101 UK Brexit Notes

Connemara Programme October 16 2018 pg. 161 Existing free trade agreements if there’s no Brexit deal Purpose The purpose of this notice is to inform businesses and other interested parties about the government’s plans to ensure continuity for the UK’s existing trade agreements with partners outside the EU if we do not reach agreement with the EU on the terms of our withdrawal prior to 29 March 2019. While the UK government is confident that it will agree a deal and a time-limited implementation period, as a responsible government it will continue to prepare for all scenarios, including the unlikely outcome that the UK leaves the EU on 29 March 2019 without a deal. This is contingency planning for a scenario that the UK government does not expect to happen, but people should be reassured that the government is taking a responsible approach. Before 29 March 2019 As a member of the EU, the UK currently participates in around 40 free trade agreements with over 70 countries. These free trade agreements cover a wide variety of relationships, including: Economic Partnership Agreements with developing nations, Association Agreements, which cover broader economic and political cooperation trade agreements with countries that are closely aligned with the EU, such as Turkey and Switzerland, more conventional free trade agreements. In 2017, ONS data showed that trade with third countries with EU free trade agreements accounted for around 12% of the UK’s total trade. Businesses in the UK, EU and partner countries are eligible for a range of preferential market access opportunities under the terms of these free trade agreements. These can include, but are not limited to: preferential duties for goods. This includes reductions in import tariff rates across a wide range of products, quotas for reduced or nil rates of payable duties, and quotas for more relaxed rules of origin requirements., enhanced market access for service providers. access to public procurement opportunities across a range of sectors. improved protections for intellectual property. For continuity and stability for businesses, consumers and investors, we are committed to ensuring these benefits are maintained, providing a smooth transition as we leave the EU. We are currently working with partner countries to prepare for a range of possible scenarios to maintain existing trading relationships. After March 2019 if there’s no-deal During any implementation period, arrangements would be put in place with partner countries so that the UK is treated as an EU member state for the purposes of international agreements, including trade agreements. In the event of a ‘no deal’, there will be no implementation period. In this scenario, the government will seek to bring into force bilateral UK-third country agreements from exit day, or as soon as possible thereafter. These new agreements will replicate existing EU agreements and the same preferential effects with third countries as far as possible, whilst making the technical changes needed to ensure the agreements operate in a bilateral context. Ministers and officials are engaging regularly with partner countries to complete this work. When we reach final agreements with partner countries will depend on our ongoing discussions with them. Should arrangements to maintain particular preferences in a no deal scenario not be in place on exit day, trade would then take place on a ‘Most-Favoured Nation’ (MFN) basis, which is sometimes referred to as ‘World Trade Organization (WTO) Terms’, until such a new arrangement has been implemented. Under WTO rules, the principle of MFN treatment means that the same rate of duty, on the same good, must be charged to all WTO members equally. This principle is subject to certain exceptions, including if a free trade agreement is in place. For services, the MFN principle means WTO members are required to grant treatment no less favourable to services and service suppliers of any other WTO member, than that which they grant to like suppliers from any other country. In leaving the EU, the UK is regularising the terms of our WTO membership because our commitments are currently contained within the EU schedules. We are working closely with WTO members to ensure a simple, fair, and transparent transition in establishing the UK’s independent WTO schedules, in a manner that minimises disruption to our trading relationships. The UK is already a full member of the WTO, and negotiations are ongoing for us to become independent members of the WTO Agreement on Government Procurement, on the basis of its current commitments as a member of the EU. Separate to seeking continuity for existing free trade agreements, powers in the Taxation (Cross-border Trade) Act 2018 enable the UK to put in place a UK unilateral trade preference scheme for developing countries as the UK leaves the EU. In the first instance, it is intended that this will provide the same level of access as provided by the current EU trade preference scheme. This will maintain tariff free access for Least Developed Countries and continue to offer generous tariff reductions to around 25 other developing countries. Implications In the event of a ‘no deal’, EU trade agreements will cease to apply to the UK when we leave the EU. Our intention is that the effects of new bilateral agreements will be identical to, or substantially the same as, the EU agreements they replace. However, users of current EU free trade agreements should be aware that, in contrast to the current situation and during any Implementation Period, there may be practical changes to how they make use of preferences under these new agreements. For example, UK and EU content will be considered distinct, and each new agreement will individually specify what origin designations may be used to qualify for preferences. We will aim to limit these changes as far as possible, but the final form of new agreements and any resulting changes will depend on ongoing discussions with our trading partners. The Trade Bill contains a reporting requirement stating that the government will publish a report before these new free trade agreements are ratified on any significant changes to the new trade-related provisions. Where arrangements to maintain particular preferences in a no-deal scenario are not in place by exit day, trade would take