Trade Continuity (UK Brexit)

Disclaimer : this Blog does not focus on trade tariffs and processes per se

The UK Government today (21st Feb 2019) published revised guidance to UK and international businesses that use preferential trade terms under existing agreements between the EU and third countries to advise them about a scenario in which the UK leaves the EU without a Withdrawal Agreement (no deal, or unmanaged Brexit).

While some continuity agreements are likely to be concluded by exit day, the DIT Secretary Statement (of today) asserts it is the duty of government to produce a highly cautious list of those that both may and will not be in place in order that businesses and individuals ensure that they are prepared for every eventuality.

A list of the agreements and guidance of what to do in no deal is here.

The DIT Secretary statement continues –

Scope of the Trade Continuity programme

The Government is seeking continuity for existing EU trade agreements in which the UK participates as a member of the EU. These agreements constitute around 11% of our trade. These agreements also cover a wide variety of relationships, including:

• Free Trade Agreements (FTAs);

• Economic Partnership Agreements (EPAs) with developing nations;

• Association Agreements, which cover broader economic and political cooperation;

• Mutual Recognition Agreements (MRAs) and;

• Trade agreements with countries that are closely aligned with the EU

Businesses in the UK and partner countries are eligible for a range of preferential market access opportunities under the terms of these agreements. These can include, but are not limited to:

• preferential duties for goods, including reductions in import tariff rates and quotas for reduced or nil rates of payable duties;

• quotas for the import of goods with more relaxed rules of origin requirements;

• enhanced market access for service providers;

• protection from discrimination in public procurement opportunities across a range of sectors;

• allowing parties to mutually recognise conformity assessment procedures;

• the ability to complete mandatory inspections and tests on products close to the place of production; and

• common standards on intellectual property.

Progress Update

To date, the UK has signed trade agreements with Switzerland, Chile, the Faroe Islands, members of the Eastern and Southern Africa (ESA) Economic Partnership Agreement, Israel and the Palestinian Authority.

The UK is also close to formal agreement on text with Fiji and Papua New Guinea (Pacific) and arrangements are being made for their signature. It is likely these agreements will be transitioned in time for day one of exit.

The UK has also signed Mutual Recognition Agreements that allow continuity of trade with Australia and New Zealand, and the United States. These MRAs mean that UK exporters can ensure goods are compliant with trading partners’ technical regulations before they depart the UK.

Discussions with other partners continue with the aim of replicating the effects of existing EU agreements as far as possible. The DIT Secretary statement asserts –

We are continuing to engage with those other partner countries to conclude agreements in time for exit day. Particularly intensive discussions are, for instance, happening now with partners such as SACU+M, EEA, Canada and South Korea.

Some agreements that will not be in place for exit day – these are Andorra, Japan, Turkey, and San Marino.

As the statement points out, the UK’s trade relationships are not just determined by trade agreements; the UK also participates in the EU’s Generalised Scheme of Preferences (GSP), which allows developing countries, including Least Developed Countries and low to lower-middle income countries to receive preferential access to the UK market. The Government fully intends to continue the existing market access provided by these unilateral preference schemes.

To do so we have taken the necessary powers through the Taxation (Cross-border Trade) Act 2018 to allow us to continue providing non-reciprocal reductions in tariffs to developing countries. Through this, the current beneficiaries of the EU’s GSP will be able to export to the UK after our EU exit on the same terms as at present. We will shortly be laying the necessary secondary legislation in Parliament.

This means that some countries will continue to be eligible for preferential tariff treatment under the UK’s newly established independent trade preferences scheme even if the relevant EU-partner country trade agreement has not yet been transitioned into a UK-partner country agreements.

Details of non-EU countries with whom the UK currently has in place arrangements for preferential trade, including both free trade agreements and unilateral preferences is here.