Trade bodies and business leaders warn of cost of six-year EU trade talks and want transition deal

Following the EU and Canada finally signing their Free Trade Agreement (FTA), research from the Open Britain campaign shows that EU FTAs take an average of six and a half years to complete. The 37 deals that the EU has in place – covering more than 50 countries – have taken an average of over four years to negotiate and more than another two years to come into force. The recently agreed CETA deal with Canada took over seven years to negotiate and is not yet in force.

This research demonstrates the complexity of securing the kind of ‘bespoke’ FTA the Government has said they are aiming for. However, even if trade negotiations can be conducted in parallel to the Article 50 process, it would be almost impossible for talks to be concluded and a final agreement ratified within the two-year timeframe of the Article 50 talks. And extension for much beyond the two years is highly unlikely.

This would mean there would be a period between the completion of the Article 50 process and the ratification of a new UK-EU trade agreement where the UK was left trading with the EU without a preferential arrangement in place at all, defaulting onto World Trade Organisation (WTO) terms. This would mean eye-watering tariffs on goods traded with the EU and, in the absence of a new UK-EU regulatory framework, UK-based service providers being unable to operate freely in the EU, as they can today.

Four trade and representative bodies – the EEF; the ICC; techUK; and the City of London Corporation – have joined Open Britain in calling for a transitional arrangement to be put in place between the conclusion of the Article 50 process and the ratification of any new FTA. The interim, transition arrangement would preserve current trading arrangements while a new Agreement is ratified. 

Commenting, Terry Scuoler, the Chief Executive of EEF, the manufacturers’ organisation, said: 

“This report emphasises the importance of reaching an agreement with the EU on exit terms, while also negotiating a clear transition period which will provide a little more clarity and reassurance that time will be given to get the complex issue of an FTA right. This all presupposes that we can reach an agreement on an orderly exit, securing tariff free access to the Single Market and no new customs barriers, which is a big priority for business.”

Commenting, Chris Southworth, Secretary General, ICC United Kingdom said:

“Greenland is the only country to have left the EU – a process that took three years. A two-year time frame, therefore, is certainly ambitious for the world’s fifth largest economy. Despite concerns over a prolonged Brexit, there is a huge amount at stake in the negotiations, so it is far more important we get it right than try and squeeze the process into an unrealistic timeframe.

“As the negotiations progress, the business environment needs to remain stable and consistent so that investment and jobs are not unduly affected. Transitional arrangements would provide insurance and a safety net should timeframes overrun – and, importantly, give businesses confidence to plan ahead without fearing a sudden increase in cost or disruption. Transitional arrangements should provide a backup – a sensible idea given the size, scale and complexity of the negotiations ahead.” 

Commenting, Charlotte Holloway, Policy Director, techUK, said:

“Tech firms of all sizes want to see an orderly exit from the EU that enables them to plan effectively and secure the future of their businesses, customers, investors and employees. Simply falling back onto WTO rules at the end of the Article 50 process would present businesses with huge uncertainties and would mean a very hard landing for the UK economy. There is very limited possibility of negotiating and ratifying a new UK/EU trade deal in two years. A transitional arrangement should therefore be put in place at the end of the Article 50 process that enables the UK to continue to do business with the EU whilst a comprehensive new trade deal is put in place. This will be vital to ensuring that the UK makes a success of Brexit.”

Commenting, Mark Boleat, Policy Chairman at the City of London Corporation said:

“Brexit has brought with it a considerable amount of uncertainty for businesses and the services sector. This can result in important strategic business decisions being delayed and much needed investment postponed or withdrawn altogether. A transitional agreement would give businesses a greater degree of certainty and the time to make crucial decisions, which will ultimately support growth in both jobs and the economy.”

Notes

Article 50 negotiations are designed to agree the terms on which Member States leave the EU, rather than the agreement of future trade arrangements, but trade talks are likely to happen in parallel to the Article 50 discussions.

The full details of the time it took to agree, ratify and bring into force each of the EU’s 37 FTAs can be seen in this table: http://www.open-britain.co.uk/the_time_taken_to_agree_ratify_and_bring_into_force_eu_ftas



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