Wednesday

17th Jan 2018

Column / Brexit Briefing

Brexit prompts trade limbo

  • Kenya's exports will be stung by EU import duties of up to 25 percent if talks are not concluded by 1 October. (Photo: Ninara)

One of the main economic arguments used by Leave campaigners before the UK's referendum on EU membership in June was that the UK, freed from its EU shackles, would be able to cut its own bilateral trade deals entirely on its own terms, and much quicker than as part of the EU bloc.

The UK will remain party to all EU trade agreements until it formally leaves the bloc, and cannot conduct any separate negotiations of its own. It hasn’t had to negotiate a trade deal for more than 40 years, which probably explained the Leavers’ optimism about how easy it would be.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

  • Of the five EAC countries, Kenya is the only one to have any real economic skin in the game with the EU. (Photo: Lisbeth Kirk)

Trade negotiators are among the most world-weary of government officials. Not surprising really, when you spend years negotiating milk and cheese subsidies only to see a deal collapse when the politicians get involved.

Two months after the referendum and the UK’s newly created international trade ministry is not launching any trade talks. Instead, it's embroiled in a turf war with the Foreign Office over who gets to handle economic diplomacy. Its officials don’t have their own building yet.

But the UK is not the only one in limbo.

October deadline

A fortnight after the referendum, Tanzania and Uganda abandoned plans to sign a regional trade agreement between the East African Community (EAC) and the EU citing the political turmoil caused by the Brexit vote.

The EAC is one of the so-called Economic Partnership Agreements (EPAs) between the EU and African, Caribbean and Pacific nations.

Talks on EPAs have been a decade in the making, amid complaints from African governments about having to open up their domestic markets to European imports in exchange for the removal of EU tariff barriers.

In cash terms, EU trade with East Africa is no big deal - the bloc imports about €2.6 billion worth of goods from the five countries in the EAC, mainly cut flowers, fruit and vegetables.

Of the five EAC countries, Kenya is the only one to have any real economic skin in the game with the EU.

As the only country designated by the UN as “middle income”, Kenya's exports would be stung by import duties of up to 25 percent if the EPA is not signed by the October deadline.

As “least developed countries”, its neighbours will enjoy preferential access to the EU’s single market with or without the EPA.

If the EAC deal is small potatoes economically, its potential collapse underscores that the goalposts have moved, not just for the UK and EU, but third countries too. Brokering a trade agreement is about leverage, and the EU and the UK now have less.

CETA and TTIP

The painstaking negotiations between the EU and Canada (CETA) and the United States (TTIP) were already in deep trouble before the referendum.

Classifying CETA as a “mixed” agreement that requires domestic ratification by all 28 EU national parliaments may kill the EU-Canada deal, while the early optimism surrounding TTIP has now been almost completely extinguished by public scepticism on either side of the Atlantic.

But Brexit is certainly unlikely to make a trade deal with the EU any more enticing. Faced with a changing EU target, third countries are perfectly entitled to cast aside years of negotiations and ask the EU for more.

The Brexit vote will force the Foreign Office to overhaul the UK’s trade policy but for the moment, international trade minister Liam Fox and his team can offer little more than warm words.

While Fox claims to have 10 bilateral trade deals lined up - and trade ministers are forming a queue to open talks with London.

Mike Froman, the US trade representative, reminded Fox of this on his recent visit to Washington, stating that it was “not possible to meaningfully advance separate trade and investment negotiations with the UK until some of the basic issues around the EU-UK relationship have been worked out”.

The UK is also short staffed. Its foreign office has fewer than 40 trade negotiators, compared with the 550-strong team boasted by DG Trade in Brussels.

For the UK, unpicking its place in the EU's trade policy while simultaneously seeking to draw up new trading arrangements with the EU, the 65 countries that already have trade pacts with Brussels, and the bigger fish like the US, Canada, China and India, will be a long and painstaking job.

In the interim, the prospect of Brexit has landed EU trade policy, as well as the UK, in limbo land.

Benjamin Fox, a former reporter for EUobserver, is a consultant with Sovereign Strategy and a freelance writer. He writes the "UK referendum briefing" column during the 23 June referendum campaign.

Tusk and Merkel discuss post-Brexit EU

EU Council president Tusk will meet chancellor Merkel at a castle retreat in Germany on Thursday as part of preparations for the Brexit summit in Bratislava.

Brexit unlikely before 2019

UK ministers have privately warned the City of London that Britain could remain in the EU until late 2019.

Column / Brexit Briefing

UK cannot have and eat EU cake

The UK’s two main demands: migration control and single market access are irreconcilable. Something will have to give.

Farage claims Barnier 'does not get' Brexit

The first official meeting between EU chief negotiator Michel Barnier and leading Brexit campaigner, MEP Nigel Farage has no impact on the talks, but gave a chance for the former UKIP leader to boast.

Magazine

Brexit timeline - 'The clock is ticking'

'The clock is ticking' - a favourite phrase of EU chief negotiator Michel Barnier - has become a stark warning, as the UK government took nine months to initiate the Brexit process and even longer to clarify its positions.

Magazine

Michel Barnier: The UK's best friend in Brussels

The EU's chief Brexit negotiator is an atypical French politician, with a love for mountains and Europe. He has been steering Brexit talks with a steady hand, and a deal could catapult him to the higher echelons of EU politics.

Stakeholders' Highlights

  1. ILGA EuropeFreedom of Movement and Same-Sex Couples in Romania – Case Update!
  2. EU2017EEEstonia Completes First EU Presidency, Introduced New Topics to the Agenda
  3. Bio-Based IndustriesLeading the Transition Towards a Post-Petroleum Society
  4. ACCAWelcomes the Start of the New Bulgarian Presidency
  5. Mission of China to the EUPremier Li and President Tusk Stress Importance of Ties at ASEM Summit
  6. EU2017EEVAT on Electronic Commerce: New Rules Adopted
  7. European Jewish CongressChair of EU Parliament Working Group on Antisemitism Condemns Wave of Attacks
  8. Counter BalanceA New Study Challenges the Infrastructure Mega Corridors Agenda
  9. Dialogue PlatformThe Gülen Community: Who to Believe - Politicians or Actions?" by Thomas Michel
  10. Plastics Recyclers Europe65% Plastics Recycling Rate Attainable by 2025 New Study Shows
  11. European Heart NetworkCommissioner Andriukaitis' Address to EHN on the Occasion of Its 25th Anniversary
  12. ACCACFOs Risk Losing Relevance If They Do Not Embrace Technology

Latest News

  1. Post-Brexit trade roll-over not automatic, EU paper says
  2. Oettinger pushes plastic tax but colleagues express doubts
  3. MEPs target exports of cyber surveillance tech
  4. Kosovo killing halts EU talks in Brussels
  5. ECB withheld information on 'flawed' bank supervision
  6. Fewer MEPs than visitors turn up for Estonian PM
  7. EU names China and Russia as top hackers
  8. Ten Commandments to overcome the EU's many crises

Stakeholders' Highlights

  1. UNICEFMake the Digital World Safer for Children & Increase Access for the Most Disadvantaged
  2. European Jewish CongressWelcomes Recognition of Jerusalem as the Capital of Israel and Calls on EU States to Follow Suit
  3. Mission of China to the EUChina and EU Boost Innovation Cooperation Under Horizon 2020
  4. European Gaming & Betting AssociationJuncker’s "Political" Commission Leaves Gambling Reforms to the Court
  5. AJC Transatlantic InstituteAJC Applauds U.S. Recognition of Jerusalem as Israel’s Capital City
  6. EU2017EEEU Telecom Ministers Reached an Agreement on the 5G Roadmap
  7. European Friends of ArmeniaEU-Armenia Relations in the CEPA Era: What's Next?
  8. Mission of China to the EU16+1 Cooperation Injects New Vigour Into China-EU Ties
  9. EPSUEU Blacklist of Tax Havens Is a Sham
  10. EU2017EERole of Culture in Building Cohesive Societies in Europe
  11. ILGA EuropeCongratulations to Austria - Court Overturns Barriers to Equal Marriage
  12. Centre Maurits CoppietersCelebrating Diversity, Citizenship and the European Project With Fundació Josep Irla