Countdown to Brexit: 38 days – After four decades of not talking trade with the World – the UK is finding that it’s not that easy

Since joining the European Union in the 1970’s – the UK has relied on the EU to negotiate its terms of trade.  Not a problem according to International Trade Secretary, Liam Fox.  Late last week, however, Government officials for the first time admitted to Parliament that they: “will not be able to renegotiate all trade treaties involving the European Union by the end of March” – and Fox confirmed that negotiations with some countries have now been “prioritised over others”.

In response, chair of the Parliamentary International Trade Committee, Angus Brendan MacNeil MP, said: “Securing roll-over of EU trade agreements in time for the end of March has been one of Department of Industry and Trade’s primary objectives since it was established.  My Committee has repeatedly warned about the considerable risks of not achieving this - and it looks like officials are now admitting what has been suspected for a long time: the UK will not be able to roll over all of the EU’s trade agreements with third countries in time for 29 March.

“It is no surprise that countries in the market are acting freely in their own interest rather than just meeting the UK's expectations.   It is time for Dr Fox to face facts and admit this – particularly to businesses, who are in urgent need of proper guidance. Failure to do so could leave businesses unprepared for a change in trading arrangements with some key markets – and the impact for some could be devastating.”

As if to prove the point, the UK’s lack of experience in trade negotiations have been amply demonstrated as trade talks Japan this week were almost cancelled Brexit - due to a 'high-handed' letter.  Talks will be going ahead - despite reports of dismay at language used by Fox and Foreign Secretary, Jeremy Hunt.

Japanese officials reportedly accused Hunt and Fox of taking a “high-handed” approach towards a post-Brexit free trade deal - and briefly considered cancelling bilateral talks due to take place this week according to the Financial Times – which cited unnamed officials in Tokyo reacting with dismay to a letter sent on 8 February - in which Hunt and Fox insisted that “time is of the essence” in securing a trade deal.  High handed as Japan is the world’s third-biggest economy.

The letter called for “flexibility on both sides” – an approach that had been interpreted as criticism that Japan did not share their desire to quickly conclude a free trade agreement once Britain leaves the European Union on 29 March.

British officials said had employed “standard diplomatic language” – but it prompted Japanese officials to consider cancelling trade talks in Tokyo this week, the paper reported.

A Japanese newspaper report said that its trade officials were growing frustrated with their British counterparts - who had arrived at meetings without specialists capable of taking the talks forward.

The letter both irritated Japan and adds to scepticism over assurances made by Brexiteers that Britain would ease its way into lucrative free trade deals once it leaves the EU.  Japan has, reportedly, ruled out replicating the terms of a Japan-EU trade agreement that had been seven years in the negotiation and which came into effect at the start of February.  It will be ‘unavailable’ to the UK after Brexit.

Japan is likely to seek tougher concessions from Britain than it secured from the EU with its vastly bigger market and new range of tariff free goods for trade.

Japanese firms, which together employ about 140,000 people in the UK, have made no secret of their alarm at the prospect that Britain will crash out of the EU without a deal.

The news that Honda will cease production in Swindon in favour of repatriating production to Japan, only adds to Nissan’s earlier decision to hold back on investment in the UK.  Uncertainty over Brexit was partly behind its decision to abandon plans to build a new model of one of its flagship vehicles at its Sunderland plant.

Japan’s angry response to the tactics employed by Hunt and Fox emerged just days after China abruptly cancelled a crucial trade meeting with the Chancellor, Philip Hammond, that had been due to take place in Beijing this week.

Hammond’s visit was called off after the Defence Secretary, Gavin Williamson, warned that Britain could deploy an aircraft carrier in the Pacific – where China has been involved in a dispute over territorial claims in the South China Sea.

There is no doubt that the UK will struggle to conclude the same high-quality free trade deals as it enjoys as a member of the European Union according to the EU’s Agriculture Commissioner, Phil Hogan during a visit to Australia for talks on an EU-Australia free trade agreement.

He warned that a no-deal Brexit would result in a big jump in food prices in the UK - a move that would cause the public to “punish those responsible at the ballot box.”

In an FT interview, he said that: “Size matters in trade - five hundred million customers will always resonate more with a third country when they want to do a trade deal with the EU - rather than the UK’s 65 million. This is what [Liam] Fox is finding out as he travels around the world.  Japan recently told him: ‘Come back to us when we see the implementation of the EU deal’.”

Hogan reminded readers that the EU has 54 existing trade deals around the world - and believes that London won’t be able to get the “same terms and conditions” when they revisit these agreements post-Brexit. 

Background

Australia is looking to conclude a free trade deal with the EU in 2019 - and is giving priority to these negotiations, rather than talks with London over a future trade relationship according to Hogan, who said: “The uncertainty in the UK is not helping these negotiations . . .the Australians don’t know what regime will be in place with the UK - or when it will be able to intensify its negotiations - or if there will be a transition period or not in the future relationship between the EU and the UK.”

“In the meantime, the Australians are intensifying the negotiations with the EU - with the intention of doing an FTA deal this year.”

Australia’s government confirmed that it is pursuing EU trade deals – and that it is precluded from formally opening talks with London until it has left the EU.  The EU is Australia’s second-biggest trade partner with bilateral trade in ‘goods’ worth almost €48bn in 2017.  Bilateral trade in ‘services’ is worth an extra €27bn.

The UK is Australia’s fifth-largest trading partner —and its second-biggest foreign investor.

Reference

https://www.parliament.uk/business/committees/committees-a-z/commons-select/international-trade-committee/news-parliament-2017/trade-remedies-authority-chairs-comments-17-19/

 
John ShuttleworthComment