A multitude of trade deals will not be signed the day after Brexit, but they can be completed quickly
Christian Stensrud, 9 September 2016
Liam Fox, the International Trade Secretary, is attempting to create a network of trade deals ready to be signed by the time the UK leaves the EU. If Article 50 is triggered in early 2017, as currently expected, this could be as soon as 2019.
But many doubt the UK’s ability to complete trade deals so quickly. Yesterday Sir Andrew Cahn, the former chief executive of UK Trade and Investment, called Mr Fox’s plan ‘unrealistic’. According to him simple trade agreements, like the proposed free trade agreement with Australia, would take at least two years to negotiate after the UK left the EU. Trade agreements with large economies, such as the US and China, would take at least a decade.
Mr Fox’s plan is slightly marred by the fact that the UK can only formally negotiate a trade agreement after it has left the EU. The idea that the UK can simply skip the formal negotiations and have a trade deal ready to sign on the day the UK leaves the EU seems far-fetched.
However, the UK can have preliminary discussions with potential trading partners whilst it is an EU member. Malcolm Turnbull, Australia’s prime minister, has been discussing an Australia-UK trade agreement with Theresa May for some time. According to Australia’s prime minister, talks are ‘already well advanced’. This week the Australian trade minister, Steven Ciobo, met with Mr Fox to discuss the characteristics of a post-Brexit Australia-UK trade deal. During his visit a bilateral trade working group was created to build the framework for an Australia-UK trade deal. The UK is using preliminary negotiations with Australia to limit the length of formal negotiations after Brexit. As a result, Mr Ciobo stated that after Brexit an Australia-UK trade agreement could be completed quickly.
It will take the UK more time to negotiate trade agreements with larger economies, including China. However, Sir Andrew’s prediction of ‘over a decade’ is overly cautious. The Chancellor, Philip Hammond, has already had preliminary talks with China regarding a free trade agreement. Other European countries have managed to agree free trade agreements with China relatively quickly. Switzerland, for instance, took four years to negotiate a free trade agreement, obtaining certain concessions that the UK would ask for in its negotiation covering intellectual property and banking. These things can be done.
However, the UK-EU exit negotiations have to progress swiftly for trade agreements to be signed quickly after Brexit. Free trade agreements that are currently being discussed by the UK depend hugely on its relationship with the EU after Brexit. This new relationship will determine what the UK can offer in a trade agreement. For example, the acquisition of passporting rights within the EU would be a huge bargaining chip for the UK in free trade negotiations with China or Japan. Delays or blockages in the UK-EU exit negotiations will curtail what the UK can offer non-EU countries via preliminary trade talks.
As a result, the UK should structure the upcoming UK-EU exit negotiations so that important concessions for preliminary trade talks with non-EU countries are negotiated first. As each concession is gained from the EU during the UK-EU exit negotiation, it should be used by the UK to further trade negotiations with non-EU countries. This should be a continual process that occurs throughout the two year UK-EU exit negotiation. Only then will the UK have a set of mature informal trade agreements in 2019. After Brexit these could be transformed into completed trade deals rather quickly.