Brexit's Impact on Trade Deals and Future Prospects
The recent tariffs imposed by the United States have heightened concerns about the future of trade deals post-Brexit. While some Brexiteers see this as an opportunity to strike better deals, the reality is more complex and challenging.
UK Dependency on EU Trade Deals
Nearly 60% of the UK's trade is covered by deals negotiated by the European Union. This dependency makes it difficult for the UK to enter into new trade agreements without first securing a deal with the EU. Recent developments, such as the EU deal with Japan and trade talks between the EU and Australia/New Zealand, underscore the competitive landscape.
Immediate Trade Challenges for the UK
For the UK government, the immediate challenge lies in signing a new deal with the EU. European officials have made it clear that they will not ask EU trading partners to allow the UK to benefit from current trade deals with countries like Japan or South Korea until a final Brexit deal is signed. This creates a tight deadline for the UK's International Trade Secretary, Liam Fox, to negotiate new trade deals.
Mr. Fox now faces a mere three months to conclude these agreements after the EU summit in December. This deadline is extremely tight, as it spans until 29 March 2019, when the UK will officially leave the EU. Without these trade deals, the UK risks facing tariffs and economic disruption, despite agreeing to a transition period covering membership of the single market and customs union until 31 December 2020.
US Tariffs and Trade Barriers
The US has recently imposed tariffs, bringing new uncertainty to the global trade landscape. Despite this, the UK's prospects for better trade deals post-Brexit remain limited. Brexiteers' hopes for improved trade relations may be overhyped, as many of the key trade barriers are not geopolitical but rather practical, such as distance and different standards.
While some may argue that matching US standards would lead to lower prices, this approach has its flaws. For instance, changing standards to align with the US could mean leaving the rest of the world behind. The UK's economy would become less competitive globally, and there would be significant costs in infrastructure and regulatory adjustments. Moreover, full integration with the US would place the UK in the same economic outfield as regions like Puerto Rico, which is far from being a top priority in Washington.
Considering the current global trade environment, the UK's best approach may be to leverage its existing trade agreements. These agreements provide a solid foundation from which to negotiate future deals with a variety of countries. The key is to focus on maintaining these relationships without overcomplicating the process.
Conclusion
As the UK navigates its post-Brexit landscape, the trade challenges are far from clear. The immediate need to secure new deals with the EU and the limited scope for better trade deals with other countries highlight the complexities of the situation. The UK must focus on leveraging its existing trade deals and finding pragmatic solutions rather than pursuing overly ambitious or unrealistic goals.