Brexit and business | Major UK trade legislation ahead

Last week, the UK government published White Papers on customs and trade after Brexit.  The customs white paper is discussed here.  The note below looks at the trade White Paper and the major UK legislation it presages.

The current trade regime

The UK’s trade policy is currently largely conducted through its membership of the European Union.  Decisions on trade policy are taken by the Council of the European Union, and the day-to-day negotiation of trade relations – including the negotiation of free trade agreements – is led by the European Commission.

The UK is a member of the World Trade Organization in its own right, but operates under the EU’s set of ‘schedules’ – the schedules which set out tariffs, quotas and subsidies.  When the UK leaves the EU, it will regain its independent seat at the WTO and will need to establish its own ‘UK-specific’ schedules.

Trade policy after Brexit

The trade White Paper outlines the five ‘basic principles’ which will shape future UK trade policy:

1. Supporting a rules-based global trading environment: Once an independent WTO member, the UK will ‘be in a position to intensify our support for robust, free and open international trade rules’.  It will ‘take steps’ to ensure the UK remains part of the WTO Government Procurement Agreement’. The UK will ‘as far as possible replicate its existing commitments as set out in the EU’s schedules of commitments and submit these for certification in the WTO ahead of leaving the EU’ – although as this Politico report on the opposition of the US and other countries to the UK/EU’s plans for dividing up existing EU quotas after Brexit suggests, that is not going to be straightforward.

2. Boosting trade relationships: The UK currently enters into commitments in international trade agreements as a member of the EU; that includes free trade agreements.  The UK intends to ‘transition’ those forty FTAs into bilateral UK-third county agreements.  It also intends to enter into FTAs with countries where there is no extant EU-country FTA.

3. Supporting developing countries to reduce poverty: The UK is part of EU arrangements which offer preferential access to UK markets for developing countries, including ‘duty-free-quota-free’ access for 49 Least Developed Countries.  The UK will maintain this LDC access after Brexit.  This means that the UK will establish a UK unilateral trade preferences scheme.

4. Ensuring a level playing field: Post-Brexit, the UK will need to put in place its own trade remedies framework.  This would ‘protect domestic industry against unfair and injurious trade practices’ – such as dumping and forms of state subsidy – as well as ‘unexpected surges in imports’. Trade remedies are currently an EU competence, with investigations, decisions and remedies being performed by the European Commission.  So the UK will establish its own mechanism of investigations and trade remedies, with that framework being designed on the principles of impartiality, proportionality, efficiency and transparency. The UK will also ‘develop the capacity to participate fully in every stage of a trade dispute’, including the ability to impose retaliatory measures against states who fail to meet international trade obligations.

5. Trade that is transparent and inclusive: Seeking the views of relevant stakeholders – business, the devolved administrations, the regions, civil society and so on.

Legislation needed to implement this new trade policy

In order to have a free-standing and fully functional independent trade policy, and to acknowledge that the present state of negotiations with the EU mean that ‘all possible outcomes’ have to be prepared for, the UK needs to create new legal powers and structures.

So the government will be introducing a trade bill – the White Paper doesn’t say when – which will:

• enable the UK to implement obligations that arise under the WTO Government Procurement Agreement;
• create a UK trade remedies framework that addresses unfair and injurious trade practices, or unexpected surges in imports, and which is consistent with WTO obligations;
• enables the UK to enforce or abide by the outcomes of international trade disputes;
• creates a unilateral UK trade preferences scheme to support development in the world’s poorest countries; and
• provides a gateway to facilitate the collection of data which the Department for International Trade requires as it takes on functions previously performed by the Commission.

There is a close inter-relationship between this trade bill and the forthcoming customs bill – for example, the customs bill will give the UK government the power to impose import tariffs as it takes back control of customs, which is presently another area of EU competence.

No hurry

The government describes the trade White Paper as ‘an early step’ in identifying the key elements of a future independent UK trade policy.  It invites responses to the White Paper by 6 November 2017.