By Assad Bhuglah
The post-Brexit is hinging on a cloud of uncertainty. It is not clear when the UK will kick off trade negotiations with its different partners. It is also not clear how the UK will accommodate its trade regime with EU or how many trade agreements it can negotiate in parallel with the rest of the world. There is no indication how the UK will re-define its trade relations with its Commonwealth constituency. Then, it is too early to pronounce on what could be the final position of the British population once the Brexit fever has cooled down.
Trade policy for UK has up till now been conducted exclusively at the EU level. Over half of Britain’s trade is with the EU, while its exports to and its imports from 60 other countries are also governed by agreements struck with the EU bloc.
Once the UK government officially notifies its Brexit decision to Brussels, all the EU trade agreements of which the UK has been automatically part as an EU member state would need to be re-negotiated on a bilateral basis. For Mauritius, UK has always been its most important traditional trade partner. Its acquired trade rights emanating from the long-standing Commonwealth preferences were incorporated into the EU trade regime when UK joined the EU Common Market in 1972. With UK getting out of the EU, Mauritius will have to imperatively to re-negotiate its trade relations with UK so that its trade benefits will not be impaired.
The EU currently has trade agreements with 52 countries, and it is further negotiating trade agreements with another 72 countries. As a fallout of Brexit, the UK would therefore need to re-negotiate or start new bilateral negotiations on around 124 trade agreements, plus one additional trade agreement re-defining its own trade status as a third country vis-à-vis the EU. To prevent disruption to the trade flows on which the British economy has come to depend, securing trade deals with the EU and with non-EU countries including the US, India, China, Japan and Australia would be a matter of urgency. Signing new trade deals with other countries will be a big challenge for UK negotiators. With a limited number of negotiators, they will not be able to respond to all calls for negotiations. They will have to prioritize with which country they would like to engage in trade negotiations.
Renegotiating these agreements would take time. On average it takes some six years to negotiate a trade deal, provided that there is full political commitments and adequate negotiating-team mobilization from both sides. While the UK would have more flexibility when negotiating alone, it has to be reckoned that its bargaining power would be considerably reduced compared to that of the EU, which is one of the top three traders in the world. But what would be more demanding and protracted would be the negotiation of a trade agreement between the UK and the EU: apart from taking considerable time, it might become hostage of consensus decision of 27 EU members. Re-establishing the UK’s trade agreements and networks would be a long a complex process.
The entire question of post-Brexit is shrouded with uncertainty. While it is very likely that the UK would have to engage in model of trade arrangements similar to Free Trade Area (FTA) with non-EU members, it is not clear what type of trade agreement the UK and the EU would settle for. Evidently, the UK would push for a FTA-type of agreement so that it can have more sovereignty and greater latitude in designing its foreign trade policy. But the EU is already insisting that movement of people should be part of the re-negotiated trade deal, to which the British are allergic. In the final analysis, the UK and the EU could come to terms with a model of trade agreement that could fall in-between the flexibility of a FTA and the rigidity of a Customs Union. It is also not clear how the UK would proceed with trade negotiations with the ACP group of countries? Will it agree to continue on the same basis of the terms and conditions contained in the Economic Partnership Agreements? Will it prefer to have a separate deal with the Commonwealth group within the ACP? Or will it prefer to negotiate bilaterally with them? Or will the UK opt to extend the bulk of the lesser developing countries the unilateral General System of Preferences(GSP)? The GSP-route will not be a solution to Mauritius because it runs the risk of being graduated out of this preferential scheme owing to its relatively high-income status.
After having completed the bilateral trade deals, the parties will have to notify them to the WTO which will start a scrutiny process. This will be a complex and time consuming exercise which will be made all the harder by the fact that potentially every single one of the WTO’s 162 members could question the contents of these trade agreements. These trade agreements will pass the test of WTO-compatibility once all the WTO members give their concurrence.
Uncertainty also surrounds as to what would be next move of the UK. The entire process of trade negotiations or re-negotiations can only start once UK decides to trigger the Article 50 of the EU Treaty provision on withdrawal of a Member State from the EU, by notifying its intent to leave the EU. It seems that the UK is buying some time before making such notification. As time passes, nothing prevents for another movement within the UK to build up and call for fresh referendum to re-visit the Brexit decision. Post-Brexit is holding the world in suspense.
The author was until recently Director of Trade Policy at the International Trade Division, Ministry of Foreign Affairs, Regional Integration and International Trade, Government of Mauritius. Over the last three decades, he has been the key trade negotiator for Mauritius at the level of the WTO, SADC, COMESA, IOC, Tripartite FTA, AU as well as bilateral trade deals with India, Pakistan and Turkey. He is presently an independent trade expert responsible for Trade Advocacy for Africa.