Since the June referendum on the withdrawal of the United Kingdom from the European Union, we have been witnessing an enormous wave of speculation, commentaries and analysis on the future trade agreements between the UK and other countries. Brexit proponents argue that a withdrawal from the EU will be beneficial for the country since the UK will be able to establish its own agenda and choose trade partners. Their arguments, however, include logical inconsistencies or even ignore serious risks.
First, in the public space, one can notice claims that trade with EU countries accounts for less than 50% of the total volume. The reality is that 44% of British exports to the EU actually do go to the EU, as compared to 54% that go in the opposite direction. This figure, however, does not include the portion of trade with third countries with which the Union has a free trade agreement, such as Mexico, South Africa and soon also Canada. These countries account for another 20% of Britain’s foreign trade. Second, Brexit proponents claim that by leaving the Customs Union, the UK has nothing to lose. Such a decision would, however, have serious consequences: among others, new rules of origin would have to be defined, which would put up the price of the products by 3-15%.
The third argument is based on the freedom to conclude bilateral trade agreements. The current practice proves that such agreements are not only about tariff reductions but also about standards of goods, harmonization of rules and intellectual property. Such comprehensive agreements are negotiated for several years and almost certainly go beyond the mandate of the current British government. The new government can therefore come up with different priorities and requirements, thus complicating and prolonging the process. Fourth, according to Brexit advocates, the United Kingdom will promote a free trade policy and eliminate protectionist tendencies associated with an EU approach to trade. However, it is already apparent that the British government will profess a specific approach for each sector and a liberal approach to free trade only in the areas that are relevant and beneficial for the UK.
The United Kingdom outside the EU will ultimately be less attractive to trade partners and have a more difficult negotiating position vis-à-vis third countries. The British have opted for a withdrawal from the Union also in order to regain control and authority. Through this decision, Britain is paradoxically losing its influence on the policies of EU countries and, after the agreement on future relations have been negotiated, a degree of sovereignty will again be transferred to the EU.
‘Brexit and Trade: Between Facts and Irrelevance’ – a Policy Briefing by Phedon Nicolaides and Thibault Roy – Collège d‘Europe.
(The study can be downloaded here)
