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UK Publishes Guide to Post-Brexit Trade Policy Rules

On 8 January 2018, the UK Government published its guide to the Trade Bill, which underwent its second reading in the UK Parliament the next day, on 9 January. Of the greatest relevance to Hong Kong exporters is that the Bill would enable the UK Government to roll over trade concessions in existing EU trade deals and to adopt dumping, subsidy and safeguard remedies through the establishment of the UK’s own (to-be-established) Trade Remedies Authority.

Roll over of EU trade arrangements: The Bill focuses on the EU’s existing free trade deals and does not concern the legal framework for adopting new ones. Since the current deals have already been scrutinised by the UK Parliament at the time of their adoption, the Bill delegates regulatory powers to the Government to implement these agreements without the need for further primary legislation. For both British and foreign businesses, it is an imperative that current access to the UK market and British access to other markets are maintained in order to avoid severe disruptions through a “cliff-edge” Brexit. A reversal to trade under World Trade Organisation (WTO) rules could abruptly increase tariffs across a range of areas for both UK imports and exports.

Yet, even if the Government is able to secure the legislative means to roll over trade deals, it must still obtain the consent of its trading partners. Brexit represents an opportunity for the EU’s trading partners to push for greater concessions from both the EU and the UK. The UK’s market is also different from the EU’s as a whole, with incentives to further liberalise certain areas and to potentially increase protection in others. This will take both time and institutional effort, and must be managed across 36 agreements simultaneously.

The EU’s Trade Commissioner Cecilia Malmström commented in December 2017 that the UK would be forced to exit from current agreements unless the UK remained in the EU Customs Union. UK Trade Secretary Dr Liam Fox, however, responded that talks with the countries of the EU’s current free trade agreements “were well advanced.” In Parliamentary testimony on 10 January 2018, a former minister in the UK International Trade Department, Mark Price, testified that a temporary solution to ensure continuity could be via exchanges of “letters of intent”, and that those of Britain’s trading partners he had spoken with were keen to avoid disruptions to current trade flows.

On the other hand, in the context of WTO tariffs, for the UK to simply adopt the EU’s current tariff schedules has already proven controversial. Joint draft proposals discussed by the EU and the UK last year to divide up current EU-wide quota access between the EU and UK markets based on previous years’ inflows and sales quantities was met with sharp resistance from other WTO members. Renegotiating the UK’s status as an independent trading partner in relation to current free trade agreements may prove even harder.

New trade remedies authority: The Bill also provides for an independent Trade Remedies Authority to undertake future dumping, subsidies and safeguard investigations. These competences are currently vested in the European Commission, and the UK Government is proposing to allocate 145 staff to the new agency.

However, maintaining current anti-dumping and anti–subsidy duties will present a challenge also in this area. At the moment, the EU has over 120 anti-dumping and anti-subsidy measures in force (several targeting mainland China). Some of them will not relate to UK producers and hence would not be possible – or desirable – to maintain under WTO rules once the UK exits the Union. However, others are vital for specific UK sectors, such as steel or ceramics. To maintain these duties, fresh investigations would likely have to be launched if the UK wishes to avoid being sued at the WTO. The UK is therefore aiming to replicate all measures which affect the UK industry by March 2019.

To this end, the Government opened a public consultation in November 2017 which asks UK companies to submit data on production and sales of relevant products. Fears have reportedly been expressed that the Government will face difficulties in replicating these duties on time, especially as it faces a scarcity of experienced trade defence investigators.

If a transition period is agreed during which the UK stays in the single market and the customs union, currently being discussed as running for two years after the Brexit date in March 2019, this would relieve some of the pressure on the UK’s need to finalise new arrangements, both in the area of free trade agreements and in relation to replicating trade remedies.

UK trade preferences and government procurement: Finally, the Bill also makes provision for maintaining the UK’s unilateral trade preferences with least developed countries, allowing them continued tariff-free market access. The Bill also makes provision for the UK to join the WTO’s Government Procurement Agreement as an independent member. The legal framework for altering the UK’s general tariff structure is being implemented through its separate Taxation (Cross-border Trade) Bill.

Content provided by Picture: HKTDC Research
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