU. In part, this stems from the fact that May has expressed the desire to retain some aspects of our existing market access ensured under the current EU framework, particularly around the areas of automotives and financial services. So, even at this point it becomes evident that the UK-EU FTA will be markedly more ambitious than that of the Turkey-EU agreement. If this is the case, then the negotiating positions will become rather more complex.
The EU’s common commercial policy covers a variety of aspects of trade (goods, services, commercial aspects of intellectual property rights, foreign direct investment) but in the recent Opinion of Advocate-General Sharpston in the EU-Singapore FTA case, it has become clear that a ‘mixed agreement’ – an agreement which includes sectors within the common commercial policy and sectors falling outside the common commercial policy – must be negotiated by the EU and the Member States. This is significant because if the UK wants to include portfolio investment clauses, for example, then the UK will be negotiating with the EU and its Member States, which will require the approval of each individual Member State for the areas of trade falling outside the EU’s external competence.
Essentially, if the UK negotiates a mixed FTA with the EU we could end up with certain EU Member States delaying the process (much like the situation regarding CETA with the blocking of the vote by Wallonia). Of course, at this stage we do not know what the agreement will look like, but we can be sure that the UK will be relentless in its quest for the best possible trade deal as an ‘outward-looking’ Global actor. Indeed, May has reassured us that “no trade deal is better than a bad trade deal”.
I remain confident that the UK will seek to negotiate ‘new generation’ FTAs that incorporate liberalisation beyond goods – much like TTIP, CETA, and the EUSFTA – and it will aim to do so with both the EU and third parties. The extent to which it will secure the concessions it is aiming to achieve, while protecting its borders and sensitive industries, will need to be monitored very carefully throughout the negotiating phase.
Global Britain external relations law
This new species of external relations law will become the key weapon for Global Britain’s foreign policy with its new trading partners. Its foundations shall rest firmly in WTO law, as the UK will start the negotiating process with countries like America, New Zealand, India, and China. There are differing views among the UK’s leading academics as to the UK’s position vis-á-vis the WTO once Article 50 is triggered. Some have argued that the UK will have to renegotiate its position in the organisation, while others propose that the UK already has legal rights and obligations under the WTO framework and the effect of Brexit will simply be that the UK exercises its power over all aspects of its trade, rather than the EU.
There a number of core concerns regarding the UK’s tariff levels on agriculture (given its membership to the EU), whether and to what extent the UK can access tariff quotas of other Members straight away, and the extent to which the services provisions under GATS will be binding (i.e. will the UK need to renegotiate its accession to the GATS). If withdrawal from the EU amounts to accession to the WTO, the UK will not be in a position to negotiate FTAs with other countries until its accession agreement – and associated tariff binding levels – have been finalised. So, the rhetoric that there are many countries lining up to trade with the internationalist, open-oriented Global Britain is of little practical significance until we have concluded our (re)negotiation at the WTO level.
In terms of negotiating WTO-compliant FTAs with third countries, there has been a great deal of speculation around who the UK we will negotiate with and in what sectors. A key problem stems from the lack of data surrounding our civil servants – does the UK have sufficient expertise in trade negotiation for these types of agreements? Theresa May would have us think so, but the former British ambassador to the EU, Sir Ivan Rogers, has suggested in his resignation email that the Brexit strategy so far rests on “muddled thinking” and “ill-founded arguments”.
Somewhat ironically, I am not sure that the first “crucial” objective of “certainty” that Theresa May is promising in the short-term can be achieved because, put simply, there is a great deal of uncertainty surrounding the political dimension of the Brexit negotiations. Even the country’s leading academics cannot agree on what the situation will be in the WTO once Article 50 is triggered. It must be remembered that there are 164 Members in the WTO, so any renegotiation of the UK’s position could be laborious. On the other hand, if the legal obligations are already in place, and only minor amendments are needed, this might not be as arduous a process as expected.
In the long term, if we are committed to a ‘hard’ Brexit, then we have to hope that the negotiators are fluent in WTO language, familiar with our existing terms of trade as part of the EU (and the strengths of our market within the EU), and that they are able to articulate a strategic direction for UK trade that is sustainable. Furthermore, and perhaps most importantly for the WTO aspect, the future direction of the WTO will be affected if President-elect Trump decides to withdraw from the organisation. I previously would have thought that move to be highly unlikely, but there seems to be a growing shift in the rhetoric of both the UK and the USA of an ‘outward approach’ which I read to be increasingly protectionist. If that is the case, then anything is possible.