UK’s FTA deals unlikely
February 21, 2019 | Expert Insights
London admits that crucial trade deals with Japan and South Korea are unlikely to be signed before Brexit. This changes the nature of the deals itself as post-Brexit trade deals will have to account for UK’s reduced trade capabilities.
On June 23rd, 2016, Britain narrowly voted to leave the European Union, stunning Europe and the world in general. The EU employs a set of policies for its 28-member states that aim to ensure the free movement of people, goods and trade among other services. Britain is deeply intertwined with the workings of the EU, especially with regard to trade.
PM Theresa May’s leadership in the negotiations has been heavily criticised. She has been unable to form a consensus within the Parliament, or even her own party, for the course of Brexit. Her “directionless” leadership has not convinced most of her peers in Westminster and she was challenged by a no-confidence motion in early December 2018, which she narrowly won.
Despite her best efforts, the British parliament is not accepting the proposed Brexit agreement. Irrespective of whether they arrive at a deal or not, the UK is officially set to leave in March 2019.
Business Secretary Greg Clark said the U.K. isn’t likely to reach agreements with Japan and South Korea to roll over existing trade deals before Britain’s scheduled departure from the European Union on March 29, 2019. Britain benefits from about 40 free-trade agreements with 70 nations through its EU membership, and it’s been seeking to extend them after Brexit. Combined, they account for 11 percent of U.K. trade.
“Unfortunately, not all of the FTAs — and I might mention the Japan and Korean ones that are important — are expected to be concluded in time,” Clark told executives and journalists on Tuesday at the annual conference of the MakeUK manufacturing lobby group. “That is one of the reasons why I think it is so important that we should not leave without a deal.”
The admission throws into stark relief Trade Secretary Liam Fox’s old promise that the deals would be ready at “one second past midnight” after Brexit day. The two Asian nations buy about £18.6 billion ($24 billion) of British exports a year and send just under £17 billion of imports per year, according to official figures.
Clark also emphasized that it’s “unacceptable” that exporters to those markets aren’t able to know what their terms of trade will be in under 40 days’ time, and referred to the freighter the Thalassa Mana, which left Felixstowe port in eastern England on Monday and is due to arrive in Osaka on March 30, 2019. “That is, I know, unacceptable to you and it’s unacceptable for me,” he said, adding that it’s “absolutely essential” for the U.K. to conclude arrangements as soon as possible “and not at the last minute on March 28.”
The Brexit deal Prime Minister Theresa May is struggling to get through Parliament includes a 21-month transition in which EU trading arrangements would be little-changed, though it’s still up to partner countries — including Japan and South Korea — to decide whether they want to roll over their agreements with the EU to the U.K., which will technically have left the bloc.
Fox’s international trade department has, so far, agreed to roll over agreements with Switzerland, Israel, the Palestinian Authority, Chile, the Faroe Islands, and Eastern and Southern Africa. The department said in an emailed statement that it’s still “seeking continuity for existing free trade agreements.”
“We will continue to engage with all our trading partners, and businesses should continue to plan for a range of Brexit scenarios — including no deal,” the department said.
Our assessment is that post-Brexit Free Trade Agreements are crucial for the UK, as they will be the only tariff-free trade agreements London will have access to once it leaves the EU. We believe that the Theresa May-led government has to prioritise these free trade agreements to cushion the fallout from a no-deal Brexit scenario.