Brexit: Understanding the regional and global trading frameworks Single market   http://wits.worldbank.org/CountryProfile/en/Country/DEU/Year/2015/Summary Patrick Holden Leader of the MA in International Relations https://www.plymouth.ac.uk/courses/postgraduate/ma-international-relations- global-security-and-development

Note These slides are for reference. (With material taken from the International Trade Politics and Policy module on the MA IR). This brief talk will introduce the core issues at stake in the negotiations and potential scenarios. This is my personal opinion. Link to WTO Trade Disputes Map: https://www.wto.org/english/tratop_e/dispu_e/dispu_maps_e.htm

Assumptions We do not live in a world of ‘free trade’. There is a degree of free trade but countries/regions protect (directly or indirectly) their own markets and promote their own rules/regulatory models. Trade negotiations are mostly determined by ‘market power’ (the size of a state’s population and GDP).

The Single Market Core principles/laws agreed in Treaties. Then secondary legislation. Devised managed and enforced by the EU institutions.

Core institutions The Councils The Commission The Parliament New President ECB Other agencies The Councils The Commission The Parliament Consultative bodies The Economic and Social Committee European Court of Justice/ Court of First Instance

The Single Market 4 Freedoms Non-tariff barriers removed. Free movement of goods, capital, people and services within Europe. Non-tariff barriers removed. Pan-European laws on product standards, labour standards, environmental policy, health and safety, managing the market (competition policy & state aid rules). Note Non-Tariff Barriers. A mixture of liberal economics (free trade, free movement of capital) and Europeanism.

Limitations ‘Trade in services’ is much more liberalised than other regions but still limited (national restrictions).

Extent of the Single Market Note the EEA (Iceland, Norway and Lichtenstein). The Swiss arrangement.

http://trade.ec.europa.eu/doclib/docs/201 2/june/tradoc_149622.pdf

Scenarios (non-exhaustive)

What would the UK want? Ideally, a deal like the proposed TTIP. Mutual recognition of standards, regulatory harmonisation on the basis of equality, services access… More realistically a deal like CETA (top of the range trade deal but much less access than Single Market membership).

Possible outcomes

Squared with the UK’s objectives

Another cut Source HSBC’s UK economics team - Simon Wells, Liz Martins and Douglas Lippoldt  http://uk.businessinsider.com/hsbc-table-explains-difference-between-hard-and-soft-brexit-2016-10

The Global Trading System: the WTO Organised chaos?

WTO provides for Consistency, predictability, equal treatment… Tariffs are bound (they have an upward limit). Limitations are placed on other forms of trade barriers. A form of dispute settlement

It does not provide Free trade in Services (limited) Non-tariff barriers (some are covered but many are not). Quick enforcement: there is a form of dispute settlement but it is slow and based on ‘retaliation’.

Global trade politics is … Brutal Unpredictable Not really free

Pros and cons of a dramatic break Some supply chains will relocate to the UK But in most cases this would be in the other direction (exodus of companies). As noted, freedom to strike different trade deals but there is little reason to believe that the UK will do better than the EU27.

The Process

Brexit process The Council The Commission The Parliament UK

Timeline 29 March 2017 Article 50 ‘triggered’ Official EU response and negotiating position. Initial round of talks: exit bill, border, citizens Trade etc. Autumn 2018 core agreement reached Ratification/exit by 29 March 2019 (Unless there is an extension).

Negotiation positions EU Agree ‘terms of exit’ first. Include social, environmental, taxation concerns in any trade deal. Fear of being undercut. UK Negotiate everything simultaneously. More hidden flexibility about EU regulation.

No deal scenario (if the UK won’t pay). Really no deal or some interim deals in areas like nuclear safety, aviation …? A grey area Legally tariffs etc. would have to be applied in April 2019 but if there is no infrastructure to do this?

Note International agreements provide guarantees but this does not mean that the worst will happen if the agreement ends: E.G. mass deportations etc. However in the case of trade if there is no deal WTO law forces the UK and EU to apply their standard tariff.

Likely scenarios A. Extension of article 50 (The UK effectively stays in the EU while negotiating, thus also maintaining external trade agreements with Canada etc.). B. A transition deal (The UK remains under EU law while negotiations continue).

Conclusions I expect brinkmanship, interim deals and eventually submission by the British government to a lot of EU law (with some face-saving distractions). The EU doesn’t bluff (it’s too unwieldy) so no deal is possible but not likely. What does this mean for businesses, local government, universities?

Further information

Trade balance

Relative dependence https://fullfact.org/eu rope/uk-eu-trade/ About 45% of UK exports in goods and services went to other countries in the EU in 2015—£220 billion out of £510 billion total exports. About 17% of ‘EU’ external trade went to the UK (the lower figure of 8% is sometimes used, including EU states trade with each other and with outsiders) https://fullfact.org/eu rope/uk-eu-trade/

Relative dependence Although it’s worth looking at individual EU states and how dependent they are on trade with the UK. It is about one country’s trading rights in 27 countries and EU states’ trading rights in the UK. Ireland is the only state which does over 10% of its trade with the UK.

UK assets Flexibility Security assets? London’s financial importance?