A European Parliament international trade committee working document, seen by EUROPE on Friday 10 February, underlines the impact of the United Kingdom withdrawal from the EU – Brexit – on EU common trade policy and shows, in particular, that Brexit may affect offers and, “to a certain extent”, the outcomes of all the on-going free-trade negotiations.
Brexit could have an effect on the content, timetable for adoption and procedure of a number of legislative texts that are currently under discussion or in the process of being adopted, such as the two regulations on the control of exports (the new anti-torture regulation adopted in 2016 and the revised regulation on dual-use goods which is currently being scrutinised), the regulation that will govern the trade in conflict minerals (due to come into force in the first half of this year), regulations on trade defence (modernisation of trade defence instruments – an issue on which the UK has steadfastly refused to do any softening of the lesser duty rule – and China’s status as a market economy) and the initiative to ensure reciprocal opening of third countries’ public procurement (an initiative deadlocked in Council and on which the UK remains “sceptical”).
Brexit will have clear implications for the host of free-trade agreements in force, concluded, being negotiated or at the pre-negotiation stage between the EU and third countries.
This is especially true of the TTIP negotiations with the United States, in view of the strong trade relations between the two countries. If the UK leaves the EU before TTIP negotiations are concluded, “it is unlikely to affect the overall objectives of the EU for the TTIP, but of course it can lead to different nuances for the final trade-offs to be made”, the note states, adding: “To sum up, the UK’s departure decreases the size of the EU market, thereby, making TTIP slightly less interesting for the US”.
With regard to CETA, the free-trade deal with Canada, the exit of the United Kingdom should have no effect on the provisional application of the agreement and the ratification procedure but “the trade volume will most likely be affected and after the UK’s withdrawal, there could be need for redistribution of commitments under the agreement among the member states”, according to the note.
Brexit could have a positive impact on free-trade talks with India that have been bogged down since 2013. The UK has a special link with India but is only its second largest EU trading partner, after Germany (its 18th largest partner globally), but Scotland has a major interest in a trade agreement with India for its whisky, the note states, adding: “In case the UK including Scotland would leave the EU, this could possibly facilitate FTA negotiations as tariffs on wines and spirits constitute an obstacle”.
Brexit will also have consequences for trade talks with Japan where the UK has “a significant offensive interest” especially in the field of financial services. The UK currently has a strong interest due to major Japanese foreign direct investment stock in the UK in the automotive and electronic sectors, mainly motivated by the free entry into the single market. This may result in diverging interests between the EU and the UK”, the note states.
The same is true for talks on a bilateral agreement on investment with China, where the UK has significant offensive interests with its financial services and which it will be in the country’s interest to defend in a post-Brexit situation.
Brexit will also affect the forthcoming free-trade negotiations with Australia and New Zealand, two partners which immediately indicated a desire to agree free-trade deals with the UK after its withdrawal. “A process of parallel consultations could complicate these negotiations”, the note suggests.
A “significant impact” is also to be expected in negotiations taking place for an international trade in services agreement (TiSA) “particularly in the areas of the negotiations, where the UK market is valuable, like financial services or telecoms, will have to be readjusted. The whole EU offer will also be reduced as a mechanic consequence of the UK withdrawal from the EU side”, the document states.
“All ongoing international trade negotiations, particularly bilateral ones, will need to take account of UK's departure from the EU. In practical terms, it can affect the offers and to a certain extent their outcome”, is the conclusion of the note in a second section which discusses provisions to be included in the withdrawal agreement that will define future relations between the EU and the United Kingdom, one aspect of which will be the future relationship between the two in terms of trade.
See: http://bit.ly/2lzgVt6 (Original version in French by Emmanuel Hagry)