In 2019, the UK and EU traded £672billion of goods and services, or a little short of £2billion per day, making it one of the world’s largest trade flows. That flow will change markedly from January 1 with the end of the Brexit transition period. The agreement just reached between the UK and EU, while superior to WTO terms, will initially mean considerably higher barriers to this trade.
Trade between developed economies in the 21st century is diverse and complex, a web of connections created by goods and services crossing and re-crossing borders, following national and international regulations as appropriate. From research to food, computer games to university students, trade has become far greater than the traditional notion of a factory in one country producing goods to be sold in another.
Modern trade relations between countries reflect this diversity and typically consist of a networked system of agreements of different types, shared membership of regional and national organisations, and regular dialogues on various matters between governments at different levels. There are, for example, more than 100 agreements in place between the EU and Switzerland and, although an extreme case, it is typical for countries to have multiple engagements with each other.
The new UK-EU Trade and Cooperation Agreement puts in place a framework with some essential elements such as the absence of tariffs, basic rules on business travel, and a structured dialogue. However, it falls far short in supporting modern trade, in particular in tackling non-tariff barriers. While such shortcomings are not uncommon –most Free Trade Agreements (FTAs) are to an extent ‘skinny’ – modern trade relations and, indeed, UK-based businesses, need much more.
This report views the Trade and Cooperation Agreement as a foundation on which both sides can build a more mature relationship, and lays out the top ten priorities for further development. Some were proposed in negotiations, by both sides, but dropped for reasons of time or politics. Priorities are discussed in sections looking at regulations, tariffs and other market access barriers, including cooperation at the WTO, and issues around movement of people, finishing with a conclusion on how this could happen.
About the Author
David Henig is Director of the UK Trade Policy Project at the European Centre for International Political Economy (ECIPE) think-tank, and one of the UK’s leading authorities on trade policy.
He has written extensively on the trade implications of Brexit and what comes next, and also examines global trade issues such as US-China tensions, the future of the WTO, and EU trade agreements.
Prior to joining ECIPE in March 2018, David worked for the UK Government on issues including Transatlantic Trade Investment Partnership (TTIP) talks between US and EU, and in establishing the Department for International Trade after the EU referendum.
He co-founded the UK Trade Forum, discusses trade issues frequently in the media, and advises businesses on trade policy. A graduate of Oxford University, David started his career in consultancy.