Negotiate, more like No-gotiate: UK-EU trade negotiations looking unpromising

June 12, 2020

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3 min read

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What's going on here?

On 15 May 2020 the penultimate round of trade negotiations between the UK-EU ended. Little progress has been made and it seems that a no trade deal outcome is more and more likely. There were two contested points that led to the breakdown of talks. These were the “level playing field” measures wanted by the EU and future fishery rights given.

What does this mean?

The “level playing field” measure would require the UK to follow similar regulations to the ones enforced in the EU. The EU wants these measures to ensure that British businesses will not have a competitive advantage. It fears that without them, the UK could potentially deregulate its industries. This would make UK firms more attractive for EU consumers, provided a free-trade deal is in place.

On the other hand, the UK sees such regulations as “bind[ing] this country to EU law or standards, or determine our domestic legal regimes.” This is hardly an outcome the UK would want. Brexit was primarily advertised as a way to “break free” from the many regulations imposed by the EU.

Moreover, the UK has already taken steps in building its own trade policy. Plans unveiled by the Secretary of State for International Trade highlight future lower tariffs than the ones currently applied and a higher rate of tariff-free imports (60% under the new rules as opposed to 47%). The UK has also recently started negotiations with the US for a future free-trade deal.

What's the big picture effect?

If a trade deal is not ratified by the end of the transition, the situation will get complicated. The most likely outcome will lead to the UK and EU trading under the general WTO rules.

That means that for every good the UK buys from the EU they will have to pay a tariff and vice versa. As the UK heavily imports food  from the EU, such tariffs will likely increase the prices in this area.  In the same way, the automotive industry is likely to also suffer from increased prices. On the other hand, the UK’s manufacturing sector could become more competitive. The proposed framework will reduce the tariffs for many mechanical parts produced in the UK. 

This situation will likely prove to be lucrative for law firms. They will undoubtedly be hired to advise on how to navigate the new regime. While International Trade Law practices will clearly be involved, there are other practice areas that will play a critical part in such matters.

Corporate law divisions will be instrumental in helping clients working both in the UK and the EU to restructure their businesses. Tax lawyers will have their hands full helping businesses navigate the new tariffs and clarify the best way to approach the UK and EU tax regimes. Dispute resolution is likely to be important as well. For instance, contracts linked to a specific delivery or completion dates could be affected by the new border controls, leading to points of conflict between parties that require solving.

All things considered, it appears that a lot of work will need to be put in by lawyers and industry actors alike to navigate such a complex relationship. To avoid the negative repercussions and added red tape of a no-deal Brexit, we should hope that the UK-EU negotiations will reach some form of consensus in the near future.

Report written by Bogdan Ciacli

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