Upbeat on Brexit Britain and trade

Much negativity has been expressed by commentators, a good deal of which is exaggerated or misguided.  It is not all doom and gloom as many would have you believe. The UK remains in a strong position with respect to its current and future trading partners. It can, in fact, prosper going forward under existing arrangements and new ones which are highly feasible and indeed quite likely.

First of all, it must be acknowledged that, contrary to what many have stated, the UK is and will remain a member of the World Trade Organization (WTO).

One of the founding parties of the original General Agreement on Tariffs and Trade (GATT) which later became the WTO, the UK is automatically entitled to enjoy the benefits of the WTO’s key non-discrimination guarantees – both national treatment (prohibiting discrimination against foreign suppliers based on the origin of the good) and most favoured nation (prohibiting discrimination among WTO members based on the national origin of the good).

This means that UK manufacturers are entitled to the same tariffs as the rest of the world from the day that its membership in the EU terminates.

These WTO tariffs, it should be mentioned, are quite low already thanks to decades of multilateral negotiations.

 Free from the EU and as a WTO member, the UK will be able to set its own level of tariffs for the rest of the world. It will mostly likely keep these at the same level as the EU, entitling UK consumers to the same low prices on most goods that they have enjoyed for years.

The UK will also be free to offer the same terms of trade to the rest of the EU that it did while a member of the Common Market, indeed some UK politicians have suggested that this is precisely what will occur.

Alternatively, leveraging its status as the largest export market within the (former) EU, the UK could secure very favourable deals with the EU, particularly in relation to manufactured goods like cars. Germany will not surrender their favourite market just for spite.

It is true that there are some issues which will need to be ironed out regarding the UK’s membership in the WTO, such as its share of the EU’s import tariff quotas (agricultural products which are entitled to a lower tariff rate), as well as allocating the UK’s portion of the EU’s agricultural subsidies (which the UK has paid into and will now want to extract).

Making these deals should not represent significant obstacles because much of the negotiations, at least with respect to the tariff rate quotas, will effectively proceed on a bilateral basis with those countries for which the UK’s quotas had the most relevance, such as New Zealand’s quota for salted butter.

Likewise, the UK can quite easily sign on to the WTO’s government procurement agreement enjoying the same terms that it did as a signatory by virtue of its previous status as an EU member state.  With access to the UK’s procurement market as the prize there is no reason that any signatories would block the process.

As the UK’s most important economic sector is services, specifically financial services, it will need to negotiate new commitments with the EU and the rest of the world under the WTO General Agreement on Trade in Services (GATS) agreement, which it will no doubt do in the coming months and years following the triggering of Article 50 of the Lisbon Treaty.

Unlike the GATT (which covers goods), the GATS admittedly offers fairly limited liberalisation for financial services, and in that sense the UK financial sector did benefit significantly from its favourable terms of trade as a member of the EU.  

Of course it also had to suffer under the EU’s burdensome financial regulations from which it will now be free, much to the delight of many London firms (who almost surely will stay where they are despite posturing to the contrary).  

There has been no evidence of a departure of these firms in the months since the referendum, as many had feared. London has been the world’s financial centre for at least three centuries, after all. In addition to pursuing negotiations under the WTO GATS for greater services liberalisation, the new Trade in Services Agreement (TiSA) currently under negotiation among 23 states including the EU and the US, represents a fantastic opportunity for greater commitments in this sector to be achieved for the UK.

The UK can and almost certainly will now take part in these negotiations as an independent state and will take advantage of the anticipated benefits in this new arrangement for its world leading financial services suppliers.  

Independent from the EU, the UK will now be able to negotiate future trade (as well as investment) agreements on its own, which it had been prohibited from doing by virtue of the Lisbon Treaty.

Rather than wait years for these agreements to satisfy the needs of 28 EU member states, these agreements can be negotiated quickly and without reservations based on the idiosyncratic needs of other EU countries (such as intellectual property protections for Italian cheese).

The Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US has languished for years because of these delays as well as egregiously protracted public consultations. It appears now that the TTIP could fail due to political resistance within several EU member states.  

A UK-US FTA under similar terms to the TTIP could potentially be concluded rapidly, depending of course on the result of the US presidential elections. High profile figures in the US government have indicated their willingness to do so (despite President Obama’s initial comments about the UK being “at the back of the queue” on trade deals).  

Contrary to what many commentators have argued, it is completely untrue that one needs to be a member of a large bloc like the EU to secure good terms under these treaties. Many small states have done very well under FTAs.

Of course the UK is free to offer the same terms to countries with which the EU already has existing trade agreements. For example, the UK could offer the same or almost the same terms to Canada that the EU had offered under the Comprehensive Economic and Trade Agreement (CETA), particularly given that the UK represents a large part of what made the EU an attractive market to Canadians.

Canada appears quite willing to negotiate a free trade agreement with the UK.  India and Australia have also made similar statements. It appears the UK’s old Commonwealth allies are quite ready to pursue amicable and mutually beneficial trade relations going forward.

For its part, the UK government has announced its intention to hire a swath of trade negotiators in order to facilitate this process. As always, there are a number of UK academics who are also quite willing to lend a hand if needs be. 

The next few years will certainly be a busy time for trade negotiators and trade law experts, but the outlook is unquestionably positive. As with change so comes opportunity.

David Collins is professor of international economic law at City University London

Key points: 

Much negativity has been expressed over the UK's future relationship with the EU.

As a WTO member, the UK will be able to set its own level of tariffs for the rest of the world.

The UK  will now take part in WTO negotiations as an independent state.