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After the UK leaves the EU, the UK government will have the power to seek to negotiate and conclude its own trade agreements. In this blog, we will explain what trade deals are, how they are created, and explain the current state of trade deal negotiations in the UK.
The Significance of Brexit in UK Trade Policy
When the UK was a member of the EU, the European Commission managed trade and investment relations with non-EU countries on behalf of the UK government (and the governments of all other member states). This means that at EU level trade policies have been developed and international trade agreements have been negotiated and concluded. According to the European Commission:
By acting together, EU Member States will benefit from increased bargaining power in reaching trade agreements with other countries.
After the implementation period ends at the end of 2020, existing trade agreements negotiated by the EU are no longer applicable in the UK. As a result, Britain became responsible for setting its own trade policy. At the time, the UK government negotiated a ‘rollover’ of an existing EU-negotiated deal, as discussed later in this blog. Had these deals not been rolled over, the UK would have had to go back to trading with some countries on World Trade Organization (WTO) terms.
In 2016, in preparation for Brexit, the UK government established the Department for International Trade. In 2021, the UK Parliament will pass the Trade Act (the “Act”). It “provides a key measure necessary for the UK government to formulate UK trade policy now that the UK government has left the European Union,” according to the notes. This includes the powers of UK and Scottish ministers to enable the UK government and devolved governments to meet UK obligations under various trade agreements, including through changes to domestic law. .
The Act also establishes a new Trade Remedy Authority (TRA), whose role is to ensure that new trade remedies (e.g., additional tariffs on imports) are “caused by unfair trade practices and unexpected surges in imports. necessary to prevent damage to UK industry caused by ”. The Act also gives the Secretary of State powers to appoint members of the Trade and Agriculture Commission (TAC), a body that scrutinizes whether new trade agreements are consistent with maintaining the UK level of statutory protection for UK flora and fauna. I’m here. Health, Animal Welfare, and Environmental Standards. Under this law, the UK government is obliged to seek advice from her TAC on the impact of trade agreements on agricultural standards.
International relations (including international trade) are reservations under the Scottish Act 1998. This means that the Scottish government has no formal role in setting trade policy or in negotiating and signing international treaties. The Scottish Parliament also has no formal role in scrutinizing and ratifying (i.e. approving) trade agreements. The role of the Scottish Government and Scottish Parliament will be discussed in more detail in his upcoming SPICE blog.
What are Trade Agreements?
Trade agreements are agreements between two or more countries that aim to remove trade barriers (such as tariffs and quotas, non-tariff barriers such as different standards and SPS regulations) and increase access to each other’s markets. A treaty between countries.
Free trade with fewer non-tariff barriers can benefit the economy. For example, lower consumer prices, more exports, and more product choice. However, frictionless trade also has its drawbacks: Decrease in tax revenue from imports. Intensifying competition with overseas companies. more likely to outsource work. The potential for trade-offs in regulatory standards such as the environment, animal welfare and workers’ rights becomes greater.
How are international trade agreements made?
The UK Government, under its privileged powers (executive powers normally exercised by Ministers on behalf of the King), negotiates, signs, ratifies (approves), modifies and withdraws from international treaties, including trade agreements. can be done.
Once the UK government has negotiated the terms of a treaty with one or more countries and signed the treaty, it will normally submit the treaty to parliament for at least 21 days of parliamentary review under the Constitutional Reform and Governance (CRaG) Act 2010. be enacted. According to the UK Parliament website:
If Congress takes no action within 21 days, the government can proceed to ratify the treaty.
If, within 21 days, either House decides that the treaty should not be ratified, the minister in charge must issue a statement explaining why he believes the treaty should still be ratified. This statement resets the 21-day review period. There is no limit to the number of times you can perform this procedure.
Once the final 21-day scrutiny period is complete, the UK government can proceed to ratify the treaty. According to the House of Commons Library, if law enforcement is required, the UK government will not ratify the agreement until both processes (CRaG’s scrutiny process and law enforcement) are completed.
Figure 1 (below) briefly illustrates the treaty process from negotiation to ratification. The role of the UK Parliament in ratifying the treaty is explained in more detail in the House of Commons Library briefing paper.
Once the domestic ratification process of all parties to the treaty has been completed and the agreement has been approved by all parties, the treaty can enter into force.
Figure 1 – The process of creating a bilateral treaty. The ratification process required by the CRaG Act 2010 is shown in blue.
What is the UK Parliament’s role in scrutinizing trade deals?
Beyond its ability to indefinitely delay treaty ratification through provisions of the CRaG Act, and its ability to scrutinize implementing legislation when necessary, the UK Parliament’s role in scrutinizing trade agreements is limited.
The UK government has made a series of non-statutory commitments to facilitate parliamentary scrutiny of the treaty. There are few legal requirements, such as clarifying the objectives and impact assessments of the negotiations and allowing Congress to discuss those objectives and final agreements. This end. In its report on congressional scrutiny of free trade agreements, the House International Trade Committee expressed the view that: [are] insufficient, and the additional commitments made by governments have not gone far enough or have sufficient power. ’ It concludes and recommends:
Congress has not been “consulted” before or during FTA negotiations, despite the government’s prior commitments to do so. This should be changed. We recognize that governments have the power to conduct trade negotiations, but ask them to consider, as part of their consideration, ways to more closely involve Congress and its committees before negotiations..
House of Commons International Trade Committee, ‘UK Trade Negotiations: Parliamentary Scrutiny of Free Trade Agreements’, 18 October 2022
What new trade deals did the UK sign after Brexit?
According to the UK government, “As an independent trading nation, the UK currently has over 70 trade agreements”. Many of these are ‘continuation’ or ‘rollover’ agreements, generally replicating most of the terms of deals the UK had previously made as a member of the EU. However, they are not always identical. For example, the UK in a Changing Europe stated that the continuing agreements between the UK and Japan were “over the rollover terms with Japan in areas such as financial services. For the purposes of this blog, continuation agreements are not considered “new” free trade agreements.
As of this writing, the UK has signed two comprehensive new trade agreements (for example, agreements not limited to digital trade, such as the UK’s Digital Economy Agreement with Singapore).
- The UK-Australia Free Trade Agreement was signed by the UK and Australian governments in December 2021, making it the first ‘new’ UK trade deal signed since Brexit.
- The UK-New Zealand Free Trade Agreement was signed by the UK and New Zealand governments in February 2022.
Both agreements have completed the ratification process in the UK, as required by the CRaG Act 2010 (see Figure 1), but before formal ratification by the UK government and their terms taking effect, Laws must be enforced. In the UK, the Trade (Australia and New Zealand) Bill needs to pass the UK Parliament to allow full implementation of these agreements. Domestic ratification processes in Australia and New Zealand also need to be completed before their respective agreements enter into force.
The UK government said both of these deals “complement the UK’s accession to the Comprehensive and Progressive Agreement on the Trans-Pacific Partnership (CPTPP)”, which is explained below. .
What trade negotiations are currently underway?
The UK is currently in trade talks with several countries and trade blocs. The UK became the first country to apply to join her CPTPP, an existing trade agreement with 11 members: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. I was. The UK has applied to join her CPTPP on 1 February 2021 and will begin negotiations in September 2021. The Department for International Trade has announced a strategic approach to the UK’s accession to the CPTPP.
The UK is also engaged in trade negotiations with the United States (USA), which was an early priority for the UK’s post-EU trade policy. The two countries had her five rounds of negotiations between May and October 2020. Negotiations are currently on hold and the UK is not expected to reach a deal with the US anytime soon. The UK has signed memorandums of understanding with several individual states (eg, Indiana), but these do not constitute formal trade agreements.
In addition, negotiations are currently underway between the UK and:
What future negotiations is the UK government considering?
The UK government has held public consultations to seek information on potential future negotiations with Switzerland (ending 22 June 2022) and South Korea (ending 2 February 2023). The UK already has continuing trade agreements with Switzerland and South Korea, but the UK government wants to negotiate a new ‘enhanced’ trade deal with both countries.
Sean Taheny, SPICE Research