Some Brexit supporters have a relaxed view of European Union (EU) law. However, their assertions about trade after Brexit, specifically the notion that existing agreements would simply continue, require closer examination. They argue that global trade regulations would prevent the EU from hindering the UK’s trade relationships. This overlooks the possibility that, absent a transitional agreement, the UK’s participation in the World Trade Organisation (WTO) and other trade agreements could be at risk.
Since the late 1960s, the EU has progressively taken control over international trade matters, termed the “common commercial policy.” This doesn’t include individual transactions like selling British trains to India; that remains under each member state’s authority. Instead, it covers policies like import taxes (tariffs) and regulations that could impact trade.
This exclusive EU trade power exists for practical reasons, not as an overreach. The EU functions as a customs union under WTO rules. Unlike the North American Free Trade Area (NAFTA), customs union members can’t set individual tariffs or make separate trade deals. Once a product has paid the common tariff, it moves freely within the Union. Individual tariffs would necessitate customs checks, contradicting the free movement of goods within the single market. The UK government’s own assessment concluded that more control over trade with other nations means sacrificing benefits within the EU’s single market.
International Law Doesn’t Guarantee Free Trade
Free trade isn’t a given right in international law. Agreements like the General Agreement on Tariffs and Trade (GATT) and the WTO are necessary because engaging in trade is a sovereign decision for each country. While there are economic advantages, states have opted out of international trade before. The pro-Brexit campaign stresses the economic incentive for UK trade partners to reach agreements but downplays the same incentives for the EU. This is contradictory: if the UK can make ideological decisions about EU membership, other countries can do the same regarding trade with a post-Brexit UK. The idea that French farmers would demand a free trade deal with the UK ignores their stance on free trade in general.
EU Membership Benefits Trade with Non-EU Countries
Negotiating new global trade deals within the WTO has been slow, leading many countries and the EU to pursue bilateral or smaller multilateral deals. The EU has concluded agreements with around 50 nations and is negotiating more.
While the UK might strike more deals outside the EU, two issues arise. First, these agreements are complex if the UK wants to preserve systems like the NHS and public education, which other countries might seek to liberalize. Second, as seen with the Trans-Pacific Partnership (TPP), such deals take time and face opposition. The Transatlantic Trade and Investment Partnership (TTIP) between the EU and the USA would likely be a mixed agreement, requiring UK ratification and giving it veto power. If the UK left the EU, it would lose the bargaining power the EU has in such negotiations. The USA would likely demand similar, if not more, concessions from a post-Brexit UK in any trade deal. This assumes the US is even willing to negotiate, which officials have denied. This also undermines the argument that Brexit would avoid the ‘unfavorable’ TTIP. The pressure on the UK to quickly reach a trade deal would be immense, potentially putting sensitive sectors, especially services, on the table for liberalization.
Brexit would mean certain international agreements exclusive to the EU would no longer apply to the UK. This has significant implications, particularly for Scotland. For instance, “Scotch whisky” is a protected name under an EU-Canada agreement, to which no individual EU members are party. More importantly, a similar agreement exists with the USA, the top market for Scotch whisky. The EU-South Africa agreement covers another crucial market. Jeopardizing these agreements by leaving the EU would be detrimental.
WTO Membership
The EU is a founding WTO member (established January 1, 1995). It nearly replaced individual member state membership, but a court ruling determined that the WTO Agreement and related agreements are mixed. This means both the EU and its member states share competence. The claim that the EU merely represents its members, as in other international bodies, is incorrect, ignoring the EU’s exclusive competence over trade. Lord Lawson’s assertion that UK trade relations would stay the same is simply wrong. He inadvertently revealed another uncertainty: Brexit could force the UK to renegotiate its WTO membership terms. This is not a simple treaty succession issue, as both the UK and the EU retain their legal personalities post-Brexit. It’s unlike Scotland’s situation because Scotland isn’t directly party to international treaties.
Experts have pointed out that if the UK leaves the EU’s customs union, it would need to submit new tariff schedules to the WTO for continued membership. These need consensus from all WTO members, which could be complicated.
While continued UK WTO membership is likely, it would require extensive renegotiations of its tariff commitments. This was challenging even for major economies like Russia and China. Some WTO members might use a “non-violation complaint” against the UK post-Brexit if they perceive a loss of expected benefits, even without a breach of agreement. This is particularly relevant for service trade (GATS schedules), where pressure from UK trading partners is possible.
Even from a purely international law perspective, renegotiating the UK’s WTO membership terms seems unavoidable. Though the UK and the EU both have international legal personality, the UK alone can’t fulfill its obligations without the EU’s single market. WTO membership requires liberalization commitments based on the free movement of goods within the Union.
Therefore, while continued WTO membership is likely, the UK can’t meet all existing obligations on its own. It would need to submit new tariff schedules, even if copied from the EU, potentially leading to further negotiations.
Free Trade Agreements
Contrary to some claims, a disorderly Brexit makes it unlikely for the UK to quickly establish trade agreements with current EU member states. The EU’s exclusive trade competence applies even to negotiations between, say, Germany and the UK. Even if German car manufacturers want a trade deal, other EU nations might not.
EU member states can’t unilaterally negotiate trade deals within the Union’s competence. While the EU would likely desire ongoing trade with the UK, it wouldn’t be automatic. Understanding EU law is crucial here.
Even the European Economic Area (EEA) agreement, granting access to the single market, is open only to EU and European Free Trade Area (EFTA) states. The UK would have to join EFTA first and then apply to the EEA under the existing treaty. Importantly, EEA members are bound by many EU laws to maintain market access. The EFTA Court has even been more liberal than the EU Court of Justice in some areas, which might not align with Brexit goals.
This means that if the EU wished to complicate trade with the UK, it could. While economically unwise, recent EU political decisions haven’t always followed economic logic. The notion that French farmers would readily push for a UK trade deal is unrealistic, demonstrating a misunderstanding of French politics.
Even in agreements where both the UK and EU are parties, like the WTO or most existing EU Free Trade Agreements (FTAs), the UK’s trade relations are likely to change. It’s arguable that these “mixed agreements” could automatically terminate for the UK after Brexit.
One legal justification is the definition of “parties” within the agreements. Some FTAs define parties as EU member states, making the UK’s continued participation questionable. Additionally, territorial scope clauses, like in the EU-Central America agreement, link application to where EU treaties apply, potentially excluding the UK. Ultimately, the non-EU country has the right to end its UK trade relationship. Therefore, while the UK is currently a party to these agreements, its rights and obligations wouldn’t automatically continue.
The EU’s current practice of provisionally applying mixed-agreement FTAs for itself, but not its individual members yet to ratify, further complicates matters. The UK benefits from these agreements via EU membership but isn’t a direct party until all EU members ratify. This applies to agreements with nations like Peru, Colombia, Central America, Eastern and Southern African states, Cameroon, more Southern African states, and many Caribbean countries.
In all FTAs, non-EU countries could request renegotiations with the UK alone or with both the EU and the UK separately. While they might lack economic incentive to renegotiate, doing so amicably would require goodwill and likely UK concessions. While this is the best-case scenario, it still necessitates negotiations and a cooperative approach from all parties.
Some suggest the principle of continuity in international law prevents automatic termination or renegotiation. However, this principle, designed for state succession and government changes, doesn’t apply here. Since the UK can’t fulfill its obligations outside the single market, automatic continuity isn’t guaranteed.
Another relevant concept in international law is “fundamentally changed circumstances.” Smaller WTO members invoking this would only allow them to leave the WTO, which isn’t in their best interest. However, the EU and its remaining members could use this concept to end FTA relationships with the UK outside the WTO context.
The most optimistic scenario still requires significant goodwill and likely concessions from the UK. Continuing bilateral trade deals hinges on the EU and the non-EU partner, not just the UK. This contradicts the claim that “trade relations with the rest of the world remain unchanged.”
Barnard & Peers: chapter 25
Photo credit: commons.wikimedia.org
[1] See Panos Koutrakos “Editorial - Brexit and international treaty-making” [2016] European Law Review 1
[2] Ibid. p. 54.
[3] Katrin Fernekeß, Solveiga Palevičienė and Manu Thadikkaran “The Future Of The United Kingdom In Europe - Exit Scenarios And Their Implications On Trade Relations” Graduate Institute Trade and Investment Law Clinic Papers, 2013, 07 January 2014, Geneva, online: Tohttp://graduateinstitute.ch/files/live/sites/iheid/files/sites/ctei/shared/CTEI/working_papers/CTEI_2013-01_LawClinic_FutureUKinEurope.pdf
[4] Ibid. p. 49
[5] Ibid. p. 50.
[6] Ibid. p. 50.
[7] Panos Koutrakos “Editorial - Brexit and international treaty-making” [2016] European Law Review 1.
[8] The relevant ILC Report stated very clearly (http://legal.un.org/ilc/documentation/english/a_cn4_120.pdf): “In consequence, the treaty obligation, once assumed by or on behalf of the State, is not affected, in respect of its international validity or operative force, by any of the following circumstances: (a) That there has been a change of government or regime in any State party to the treaty; (b) That some particular organ of the State (whether executive, administrative, legislative or judicial) is responsible for any breach of the treaty; (c) That a diminution in the assets of the State, or territorial changes affecting the extent of the area of the State by loss or transfer of territory (but not affecting its existence or identity as a State), have occurred, unless the treaty itself specifically relates to the particular assets or territory concerned. In all such cases, the treaty obligation remains internationally valid, and the State will incur responsibility for any failure to carry it out.”
[9] Many thanks to Dr Michael Waibel for highlighting this point.