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Expert View

7 reasons the UK’s Brexit trade plans aren’t working out

by David Hannay | 23.05.2018

David Hannay is a member of the House of Lords and former UK ambassador to the EU and UN.

One of the Brexiters’ major sales pitches during and since the referendum campaign was that a trade bonanza awaits the UK once it leaves the EU. This has begun to look increasingly distant, and highly improbable, as the Brexit negotiations grind remorselessly on without making much progress.

Here are seven recent developments which make this trade mirage unlikely to materialise.

1. No trade deals during transition

The agreement reached at the March meeting of the European Council on a transition period after exit day until the end of December 2020, during which the UK would remain in the EU customs union and single market, means that no new trade agreements between the UK and third countries can be concluded during that period.

2. Irish border headache could postpone trade deals further

The government’s latest shift in its position over the Irish dimension of Brexit, in order to avoid new border controls between the two parts of the island of Ireland, means that the UK is likely to remain in the customs union for even longer than the duration of that transition period. So the conclusion of any new trade agreements would be postponed well beyond December 2020.

3. Commonwealth countries aren’t desperate for deals

The recent Commonwealth Heads of Government meeting showed, to anyone who did not realise it already, that the Commonwealth is not, and never will be, a trading bloc. It is not an alternative trading option to the EU. Trade negotiations with important Commonwealth countries such as India will be far from straightforward and will inevitably involve big concessions by the UK over immigration policy to have any hope of agreement. Meanwhile, the EU is set to start free trade talks with Australia and New Zealand soon. The UK can only do the same if or when it leaves the customs union.

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4. All deals are worse than being in the EU

The government’s own economic forecasts, leaked to the press, demonstrated clearly that even the most optimistic array of new trade agreements will not nearly compensate for trade losses, when our trade with the EU ceases to be frictionless – as it inevitably will do if the government has its way and takes us out of the customs union and the single market.

5. Donald Trump

Developments in US trade policy – ructions in NAFTA, unilaterally imposed tariffs on steel and aluminium imports, a looming trade war with China (temporarily on hold), vetoing WTO judges – cast serious doubt on the prospects for an advantageous trade deal with our largest non-EU trading partner. Add to those doubts the concerns over food safety and remarks by the US Health Secretary about using the negotiations to improve US access to our pharmaceutical market and the prospect is not promising.

6. Liam Fox’s priorities are all wrong

The spat between the UK Treasury and Fox’s Department for International Trade (DIT) over the latter’s budget revealed that the trade secretary was prepared to sacrifice his front-line trade promotion staff around the world in order to protect his fledgling team of trade negotiators back home, pursuing the receding will-o’-the-wisps of new trade agreements.

7. We could still lose the deals we already enjoy

An ominous silence reigns over what should be the DIT’s most urgent task – ensuring free trade access after March 2019 for British exporters to all those third country markets with which the EU has preferential agreements from which we currently benefit (such as South Korea, Japan, Turkey, most of Africa, and the Balkans). As things stand (as a result of the transition deal), we will have to give exports from these countries continued tariff-free access, but our exports to them will not be assured of the same treatment. 

That is rather a long list, you might think. It goes to show how the referendum was won, and the Brexit negotiations are still being conducted, under false pretences.

Edited by Quentin Peel