The reality of Britain's role in the global trading system after Brexit remains deeply uncertain

Opinion piece (The Independent)
30 March 2019

The UK’s ability to strike new trade deals has increasingly defined the Westminster Brexit discussion.

Whether these deals should be prioritised over a deep economic relationship with the EU, or indeed an all-UK approach to Northern Ireland, has been the central conundrum for a government still unwilling to nail its flag to the mast.

Instead it has attempted to square the circle via a Chequers proposal that would, if implemented, allow the UK to benefit from both new trade deals and continued integration with the EU in respect of goods and agri-food. Such notions of a halfway house that allows the UK to have the best of all worlds have been rejected by the EU. As such, it is difficult to predict with any great certainty what any future UK trade policy will look like.

Much of the Department of International Trade’s focus and capacity to date has been consumed by its colossal task: not only has it had to re-establish the UK as an independent actor at the WTO, create its own trade remedies regime and authority, and accede to the WTO government procurement agreement. It also is tasked with replacing the 40 trade agreements the UK is already party to by virtue of its EU membership.

While continuity agreements have been agreed with a small number of countries, including Switzerland, Israel and Chile, there is still much to be done. Larger economies, such as Japan and Canada, have already indicated that they will treat the replication as a fresh negotiation, and for others, such as Turkey, the question as to whether the UK can fully replicate what already exists is entirely dependent on the nature of the future UK-EU relationship.

This replication process will remain the UK’s overriding trade priority well into the transition period and, perhaps, beyond.

During that transition, if it has one, the UK can also begin negotiations with potential new free trade agreement partners. It has already identified New Zealand, Australia, the US and accession to the Comprehensive and Progressive Transpacific Partnership (CPTPP—a plurilateral trade agreement made up of 11 countries) as a priority.

While Australia and New Zealand will be happy to begin negotiations—knowing that it will buy political goodwill with the UK—nothing will be concluded until there is certainty over the UK’s future relationship with the EU, particularly whether the UK will be in a customs union with the EU and, if so, for how long.

Negotiations with the US will prove trickier. Washington is unlikely to play the role of a disinterested observer, and a comprehensive trade deal with the US requires the UK not only gain control of its tariffs, but also fully extricate itself from the EU’s regulatory orbit in areas such as food hygiene. While the US is also pressuring the EU to budge on the "chlorinated chicken" issue, it is unlikely to succeed.

This leaves the UK in the awkward position of having to choose between prioritising frictionless trade in products of animal origin with its most important trading partner (with implications for Northern Ireland) or reduced friction with the US. However, if and when the UK decides to accept additional friction between the UK and the EU, or it becomes unavoidable due to UK and EU red lines, Britain may decide that the additional marginal cost of further divergence from the EU in order to accommodate American demands is a price worth paying.

CPTPP will remain a long-term ambition. Putting aside jokes about whether the Pitcairn Islands qualify the UK as a Pacific power, the accession process is still unclear, and there are other more viable accession candidates such as Thailand and South Korea. Furthermore, there are differences in opinion between the UK and some existing members as to how much leeway the UK would have to negotiate opt-outs. Failure to accede to CPTPP in the short term is not in and of itself an issue for the UK.

The gains of CPTPP are predominantly political—the UK will be replicating EU agreements or negotiating new ones with the main economic players of CPTPP anyway—in that attempted accession is designed to signal the UK’s continued commitment to the international rules-based order, something which has been placed in doubt by Brexit, and even merely placing ourselves in a queue partially achieves this.

Ultimately, the question of what role the UK will play in the global trading system cannot be fully settled until the UK clarifies the depth and scope of future relationship with the EU. And until and unless it does, Britain’s future trade policy will remain disjointed, and its global role ill-defined.

Sam Lowe is a senior research fellow at the Centre for European Reform. This is from the UK in a Changing Europe’s report, 'Article 50 two years on'.