|The pro-Brexit view
“A first step would be to broker a bespoke UK-EU trade agreement, which we believe is desirable”. UKIP manifesto, 2015.
What is the “UK-EU FTA option”? Exiting the EU but entering into a Free Trade Agreement (FTA) between the UK and the EU.
What would it mean for the UK?
- Access to free trade in the EU, including for financial services, would depend on the ultimate agreement negotiated.
- The extent to which the UK is subject to the rules on freedom of movement, in exchange for receiving freedom of capital, goods and services, would also depend on the deal negotiated.
- There is no guarantee that a new FTA could be negotiated, or how long it would take. For example, the EU FTA with Canada (CETA) took five years and five months to negotiate and sign; ratification is expected to take another two years. FTAs with key countries typically require ratification from all Member States through their national parliaments.
- An association agreement would be required if the UK wanted to maintain membership of the Common Foreign Security Policy, amongst other matters. An association agreement would require unanimity from Member States.
- Differences in bargaining power between the UK (which sells approximately 50% of its goods to the EU) and other countries of the EU (which sell approximately 6% of their goods to the UK).
- UK businesses wanting to sell their products into the EU would still have to adhere to EU products standards and regulation, but the UK would not have any influence in their formulation.
- The UK Government would no longer be automatically entitled to challenge EU legislation before the Court of Justice of the European Union.
- The UK would be free to conclude its own bilateral trade agreements with third countries; the free trade agreements between the EU and those other countries – of which there are over 50 – would no longer apply (including those with Korea, Norway, Mexico, South Africa, Colombia, and those in progress such as those with Japan and the US). The length of time that this would take and the extent to which the UK would be successful is not clear, given the smaller size of its market and relative weakness in negotiating position.
|The United States Trade Representative view
“I think it’s absolutely clear that Britain has a greater voice at the trade table being part of the EU, being part of a larger economic entity”.
“We’re not particularly in the market for FTAs [free trade agreements] with individual countries. We’re building platforms that other countries can join over time. We have no FTA with the UK so they would be subject to the same tariffs – and other trade-related measures – as China, or Brazil or India”. Michael Froman, United States Trade Representative, October 2015.
- For example, when Greenland exited the EC in 1985, it continued to receive EU funding after withdrawal and had tariff-free access to the Community market for fisheries products in return for satisfactory EC access to Greenland waters for the duration of the fisheries agreement. House of Commons Library, Research Paper 13/42, Leaving the EU, 1 July 2013 – http://www.parliament.uk/briefing-papers/RP13-42.pdf. ↑
- Global Affairs Canada – http://international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/understanding-comprendre/chronology-chronologie.aspx?lang=eng. ↑
- Association agreements between the EU and third countries are require unanimity; EU Procedure for adoption of international agreements – http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=URISERV:l14532&from=EN. ↑
- In October 2015, UK exports to the EU were 47% and UK imports from the EU were 52%. Over the 18 months to September 2015, the EU accounted for between 41-51% of UK exports and 49-55% of UK imports – HM Revenue & Customs: Overseas Trade Statistics – Non-EU and EU Trade, 8 January 2016 – available at https://www.uktradeinfo.com/Statistics/OverseasTradeStatistics/Pages/EU_and_Non-EU_Data.aspx. ↑
- According to the Bank of England, global EU exports are worth £5 trillion, UK global exports are worth £515 billion and UK imports from the EU are worth £219 billion, meaning that the EU makes 5.8% of its exports to the UK. This figure increases to approximately 16% if intra-EU trade is excluded – Bank of England, EU membership and the Bank of England, October 2015, page 8 – http://www.bankofengland.co.uk/publications/Documents/speeches/2015/euboe211015.pdf. ↑
- EU bilateral investment dialogues and trade agreements – http://ec.europa.eu/finance/capital/third-countries/bilateral_relations/index_en.htm. ↑