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MEPs see scope for change in EU trade negotiation positions post Brexit

 

The European Parliament’s trade committee has undertaken a first appraisal of the possible effects of the United Kingdom’s departure from the EU on the EU’s common commercial policy. MEPs see some changes ahead in the politics of the EU27 bilateral and multilateral trade negotiations and also want the EU to change its position in some of them.

 

Free trade agreement negotiation complications

 

A leaked report by the chair of INTA Bernd Lange to the Parliament’s committee coordination unit reveals that MEPs see some difficulties ahead, but also some opportunities to rearrange some negotiations.

The freshly adopted CETA with Canada would need to partly be renegotiated. The major issue at stake is the EU’s agricultural tariff rate quotas. These TRQs – on beef for example – have been granted to Canada for the entire EU market. The quotas will need to be sliced up and divided between the EU and the UK.

On the now frozen TTIP, the report put together by Bernd Lange concludes that, given the UK’s deep trade ties with the United States, Brexit is “making TTIP slightly less interesting for the US”.

In the ongoing free trade agreement discussions with Japan, the UK’s departure from the EU could mean that the EU and Britain could end up in a competitive situation. The UK could be less defensive in auto and electronic tariffs due to Japan’s significant investments in this sector in Britain than the EU, meaning, “divergent interests” ahead.

MEPs are critical of the possible parallel talks held by New Zealand and Australia towards a free trade agreement with both the EU – to be launched soon – and with the UK. “A process of “parallel consultations” could complicate negotiations” with the EU, the MEPs believe.

The trade committee says Economic Partnership Agreements with West Africa and the Eastern African Community, signed but not adopted, could be jeopardised by Brexit, as key countries such as Nigeria or Tanzania, and Kenya have special ties to the UK.

MEPs believe Brexit could complicate recently revived negotiations with Mercosur, the South American bloc. Indeed, internal EU “reluctances towards ambitious negotiations could become more visible and timeline affected”, the report reads.

The elected EU representatives say that Britain’s departure from the EU could weaken the EU’s hand in negotiations with third countries on market access in public procurement, a major offensive interest of big member states .

 

Defensive turn

 

Beyond the challenges Brexit is also seen as a potential opportunity. MEPs believe that Brexit could make reducing tariffs on spirits (Scottish Whisky) and opening up financial markets less of a priority for the EU in possible revived free trade talks with India.  MEPs seem adamant an UK-Indonesia free trade agreement – negotiations towards were launched in 2016 – “could be “modelled on” an EU-Indonesia deal”.

The trade committee believes the UK’s withdrawal from the EU could have a “significant impact” on the now halted Trade in Services Agreement – TiSA – negotiations, citing notably telecommunications and finance. MEPs think negotiations in these sectors “will have to be readjusted”.

The EU and the UK will have to renegotiate their TRQs with third countries in almost 100 agricultural products in the World Trade Organization as part of an ongoing WTO schedule ‘rectification’ process by which the UK adopts its own tariff schedule modelled on that of the EU. MEPs cite specific complications for ‘Hilton’ beef. Also MEPs explicitly call on the EU to shrink its current quotas vis-à-vis third countries to reflect the UK’s departure from the EU.

Further: “EU trade agreements will not be binding on the UK after its departure and while [the] situation would be slightly different for agreements covering EU exclusive competence (especially sectorial: on wines, spirits, [Geographical Indications]) and for so-called mixed agreements, there will be effects on both, likely raising issues in the relations with the third countries.”

More broadly MEPs see a possible future bilateral FTA with the UK, enhanced by specific areas of cooperation on issues like dual-use export controls.

MEPs say that the UK’s withdrawal agreement with the EU, negotiations towards which are expected to start end March this year, is “to take account of the framework for the future relationship with the Union”. The withdrawal agreement “could contain transitional periods related to [the] trade regime”, MEPs reckon.