We will pursue a bold and ambitious free trade agreement with the European Union.”Theresa May
THE UK’S PRIME Minister yesterday laid out a plan for a hard Brexit, one that would see the UK leave the EU and negotiate its own trade deal with the remaining 27 members.
But what would that deal contain? Is it feasible? What happens now?
May has long held an ambition to trigger Article 50 of the Lisbon Treaty by the end of March, formally beginning the process of taking the UK out of the EU.
From then, her government has 24 months to negotiate its own versions of agreements with countries which have deals with the EU, if it wishes to continue trading as usual.
That means sitting down with all nations from Albania to Turkey which have existing agreements – as well as Canada, much of Southern Africa and the Caribbean, all of whom currently have provisional agreements in place with the EU.
There is also the issue of a shelved TTIP (the EU trade agreement with the US). Incoming President Donald Trump said at the weekend that he wants to negotiate a deal with the UK as soon as possible, but even that might not be quick enough.
Sources familiar with the negotiation of such deals say that while two years may seem like a long period, in reality it is not even close to enough time.
“The UK says it needs 50 new trade agreements straight away, but you can’t do that,” says one source, who points to CETA, the EU deal with Canada. It was agreed in October, seven years after negotiations began in 2009.
They can take years to negotiate. It’s hard to see them doing them all at one time. It’s the same people – the same civil servants – who will be negotiating all of the deals. They can’t keep that many plates spinning.
Taxing issues
So what is a trade agreement, anyway?
According to the World Trade Organisation, there are 625 trade agreements between the world’s 195 sovereign states.
The basic aim of agreements is to remove trade tariffs and taxes on goods entering markets.
So in the case of CETA, Irish farmers were unhappy that a large quantity of Canadian beef would be allowed enter the EU market without tariffs.
While economists generally praise the deals for opening up trade flows, some politicians are wary of them.
“It’s been shown over consistent studies that single-market membership increases trade flows,” says Dermot O’Leary, an economist with Goodbody. “That’s not argued with.”
But Luke Ming Flanagan does argue with the purpose of CETA. While many businesses see trade agreements as market opportunities for their products, Flanagan says some see other opportunities.
“Despite the tag, CETA is not about trade, it’s about big business and standards – labour standards, environmental standards, food quality standards, healthcare standards – and it’s about big business and access to and potential private ownership of what are normally seen as public utilities – water, power, transport, communication.”
May-be she will
So with May under pressure to rewrite the UK’s trading policy of the last 44 years in just 24 months, the question is: Is it doable?
“Theresa May is trying to avoid a cliff edge. The cliff edge would be that period outside the EU,” says O’Leary.
“That two-year transition period would be one where nothing would change. That’s important for the UK, but it’s also important for the EU. In the event of no negotiations, there would be a crash-landing Brexit.
“(Yesterday’s) speech is very much a starting position.”
Sources familiar with EU trade agreements say that any deal between the UK and EU will take “some time” to negotiate. With the UK a major trading partner of Ireland’s, that could be a problem for many export-based companies, says O’Leary.
This is the worst possible outcome for Ireland… first the vote, then the expectation would have been a soft Brexit, which now seems unlikely. This will create trade friction for many companies.
“For May, it’s a decent starting position to begin her negotiations. It’s just not realistic to expect some of the things she has set out.
“It’s only when the conversations start will we get into the meat of what she wants.”
To embed this post, copy the code below on your site
have your say