Summary
A cross party group of UK MEPs representing agricultural constituencies have requested a detailed explanation from the UK International Trade Secretary Liam Fox on how the UK government will secure continued preferential access to 3rd country markets covered by EU trade agreements, once the UK is no longer part of the EU (from 30th March 2019). The current text of the EU27/UK Withdrawal Agreement is ambiguous on this issue, with serious WTO complications arising for 3rd country signatories of EU FTAs if they were to simply ‘roll-over’ UK preferential access once the UK was no longer part of the EU.
A cross party grouping of UK MEPs all of whom represent agricultural constituencies have sent a letter to the UK International Trade Secretary Liam Fox expressing concern that he is underestimating the difficulties which will be faced in replicating the terms and conditions of access to 3rd country markets which UK farmers currently enjoy under EU trade agreements (1).
The letter aimed to secure detailed information on the state of play in discussions on reconsolidating current UK access to 3rd country markets under EU trade agreements, which the MEPs maintained would be a ‘complex and time-consuming matter’ (1). Particular concerns were expressed over whether non-EU countries would ‘recognise that Britain still follows EU standards during the transition period’ and whether geographical designations of origin given protection under EU rules for products such as Cornish Pasties, West Country Cheddar Cheese and Gloucestershire Cider, would still be applicable to UK products once it was no longer part of the EU (1).
More broadly concern was expressed over the reality that since the UK would no longer be part of the EU ‘other countries will not have to recognise it as such for the purposes of existing EU trade deals that give Britain farmers access to markets’ (1).
The UK Department for International Trade (DIT) representatives meanwhile have asserted the ‘the Brexit transition period would provide “continuity” on current trade terms’. A UK government spokesperson added ‘as we leave the EU we will forge new and ambitious trade links around the world, reaching new customers for UK farmers and food and drink producers, while also maintaining our high standards on animal welfare and food safety’ (1).
It has further been asserted ‘the UK will continue to protect UK geographical indications, and we expect that all current UK GIs will continue to be protected by the EU’s GI schemes after we leave’. It was noted how all these matters were under discussion with the EU with the aim of ‘agreeing an implementation period which provides continuity of our current trade terms’ (1).
However the current wording to the EU-UK Withdrawal Agreement is far from clear on this point. Article 124.1 of the mutually agreed text of 19th March 2018 states: ‘the United Kingdom shall be bound by the obligations stemming from the international agreements concluded by the Union’ (2). However the main body of this article of the Withdrawal Agreement makes no reference to maintaining UK trade preferences on third country market. The focus in the main body of the text is on the UK complying with its existing obligations under EU trade agreements so as not to undermine the functioning of EU27 markets. The issue of the maintenance of existing UK tariff preferences on 3rd country markets under existing EU trade agreements is dealt with in a footnote to article 124 which states ‘the Union will notify the other parties to these agreements that during the transition period, the United Kingdom is to be treated as a Member State for the purposes of these agreements’.
In the course of the negotiations around the Withdrawal Agreement the UK government has secured the concession that:
‘during the transition period, the United Kingdom may negotiate, sign and ratify international agreements entered into in its own capacity in the area of exclusive competence of the Union, provided those agreements do not enter into force or apply during the transition period, unless so authorised by the Union’ (Article 124.4).
However the value of this provision can be questioned. According to the Chinese Ambassador to the EU ‘a deal with the EU was crucial before substantial trade talks could take place’ with the UK. He argued ‘only with an EU-U.K. deal can the U.K. be in a better position to have more detailed discussions with other players of the international community’. He maintained ‘if the EU and the U.K. fail to reach agreement in the first place, the U.K.’s agreements with other parties may have to face great uncertainties’. He went on: ‘if there is not a Brexit deal, there won’t be things to talk about’ (3).
Press reports meanwhile noted how ‘formal trade talks with the EU can only begin once the U.K. has left the bloc in March next year, meaning that any trade deal with China is likely several years away’ (3).
| Comment and Analysis
The structure of article 124 of the Withdrawal Agreement raises serious issues for UK agricultural exporters. Since the UK will no longer be part of the EU from 30th March 2019, existing WTO compatible EU free trade area agreements will no longer apply to the territory of the UK. In this context it is far from clear what the WTO compatible basis would be for 3rd countries treating the UK as if it were still a part of the EU for the purpose of implementing the commitments contained in EU trade agreements. The legal difficulties faced of incorporating into the legally binding EU-UK Withdrawal Agreement provisions guaranteeing continued preferential access for UK exporters to 3rd country markets under EU trade agreement has long been acknowledged by the European Commission. The limitation of the formal provisions of the Withdrawal Agreement to UK obligations under EU trade agreements is deliberate since this is the only dimension which falls within the EC’s responsibility for maintaining the integrity of the EU single market.
By limiting the withdrawal agreement to ensuring full respect for the UK’s ‘obligations’ under trade agreements, the EU ensures the functioning of EU27 markets are not disrupted during the transition period, without provoking conflict with the EU’s WTO partners who are insisting once the UK leaves the EU it should be accorded the same treatment as any other 3rd country. Implicit in this insistence by 3rd country governments is the threat that if the UK is treated better than any other 3rd country the EU’s major trade partners will immediately seek equivalent treatment from the EU. The use of a footnote with its legally ambiguous wording would appear to shift the focus of discussions on the WTO compatibility of any such unilateral extension of preferential access to UK exporters outside of the framework of a WTO compatible FTA, onto the shoulders of ACP and other 3rd country governments which have concluded FTAs with the EU. While making matters simpler for the EU this formulation complicates ACP EPA signatory governments’ relations with major WTO members (e.g. the USA). If ACP governments grant the UK preferential access to their markets despite the UK no longer being a party to the EU EPA, they will de facto be granting the UK trade preferences outside of a WTO compatible FTA. This could lead other WTO members to demand from ACP EPA signatory government the extension to their own exporters of the same trade preferences as those enjoyed by the UK. This is not the only complication faced in replicating existing preferences for UK exporters during the transition. Another major issue relates to the rules of origin to be applied to UK products in a context where the UK is no longer a party to the EU trade agreements. Again any unilateral extension of existing rules of origin under EU trade agreements to the UK once it has left the EU could lead to complaints from WTO members. While this issue is less relevant in the agricultural sector difficulties in other sectors (e.g. automobiles and pharmaceuticals) could pose challenges to the overall extension of existing UK trade preferences by 3rd country governments once the UK is no longer part of the EU. The issue of the rules of origin to be applied to UK exports to 3rd country markets is one of the many difficulties faced in ‘cutting and pasting’ EU FTAs into bilateral UK-only trade agreements. These difficulties are gradually being recognised by the UK government, with a consequent focus on simply ‘rolling-over’ existing EU FTA preferential access for UK exporters during the transition period, regardless of the WTO complications. |
Source:
(1) Independent, ‘Liam Fox has under-estimated difficulty of getting British farmers a good trade deal’ 18 April 2018
https://www.independent.co.uk/news/uk/politics/brexit-liam-fox-britain-farmers-trade-deal-agriculture-meps-leaked-letter-a8310841.html
(2) EC ‘Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community highlighting the progress made (coloured version) in the negotiation round with the UK of 16-19 March 2018’, TF50 (2018) 35 – Commission to EU27, 19 March 2018
https://ec.europa.eu/commission/sites/beta-political/files/draft_agreement_coloured.pdf
(3) politico.eu, ‘Chinese Ambassador to EU: No UK trade talks without a Brexit deal’, 13 April 2018
https://www.politico.eu/article/chinese-ambassador-eu-zhang-ming-no-uk-trade-talks-without-a-brexit-deal/