08 January 2017

The Guardian: As a trade negotiator, I’m shocked at Brexiters’ ignorance

[...] This is shaping up to be a one-sided affair. Brexit is a paradox, an effort to return to the past and a vision for the future at the same time. After nearly 45 years as a fully fledged member of the EU the UK wants out. And it has two years to cut a deal with the EU.

There is no mutually beneficial deal available between the UK and the EU in this time frame. Existing levels of trade and investment will not guarantee a positive outcome for the UK. The Brexiters who think they have the upper hand are wrong.

Then there are the more mundane aspects of international trade negotiations that evidently are not getting a hearing in Whitehall. I write from experience, having helped give birth to the Canada-EU Comprehensive Economic and Trade Agreement (Ceta).

Ceta is a very good agreement between two willing and flexible partners that approached negotiations with a positive spirit, seeking to realise the full potential of the relationship. It will stand the test of time once implemented. However, I certainly did not think that the scoping, negotiation and the ratification of the treaty would take more than 10 years. The politicisation of the European process of ratification has been most surprising and, at times, disconcerting. Rogers’s warning to Downing Street, outlining that the EU expects a full UK trade deal to take until the early to mid-2020s, seems a realistic timeframe. Undoing nearly 45 years of integration and shared law will not be a pleasant experience and represents a clear step backwards.

Why do these agreements take so long? The last generation of trade agreements was focused mainly on removing tariffs. Multilaterally, the single biggest recent event at the increasingly ineffectual World Trade Organisation has not been the conclusion of a successful round, but, rather, China’s accession in 2001. The next generation of bilateral agreements, of which Ceta is the template, is complex. They reflect the realities of modern commerce and go beyond trade, touching upon behind-the-border issues such as standards, regulation and opening government contracts to competitive bidding. This complexity means that the deals take years to negotiate and conclude. In our amped up media environment, there are special interests making noise at each step in the process, ensuring that trade and investment deals are a marathon, not a sprint.

The EU’s chief negotiator, Michel Barnier, has stated that the ratification process alone for a UK-EU deal would take six months. Based on the experience of Ceta it will certainly be longer.

An interim deal is surely now the target – but it seems impossible to achieve without UK flexibility on freedom of movement and the role of the European courts. This means that a reversion to WTO rules and the common tariff schedules is the most likely scenario for the UK. Estimates are that this will mean a 4% drop in UK GDP versus a 1% loss in the EU, due mainly to the relative sizes of their economies. While it would be diminished by the loss of one of its most dynamic members, the EU can take the hurt. It has no choice but to do so.

In addition to paving the way for similar deals across the Union which could lead to its fragmentation, a sweetheart deal with the UK would be a missed opportunity to extract industries back to the continent – banking, autos and aerospace to name a few. The Brexit camp seems to be divided into two groups – those who believe that an interim deal is possible and those who are not only resigned to a WTO outcome, but have actually convinced themselves that the UK will be as strong or stronger as a result. This view is held despite the higher tariffs, a loss of passporting rights for UK financial institutions and the disappearance of agricultural subsidies such an outcome will represent.

Yet a post-EU Britain would pitch itself as a country open for business – free of red tape and a great place to invest. Pay no mind the red tape represented by those customs barriers into the 450 million-person market that the UK used to be part of. [...]

Full article on The Guardian

© The Guardian