It has now been more than a month since the UK’s withdrawal from the European Union on 31 January 2020. The UK's relationship with the EU is now in the Transition Period established by the Withdrawal Agreement which will end (unless extended) on 31 December 2020. In practical terms, for businesses and individuals, little has changed, with the substantive changes coming at the end of the Transition Period. The UK's formal departure is nonetheless a significant step, and one that has real consequences for role of the UK in international trade.
The key media attention has been on whether the UK and EU can agree an overall new relationship including a new Free Trade Agreement (FTA) before the Transition Period ends, and what progress the UK can make on other free trade negotiations, including with the US, at the same time. There has been progress on these, and also some other reflections of the change in the UK's status. We set out below our pick of notable developments from the past month.
1. UK notifies WTO members of withdrawal from the EU
The UK was quick to issue a Communication to the other 163 WTO member states, of its new status in the organisation in light of its withdrawal from the EU. In the Communication1 , issued on 1 February 2020, the UK set out the WTO-related implications of Brexit for the UK and the other WTO members, including its status during the Transition Period.
- notes the UK's withdrawal from the EU and the existence of the Withdrawal Agreement;
- confirms that, during the Transition Period, the UK would apply the EU's Generalised System of Preferences, and would be treated as part of the EU for the purposes of the EU's existing FTAs and any ongoing WTO disputes to which the EU is a party (which includes the disputes about Airbus and Boeing subsidies);
- references the UK's draft schedule of concessions and commitments for goods, and its schedules of concessions and specific commitments in services and Article II GATS (MFN) exemptions (while noting that it will be covered by the EU schedules during the Transition Period); and
- reaffirms and emphasises the UK's support for the multilateral trading system, and commits to support efforts to strengthen it and to modernise the WTO.
2. UK's communications and statements at the WTO
On 4 February 2020, the UK's ambassador to the WTO gave his first statement at the WTO2 following the UK's EU withdrawal. He highlighted the importance of the Joint Initiative on Services Domestic Regulation. The initiative is intended to streamline procedures for qualifications and licensing for traders around the world; the regulation addresses the "barriers that directly affect businesses seeking to offer services". He emphasised that services are the predominant driver of the UK's economy and urged WTO members to redouble efforts to come to an agreement at the 12th Ministerial Conference in June 2020.
Since then, the UK has started to make its voice heard on various WTO committees:
- on 11 February 2020, the UK's WTO ambassador made his first statement to the WTO Committee on Trade and Development3 . He conveyed the UK's strong support of the International Trade Centre, and outlined the UK's wider approach to "aid for trade".
- on 21 February 2020, the UK informed the WTO's Committee on Technical Barriers to Trade of the measures it has put in place to ensure the implementation and administration of the WTO's TBT Agreement, following its withdrawal from the EU4. The TBT Agreement aims to ensure that technical regulations, standards, and conformity assessment procedures are non-discriminatory and do not create unnecessary obstacles to trade5.
- in this communication, the UK describes its regulatory system, identifies the UK TBT Enquiry Point and Notification Authority, and the standardisation and accreditation bodies, and outlines the way in which it deals with notification and transparency. The UK reaffirmed its participation in the TBT Committee, the preparation of technical regulation and conformity assessment procedures and the development of technical assistance.
- separately, on 25 February 2020, the UK's WTO ambassador made his first statement to the WTO's Informal Working Group on MSMEs6. He recalled the importance of MSMEs to the economy of the UK and many other countries, and conveyed the UK's strong support for the work of the Committee.
- on 26 February 2020, the UK's WTO ambassador followed this with a statement to the WTO TBT Committee recalling that the UK is committed to transparency and will continue to inform the Committee of measures in existence or taken to ensure the implementation and administration of the TBT agreement.7
On 3 March 2020, the UK Secretary of State for International Trade, Liz Truss, addressed the WTO General Council for the first time8 . She outlined the UK's position as a world leader in setting standards in services and digital, and in ensuring the WTO takes advantage of the "digital revolution" to drive the global economy. She called for WTO reforms to tackle unfair practices (including industrial subsidies, state-owned enterprises and forced technology transfer), to resist the trend towards protectionist measures and to ensure that the WTO works for all countries, large and small.
3. UK Representation to the EU becomes a UK Mission and the EU opens a delegation to the UK
Following the UK’s exit from the EU, the UK’s Representation to the EU (UKRep) in Brussels has become the UK’s Mission to the EU reflecting its new status as a non-EU country.9
Correspondingly, the European Commission's Representation in the UK ceased activity on 31 January 2020. In its place, the European Union opened an EU Delegation to the UK, under the responsibility of the High Representative of the European Union for Foreign Affairs and Security Policy.10 Delegations are the EU's offices in "foreign" countries and are similar to a country's embassies abroad, but have a more limited role reflecting the more limited level of foreign affairs coordination in the EU architecture.
4. UK Government consults on its Global Tariff schedule
On 6 February 2020, the UK government launched a four-week public consultation on the UK’s future Global Tariff schedule, closing on 5 March 2020.11
The new UK Most Favoured Nation (MFN) tariff schedule will enter into force on 1 January 2021. It is a bespoke regime, known as the UK Global Tariff (UKGT), and it is "designed specifically for the UK economy" to replace the EU’s Common External Tariff which is currently applied on imports into the UK.
The new UK Global Tariff will apply to goods imported into the UK on 1st January 2021 unless an exception such as a preferential arrangement or tariff suspension applies. In particular, this tariff will not apply to goods coming from developing countries that benefit under the Generalised System of Preferences, or to goods originating from countries with which the UK has negotiated FTA. The Northern Ireland / Ireland Protocol in the Withdrawal Agreement provides for certain specific arrangements as regards Northern Ireland.
5. UK government consultation to inform its Freeports policy
On 10 February 2020, the UK government launched a consultation on its proposed Freeports policy. The consultation is open until 20 April.12
Freeports are customs zones which have different customs rules (and potentially different rules in other areas) to the rest of the country. Freeports (and the similar concept of special economic zones) are used in many countries around the world. The consultation notes that they can reduce administrative burdens and tariff controls, provide relief from duties and import taxes, and ease tax and planning regulations, but it also notes, and consults on, the risk of "illicit cross-border activities" which are commonly associated with freeports.
The consultation states that the UK government has three objectives for freeports, namely to:
- serve as national hubs for global trade and investment across the UK;
- promote regeneration and job creation; and
- create hotbeds for innovation.
The UK government aims to create up to 10 freeports in locations across the UK to "boost economic activity across the UK, ensuring that towns, cities and regions across the country can begin to benefit from the opportunities of leaving the EU".
6. The opening of trade negotiations between the EU and UK
On 25 February 2020, the Council of the EU adopted a decision authorising the opening of negotiations on the future UK-EU relationship, and setting out EU negotiation mandate.13
On 27 February 2020, the UK government published its position paper setting out its approach to the forthcoming negotiations with the EU.14
Negotiations formally started on 2 March 2020, and are set to continue throughout the year. The aim is for a "stocktake" in mid-June. The timetable is widely considered to be ambitious, and too little time to agree and finalise a full FTA. However UK government has so far stuck to its position that there will be no extension to the Transition Period, even though the Withdrawal Agreement provides for the possibility of such an extension – although that was before the coronavirus, which will have imposed further resource demands and required ministerial attention which might otherwise have been focused on these negotiations.
The negotiations will cover a wide range of issues including tariffs, level-playing-field provisions such as health, safety and environmental standards, regulatory cooperation, mutual recognition and dispute resolution. Issues, fishing and state aid look likely to present particular difficulties.
7. UK/US trade talks
On 27 February 2020, UK International Trade Secretary Liz Truss met US Trade Representative Robert Lighthizer in London15. The two sides reiterated their commitment to get on with negotiating FTA.
There is no specific timeframe for these talks, and the UK government has at times indicated that the EU deal is the priority. The UK government will likely be keen to reach a deal before the US presidential elections in November, given US President Trump's positive comments on the prospects for a US/UK deal, although many commentators see achieving a comprehensive FTA in this timeframe as highly unlikely.