Post Brexit: ‘Trade Bill’ aiming to support UK’s future ‘independent trade policy’ moves a step closer

On 8 September 2020 the House of Lords picks up the passage of a Trade Bill that, if it becomes law, aims to support “continuity agreements” – as the Government is calling them.  It seeks to allow the UK to replicate the existing network of trading relationships with the EU’s current partner countries.

The bill would enable:

• the UK to meet any obligations arising under International Government Procurement Agreement – presently covered under UK membership of the EU;
• the UK to implement in domestic law obligations that may arise under international trade agreements signed between the UK and countries having an existing international trade agreement with the EU;
• establishment of a new UK Trade Remedies Authority;
• HMRC to collect information on the number of exporters in the UK; and
• data sharing between HMRC and other private and public sector bodies in order to fulfil ‘public functions’ relating to trade.

The bill does NOT address:

• any agreement that may be reached between the UK and EU about their future trading relationship; nor
• any powers to implement new free trade agreements between the UK and any countries that do not currently have a free trade agreement with the EU.

Background

Whilst the UK was a member of the EU, it was party to many trade agreements with ‘third’ (every other non-EU) countries by virtue of its EU membership.  It did not have an independent trade policy – and was, indeed, precluded from negotiating its own trade agreements.  The Withdrawal Agreement continued this arrangement until the end of the ‘transition period’ that ends on 31 December 2020.

The Government cited the ability for the UK to control its own trade policy, set its own tariffs and do its own trade deals as one of the benefits of Brexit.  However, the Government is also seeking ‘continuity’ of existing EU and third country trade relationships post-transition.

By the end of August 2020, the Government has signed ‘continuity agreements’ with about three-quarters of EU trading partners – accounting for £110 billion of trade in 2018.  They come into effect on 1 January 2021.  A list of countries and trading blocks and countries that have already signed continuity agreements – and those “still in discussion” is set out, below.

Significantly, the EU does not have a free trade agreement with the US – so the powers in this bill may not be used to implement a free trade agreement between the UK and the US.

International relations – including making treaties—is a ‘reserved’ matter within the devolution settlements; meaning that the UK Government negotiates and enters into such agreements on behalf of all nations within the UK.

The Government Procurement Agreement (GPA) falls within the framework of the World Trade Organisation.  It consists of 20 parties covering 48 WTO members.

WTO explains the purpose of the GPA as follows: “to mutually open government procurement markets among its parties…worth an estimated US$1.7 trillion annually to international competition.

The UK expects to join the GPA in its own right at the end of the transition period – on substantially the same terms.  However, the Government has stated that it may take up to 30 days to come into force after 31 December 2020.

Overseas businesses will be able to bid for £67 billion worth of public sector contracts in the UK every year.  In return, British suppliers will be able to bid for £1.3 trillion worth of government contracts overseas in a wide range of sectors from large infrastructure to professional and business services.

Trade negotiations are new for the UK

Countries that are experienced in trade negotiations, typically implement domestic reforms that precede commitments in trade agreements.  In other words, they try to work out what reforms they want to pursue – and then identify how entering into treaty commitments can underpin and lock in these reforms.  The UK’s has yet to set its aims and policies in this respect.

Trade policy in the 21^st Century is both cross-cutting and fast-moving.  For instance, in the decarbonisation and the ‘green’ agenda.  The UK has its net zero-emissions target, but the pursuit of climate and environmental objectives will require a mix of policy instruments such as standards, subsidies, and environmental/ emissions taxes.  In turn this raises the question of how these all relate to agreements and multilateral trade rules.  How will the UK government manage differences between countries around the World in terms of ambitions regarding environmental and climate objectives?

Trade agreements also need to address digitisation in production and trade.  Distinctions between ‘goods’ and ‘services’ – and between traditional industry sectors – are breaking down.  It is vital that the UK gets its policy right in a world of evolving patterns including: the regulation and taxation of digital platform and network services; data protection and privacy; support for sectors and regions in accessing technological innovation; and consumer protection.

In an increasingly digital, networked, globally connected world, “lock-in” of the wrong policy settings will be somewhere between detrimental and catastrophic.

Status of UK trade ‘continuity’ negotiations at August 2020

The UK has signed ‘continuity agreements’ with: Andean countries (Columbia, Ecuador and Peru); CARIFORUM trade bloc (Antigua and Barbuda, Barbados, Belize, Bahamas, Dominica, the Dominican Republic, Grenada, Guyana, Jamaica, St Christopher and Nevis, St Lucia, St Vincent and the Grenadines, Trinidad and Tobago – whilst Suriname has approved in principle); Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama); Chile; Eastern and Southern Africa (ESA) trade bloc (Madagascar, Mauritius, Seychelles, Zimbabwe); Faroe Islands; Georgia; Israel; Jordan; Kosovo; Lebanon; Liechtenstein; Morocco; Pacific States (Fiji and Papua New Guinea); Palestinian Authority; South Korea; Southern African Customs Union and Mozambique (SACUM) trade bloc (Botswana, Eswatini, Lesotho, Namibia, South Africa and Mozambique); Switzerland; Tunisia.

The Government is ‘in discussion with’ the following countries that currently have existing EU trade agreements in place: Albania (Western Balkans); Algeria; Bosnia and Herzegovina (Western Balkans); Cameroon (Central Africa); Canada; Cote d’Ivoire; East African Community (EAC) (Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda); Egypt; Ghana (Western Africa); Mexico; Moldova; Montenegro (Western Balkans); North Macedonia (Western Balkans); Serbia (Western Balkans); Singapore; Turkey; Ukraine; Vietnam.

Reference: http://researchbriefings.files.parliament.uk/documents/LLN-2020-0119/LLN-2020-0119.pdf