Brexit and the UK Future Trade Regime with the EU and the World: Options and Constrains

Giorgio Sacerdoti
CSF-SSSUP Working Paper No 2/2017

The UK Government has indicated that it intends to maintain after Brexit the existing “deeply integrated trade and economic relationship between the UK and the EU”, while at the same time not seeking to remain part of the EU single market, or to establish a custom union with the EU. The EU Guidelines for Brexit negotiations under Art. 50 of the TEU, on the other hand, have made clear that a non-member of the Union cannot enjoy the same benefits as a member. Establishing a trade regime “as frictionless as possible” as aimed at by the UK appears therefore problematic, short of the UK remaining in the single market or establishing a custom union with the EU, both options having been rejected by the UK at the opening of the Art. 50 negotiations on 19 June2017 notwithstanding the results of the 8 June elections.

The paper discusses then the features of a possible EU-UK post-Brexit Free Trade Agreement, and of trade relations in the light of WTO rules, should an FTA not be concluded. The Frontier Traffic exception of GATT could be a basis for avoiding reestablishing a hard border between the Republic of Ireland and Northern Ireland. As to future UK trade relations with third countries, the conclusion is that the UK could not maintain its membership in the EU’s current bilateral agreements, even if it so wished.

As to UK’s relations with other WTO members, it is submitted that the UK will retain its status as a full “original” member of the WTO and that its schedule of concessions will be initially that of the EU in place at the date of Brexit, thus preventing third countries from asking for renegotiation of the UK schedules. A delicate issue will be represented however by the apportionment between the EU and the UK of EU tariff-rate quotas for agricultural products, which will imply negotiations with third countries beneficiaries by both the EU and the UK. Finally, the UK will be able after Brexit to freely negotiate FTAs with any WTO member, notably with the US, in accordance with GATT rules on regional agreements.

Keywords: Brexit, Trade, UK, EU, World, WTO

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