The government draws closer to establishing the legislation that will be needed after Brexit with the introduction of a new Trade Bill.
- The Trade Bill has received a first hearing in parliament, but not been debated at this stage.
- In terms of the future trade agreement between the UK and the EU, the December European Council meeting of the EU27 leaders is the next key milestone to watch.
The EU is the largest and most ambitious single market and customs union ever negotiated between countries. Prime Minister Theresa May has made it clear that the UK will leave the single market and the customs union after Brexit. The UK must seek to replace this by setting a clearly articulated and forward-thinking trade policy and industrial strategy which positions the UK as a free trading nation in global terms.
Currently, as a member of the European Union (EU), the UK’s external trade policy is part of the EU’s Common Commercial Policy, the harmonised approach to imports of goods and services from outside the EU. Under the Common Commercial Policy, EU member states apply a single set of external tariffs. Negotiations with external trade partners are negotiated by the EU on a collective basis. This includes, broadly speaking, commitments made by the EU to other World Trade Organisation (WTO) members.
Once the UK exits the EU, the Common Commercial Policy will cease to apply and the UK will be able to set its own external trade policy. This will include establishing the UK’s WTO commitments and negotiating free trade agreements with other countries.
On 7 November 2017, the UK government took further steps to establish the legislation needed after Brexit with the laying before Parliament of a new Trade Bill. A new Customs Bill is set to follow shortly.
“For the first time in over 40 years the UK will be able to shape our own trade and investment agenda—and we are determined that businesses and consumers can take advantage of this opportunity. We are getting on with delivering a successful Brexit, by seeking a deep and special partnership with the EU, and by boosting our existing trading relationships with old partners while opening up access to new and exciting markets across the world.” —Dr Liam Fox, International Trade Secretary
The new Trade Bill provides, albeit at a fairly high level, more information about the UK government’s post-Brexit trade policy. What it does not do, is define the UK’s trade policy, which will be essential to inform trade negotiators about the UK’s trade priorities and objectives.
Key measures in the Trade Bill include:
- empowering the UK in the transition of over 40 existing trade agreements between the EU and other countries—the UK currently participates in these agreements in line with the Common Commercial Policy rather than in its own right,
- helping ensure that UK companies can continue to access £1.3 trillion worth of major government contracts in 47 countries, by becoming an independent member of the Agreement on Government Procurement (GPA),
- creating a new independent trade body, the Trade Remedies Authority, to defend UK businesses against unfair trade practices, and
- making sure the UK Government has the legal powers it needs to gather and share trade information.
Although the Trade Bill has received a first hearing in parliament, it was not debated at this stage. The date for its second hearing, when it will be debated by parliament, has not yet been set.
A separate Customs Bill, for which a publication date has not yet been set, is to be introduced soon on order to set the tax and tariff-related elements of the UK’s trade policy. It will allow the creation of a standalone customs regime and amend the VAT and excise regimes. This will include setting preferential, or additional, duties in certain circumstances—for example, to support developing countries. It also aims to maintain a functioning movement of goods from Brexit day (currently 29 March 2019) by continuing the VAT and excise regimes in line with the final agreement reached with the EU27.
European Council Meeting
The new Trade Bill and the promised Customs Bill, along with the EU (Withdrawal) Bill— currently at the committee stages in parliament — constitute some of the necessary legislative groundwork for Brexit. However, in terms of the future trade agreement between the UK and the EU, the December European Council meeting of the EU27 leaders on 14 – 15 December is the next key milestone to watch. At that meeting, the Council will decide if “sufficient progress” has been made in the withdrawal negotiations, in particular on citizens’ rights, the Irish border and the Common Travel Area, and, of course, the financial settlement, to enable discussions about the EU/UK’s future relationship plus possible transitional arrangements to take place.
Smooth Transition or Cliff-edge Exit?
As the clock ticks down, with Brexit day getting ever closer, Brexit watchers have been looking carefully for signs that idea of some form of transition arrangement might be gaining traction. However, the lack of progress to date means that businesses’ contingency plans should cater a wide range of scenarios including the so-called “cliff edge,” i.e., the UK leaving the EU without a formal withdrawal agreement.