The government of United Kingdon is preparing 11 trade deals to decrease the economic effects of leaving the European Union. However, all these work may be in vain.
The department, which is led by Liam Fox, is not able to negotiate any trade deal while they are still a member of the European Union – which will be the case until the 29th of March 2019. However, it can conduct discussions with possible partners.
As such, United Kingdom’s government is currently exploring how to possibly intensify its trade links with 11 partner countries such as:
- the United States
- the Gulf Cooperation Council (GCC),
- South Korea
- New Zealand
However, these preparations may never see the light of day. A senior U.K. economist at Berenberg, Kallum Pickering, told CNBC on Friday that “It really depends whether the U.K. can sign off the deals during the transitional period, such that they automatically come into force after the transitional period is over.”
The United Kingdom has said that a transition period is necessary to allow businesses to adjust and prepare for a post-Brexit world. This transition period may take up to three years, meaning that the United Kingdom will still have a link with the union up until the year 2022.
“We won’t know whether (the possibility of making trade deals) will be a feature of the transitional period until there is ‘sufficient progress’ on the Brexit divorce and the transitional framework can thus be negotiated,” Pickering has told CNBC.
However, the European Union appears to unlikely to agree to that. In one of the guidelines of the Brexit negotiations, the European Union stated: “Should a time-limited prolongation of Union acquis ( a body of common rights and obligations) be considered, this would require existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply.” It seems that this statement suggests that the current rules, such as on negotiating trade deals would continue to be implemented even during the transition period.
However, even if the European Union adhered to that, the United Kingdom may fail to convince partners to strike agreements without first settling its trade links with the European Union.
“The problem for the Department for International Trade is that any trade partner will wait to find out what the final trade terms between the U.K. and the EU will be , before agreeing a meaningful bilateral trade agreement with the UK. The EU market is simply too important for UK-based business,” head of Europe in the World unit at the Netherlands Institute of International Relations, Rem Korteweg, told CNBC.
Meaning, if a U.S investor is not sure whether a factory based in the United Kingdom will face barriers when selling to the European Union market, he or she is unlikely to purchase the said facility.
“Since the transition deal is also meant to buy time to negotiate the future EU-UK trade relationship, it is highly unlikely that a meaningful trade deal will be finalized during that period,” said Korteweg.
Even though the United Kingdom is free to explore new trade deals, and other actions regarding trade negotiations, these actions would not establish a final free trade agreement in themselves.
According to Korteweg, “such flirts do not make a marriage.”