Britain faced with Brexit headache over ties with rest of the world
As Britain seeks to decide what kind of relationship it wants with the EU, another issue is racing up the agenda: the country’s post-Brexit relations with the rest of the world.
Even if Theresa May, prime minister, secures a deal to maintain most of the status quo after Britain leaves in 2019, it may still be hard to replicate the web of treaties that shape relations with dozens of other countries.
The transition deal that the UK is seeking to negotiate early next year will only cover ties with the bloc, not the accords that Brussels struck with the rest of the world.
As a result, when it leaves the EU on March 29 2019, the UK risks falling out of hundreds of agreements that are relevant to British interests, covering everything from nuclear cooperation and free trade to airline flying rights.
Liam Fox, Britain’s international trade secretary, describes the change as a liberation that will allow the UK to “seize the opportunities” of setting an independent trade policy for the first time since the 1970s.
We don’t control what third countries will do. We have better things to do. The UK told us they would replicate it. That is their problem Senior EU negotiator
But seen from Brussels, the situation looks like Britain having to run to stand still. UK officials must replicate the lost arrangements — while at the same time being under an EU law based transition that constrains their ability to negotiate.
It is a challenge that Stefan Lofvan, Sweden’s prime minister, describes, in his understated way as “quite difficult”.
How these treaties — covering 168 non-EU countries — might be prolonged, re-established or altered after Brexit is set to be the scene of battle in Brussels over the coming months.
What are the agreements and why do they matter? When Britain joined the EU it ceded powers to enter into international agreements. That is most obvious on trade, where the EU runs a common trade policy managed out of Brussels. As a bloc, it has signed more than 50 free trade agreements. In practice EU agreements have ranged much wider. One notable example is equivalence arrangements in areas including financial services — which allow the bloc to recognise as equivalent another jurisdiction’s rules, and vice-versa. Others include agreements involving Euratom, the pan-European nuclear regulator, or more out-of-the-way issues such as fishing rights in the South Pacific. A US treaty with Euratom that is vital to UK nuclear power stations may need congressional approval to replicate or renew © Bloomberg While many agreements would hardly be noticed if they lapsed, some will be important to specialist sectors of the economy, and some are vital to core national interests. A nuclear agreement between the US and Euratom is vital to the delivery of fuel and spare parts for Britain’s fleet of power stations — and US officials say the treaty may need congressional approval to replicate or renew. Whitehall officials estimate there are up to 1,200 agreements, although the FT found around 750 with direct relevance to Britain. Around 200 to 400 would have a material impact if Britain were unable to replace them on Brexit day. Will the transition give Britain more time to negotiate? One commonly made mistake is to assume that pacts with third countries would be “rolled over” in a transition, since Britain is expected to accept the EU’s full legal order until at least the end of 2020. The legal situation is complex and such a rollover is often not entirely in the gift of the EU or the UK. Some agreements (including for aviation) are drafted broadly enough to apply during a transition; others have clear geographic clauses that mean Britain would fall out of scope. In practice Brexit negotiators expect Britain to be excluded from those agreements unless the third countries — and there are more than 100 of them — explicitly agree and pass any changes necessary to their domestic laws.
That means that UK officials have around 14 months to replicate those arrangements before Brexit day if they want to maintain existing terms for UK companies around the world. While the EU could help or hinder those discussions with third countries, there are no quick EU-UK legal agreements to short-cut the diplomatic legwork. Won’t Britain need to have its own trade policy? Britain wants a transition of around two years, and EU leaders have made clear that means upholding the substance of the EU’s regulatory regime, including how it treats third countries. In guidelines adopted at a summit last week, EU leaders said Britain “will have to continue to comply with EU trade policy”, including in the way it applies the EU’s external tariffs. A strict interpretation of this text would mean the UK loses the benefits of some EU external agreements yet would be legally prohibited from replacing them. But one senior EU negotiator described such a scenario as “not realistic”. The alternative would allow the UK to enter discussions or trade negotiations with third countries, but under one condition: no changes to EU law or common external tariff would apply before the end of the transition. Will the EU and third countries assist Britain in managing this process? The UK and EU have already co-operated on issues including a common approach to managing changes to quotas for agricultural products at the World Trade Organization Such an approach could be applied more broadly, for instance through jointly notifying trading partners that no changes to trade terms are necessary during a transition since the UK and EU will remain part of a “customs territory” with the same rules. But to date Britain has sought no help from the EU — and may find little sympathy if it did. “We don’t control what third countries will do [in the Article 50 process],” said one senior negotiator. “We have better things to do. The UK told us they would replicate it. That is their problem.” Leaked documents from the EU’s Brexit negotiating team indicate that the bloc will only help Britain extend arrangements if they are “necessary, legally feasible [and] in the union’s interests”.
Many third countries will want to avoid big disruption to their trade terms with the UK after Brexit. To that extent, there will be a common interest in rolling over arrangements, especially if such agreements do not need parliamentary approval. However, in some cases Britain will stand more to lose during a transition than its trade partners. That is because the EU trade deals for a country such as South Korea would cover the whole customs union — including full access to Britain’s market during a transition. Britain would, in other words, be asking Seoul to open its market even though the UK had nothing to offer in return. Trading partners may see it in their interests to help the UK, especially if they are hoping to secure better trading deals after the Brexit transition. Others will seek to exact a price for their support. Even traditional UK allies such as the US and New Zealand fiercely rejected the Britain opening offer on agricultural quotas and are pushing for a better deal at the World Trade Organization.