Tricks of the trade: Britain, the EU and doing deals in a post-Brexit world | Business| Economy and finance news from a German perspective | DW | 28.03.2019
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Tricks of the trade: Britain, the EU and doing deals in a post-Brexit world

The beauty of Brexit, according to those in favor, is that the UK will be able to strike its own trade deals without EU "interference." But 65 percent of UK trade is linked to EU trade, and new deals are deeply complex.

Incredibly, despite the fact that the original Brexit D-Day of March 29 is now upon us, no one can credibly claim they know what is going to happen in the end. Granted, D-Day has been postponed for two weeks but there is justified doubt as to whether we'll be much wiser in a fortnight.

What those in favor of the UK's leaving the EU have consistently argued is that a post-Brexit landscape would resemble a kind of trade nirvana, a world in which British civil servants bound merrily across the globe signing trade deals like autographs — Canada one week, India the next.

"The only thing we have to fear is fear itself," Boris Johnson, a driver of the Leave campaign, said a few months before the referendum. "I think there is a huge opportunity. Do free trade deals, believe in ourselves."

Other passionate Brexiteers like Jacob Rees-Mogg, Liam Fox and David Davis have been every bit as ardent. "Global Britain" was the watchword. This was all going to be rather straightforward.

Trade deals are fiendishly complicated things to deliver, yet in late 2017, UK Trade Secretary Fox delivered the unforgettable quote: "I hear people saying 'oh we won't have any [free trade agreements] before we leave'. Well, believe me we'll have up to 40 ready for one second after midnight in March 2019!"

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He was wrong. As things stand, the UK has signed just eight "continuity deals" with countries and regions with which the EU has trade associations and agreements, and which the UK already has the full benefit of through their EU membership.

You won't get me, I'm not part of the union

The eight are: the Palestinian Authority, Israel, Switzerland, the Faroe Islands, Chile, Eastern and Southern Africa (four countries), Caribbean countries (nine countries) and a group of Pacific Islands.

Those were relatively straightforward to strike but others are proving much trickier. UK Agreements with Norway, Iceland, Canada and South Korea are seen as a long way off while bespoke UK trade deals with Japan, Turkey and Singapore have already been ruled out.

It's important also to point out that the above only applies to continuity deals with countries the EU already has trade agreements and associations with. For countries that the EU has no specific agreements with (for example, India, the USA or Australia), entirely new trade deal negotiations would need to be initiated. That's a whole new ball game.

Also significant is the fact that the agreements the UK has already struck will not apply until at least 2021 if the EU-UK Withdrawal Agreement is eventually ratified by the British parliament.

"The UK will remain bound during the transition period by the obligations stemming from all EU international agreements," a European Commission spokesman told DW. "In the area of trade, this means that third countries keep the same UK market access. During this period, the UK cannot become bound by new agreements on its own in areas of union-exclusive competence unless authorized to do so by the EU."

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The art of the deal

Tim Cullen, the founder of the Oxford University program on negotiation and an experienced negotiator at commercial and international level, says trade agreement negotiations are "just about as difficult as it gets."

Based on what he has seen from the UK side in their approach to negotiations with the EU so far, he believes they need to learn many valuable lessons if they are to succeed in future trade agreement negotiations with both the EU and other countries.

"For future negotiations, they need to be extremely realistic" he told DW. "Much more realistic than they have been so far, as to what it will entail going into these other big negotiations."

"The Canadian-EU agreement (CETA) took seven years for the documentation to be finalized alone," he said. "The agreement itself has the same amount of pages as the complete works of Shakespeare and the Old and New Testament of the Bible put together."

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He believes that many "first principles of negotiation" have been lacking in the UK's approach so far, for example a lack of unity and a lack of clarity as regards their ultimate goals. He also says a fundamental tenet of negotiating — making concessions in order to make gains — is undermined when any concession mid-negotiation is leaked to the media and then represented as a capitulation, as happened throughout the EU-UK process.

Another thing he thinks is worrying for future UK negotiating prospects is the possibility of ideology, rather than pragmatism, governing the approach of pro-Brexit politicians.

"People who put forward proposals based on pragmatism and solid research underpinnings are much more successful in negotiations than those who are driven by ideology," he said.

Starting from scratch

The EU has trade agreements with 72 countries around the world. As long as its in the EU, the UK benefits as much from these as any other EU member. Those agreements cover around 15 percent of UK trade. 

On top of this, there is still no guarantee that a close future EU-UK relationship will make it any easier for a post-Brexit UK to strike a trade deal with a country like Japan.

Fredrik Erixon, director of the European Centre for International Political Economy (ECIPE), a Brussels-based think tank, says that while some countries will be happy to replicate with the UK the exact deal they have with the EU, others will seek to make gains from the UK's post-Brexit lack of leverage.

"Some countries will believe that the UK should open its markets much more than it was compelled to do under the agreement that it had with the EU," he told DW. "These countries believe they have leverage now and that's why they want to actually negotiate. This is not going to be a simple rollover, it's going to be a new negotiation. Countries like Japan have been very clear about this."

Ask the question before looking for the answer

Close to 50 percent of current UK trade is with other EU nations. So, alongside the aforementioned 15 percent with nations in EU agreements, around 65 percent of UK trade is directly tied to the nature of its future relationship with the EU.

So even allowing for the untested Brexiteer vision of the UK quickly penning trade agreements with countries such as the USA, India, Australia and so on, there is no denying that the most important trade agreement negotiation it will enter whenever Brexit finally does happen is the one with the EU itself.

Erixon believes that the trade agreement talks between the EU and the UK will "for sure" take longer than the period covered by the transition period in the Withdrawal Agreement. "At least four years," he says.

He also believes the current lack of clarity over the terms of the UK's exit means much will need to be defined regarding what kind of relationship the UK wants with the EU before the negotiations can even begin.

With one day to go until March 29 — the day by which all this was supposed to have been resolved — it's clear that the question of the future of British trade has not yet even been fully formulated, let alone answered.

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