Empire2.0, anyone?

The EU and the Commonwealth
By Steve Peers
Professor of EU Law and Human Rights Law, University of Essex
When the UK joined the EU, it reduced its trade ties with many Commonwealth countries in order to sign up to the EU’s common trade policy. It’s sometimes suggested that if the UK left the EU, it could simply reverse that policy, making up for any loss in trade with the remaining EU by increasing Commonwealth trade again.

But this argument rests on a false assumption. In fact the EU does not prevent the UK from trading with the rest of the world – or the Commonwealth in particular. First of all, the EU has no impact on the commercial type of trade deals, like the £9 billion worth of trade deals between the UK and India agreed during the recent visit of the Indian Prime Minister.

On the other hand, because it is a customs union with a common trade policy, the EU does have powers on the sort of trade deals which concern government regulation. But since the UK joined the EU over 40 years ago, the EU’s trade policy has been transformed, in part at the UK’s urging. The EU no longer focusses on trade deals with neighbouring countries only, but has been negotiating deals with states across the world.

For the Commonwealth in particular, this policy change means that the EU has agreed free trade agreements (FTAs), or is in the process of negotiating free trade agreements, with the vast majority of Commonwealth states – a full 90% of the 50 Commonwealth countries that are not in the EU. This includes the six Commonwealth states that accounted (in 2011) for 84% of Commonwealth trade – and many more besides.

More precisely, there are already FTAs in force between the EU and 18 of those 50 Commonwealth states (36% of the remaining Commonwealth). The EU has agreed FTAs with 14 of those countries (28%), subject only to completing the ratification process. It is negotiating or about to start negotiating FTAs with 13 states (26%). That leaves only 5 Commonwealth states (10% of the non-EU total) that the EU is not planning FTA talks with. (For full details of the status of EU trade relations with each of the countries concerned, with links to further information, see the Annex to the blog post on the EU Law Analysis blog).

It’s sometimes suggested that the EU’s trade deals with other countries don’t benefit the UK. But the UK’s exports to Commonwealth countries have been increasing at over 10% a year – with increases (over two years) of 33% to India, 31% to South Africa, 30% to Australia and 18% to Canada. In fact, since 2004, British exports to India are up 143%. Needless to say, this increase in trade with the Commonwealth (while an EU member) must have created or maintained many British jobs.

Is it possible that after leaving the EU, the UK could negotiate trade deals with Commonwealth countries more quickly, or deals which are even more favourable to the UK? First of all, as noted above, the EU already has agreed trade deals with 64% of Commonwealth countries, and is negotiating with another 26%. Some of the latter negotiations are likely to be completed by the time that ‘Brexit’ took place.

So the UK would have to ask perhaps three-quarters of its Commonwealth partners for trade deals to replace those already agreed with the EU. They might agree quickly to extend to the UK a parallel version of their existing arrangement with the EU, since that would not really change the status quo. But they might not be interested in negotiating any further trade liberalisation. If they are interested, they will ask for concessions in return, and this will take time to negotiate.

For the remaining one-quarter or so of states, the UK will have to start negotiations from scratch, in some cases having to catch up with EU negotiations that are already underway. And there is no guarantee that these other states will want to discuss FTAs, or that negotiations would be successful.

Overall then, there’s no certainty that UK exports to the Commonwealth would gain from Brexit. They might even drop, if some Commonwealth countries aren’t interested in replicating the EU’s trade agreements. Alternatively, they might increase – but it’s hard to see how any gain in British exports would be enormous, given the existence of so many FTAs between the EU and Commonwealth countries already, and the uncertainty of those states’ willingness to renegotiate those deals.

It seems very unlikely that the UK’s trade with the EU would be unaffected by Brexit, since the remaining Member States would be unlikely to create an incentive to leave by extending continued unlimited trade access to a departing Member State. So, even if the UK could increase its exports to the Commonwealth, would this make up for any loss in UK exports to the EU following Brexit?

The key fact to keep in mind here is that the UK’s trade with the Commonwealth is less than one-quarter of its trade with the EU. So to make up for even a 10% drop in exports to the EU, the UK would have to increase exports to the Commonwealth by more than 40%. How likely is that, when the vast majority of trade between the EU and the Commonwealth would already be covered by FTAs at that point?

Taken as a whole then, it’s clear that the UK can have it both ways, trading with both the EU and the Commonwealth – and this trade will only increase in future as more EU FTAs with Commonwealth states come into force or are negotiated. Leaving the EU, on the other hand, is liable to lead to reduction in trade with the remaining EU without any plausible likelihood that trade with the Commonwealth would increase by anything near the level necessary to compensate.

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17 thoughts on “Empire2.0, anyone?

  1. We are recently back from New Zealand and Australia. The trade, particularly agricultural trade, to the UK has been replaced by trade with Asian countries. They have no desire to replace it with trade with the UK, after being dropped by us when we joined the EU. Much of their agricultural production is now owned by Chinese companies who will want to continue supplying Asian countries, especially China. The brexiteers who thick we can return to the trade deals of the 1960s are sadly deluded.

  2. Sorry, think, not thick! Freudian slip!

  3. No , Fairliered, you were right the first time, THICK!!!!!!

  4. It’s the arrogance of the Tories on this that perplexes me. They seem to think that they can just snap their fingers and the rest of the World will be queuing up to sign deals with the UK. Living in the past!

  5. If new, more favourable trade agreements are the reason for Brexit then Westminster (Tories and Labour together) really have shot themselves in the foot. Why on earth would Commonwealth countries give more favourable trading terms to little old UK compared with the huge EU?

    With UK soon to be desperate for trade deals to replace those they lose when they leave the EU, they will hardly have a strong hand in negotiations and will more likely appear desperate to countries that already have FTAs with a market of 400+million consumers. The result? Less favourable trade terms for the UK than it would have had within EU.

  6. This analysis really needs to be ‘out there’. I remain hopeful that as Brexit unravels more and more of this type of information will appear in the MSM; it needs to be seen and discussed.

  7. Given that 40% of food/drink sector exports = Scotch Whisky, what reduction in tradables are left to Westminster when Scotland becomes independent?

  8. For some years now, the EU has been trying to negotiate a free trade deal with India. The Leave people are always saying that the EU is hopeless in finalising trade deals because it involves agreement among 28 countries – the Brits would be so much better on their own !
    But the Member State that has done most to block progress on an EU-India deal is….the UK.
    You couldn’t make this stuff up…
    Why would India be ready to open its services markets in return for access to 60 million consumers in Britain when it wasn’t ready to do that in return for access to the EU market of 510 million ?
    Because their experience of Empire 1.0 was so great they just couldn’t wait for version 2.0 ?

  9. There will always be an England. No problem with that. Just don’t call ot UK. It can go “global”, that is May’s new mantra.
    Scots just want out.

  10. The point about Australia is well made. I think they have been moving that way for several decades – geography, rising economic power make it inevitable.

  11. bungleoffrainbow

    I think this is one of the most sensible analyses I’ve read on any likely outcomes from Brexit. Which is probably why it never made it’s way into any of the pre-vote conversations. However, it should be used far and wide now by all in the pro-Indy/EU camp, since at this rate, if we scoot away and join the EU (regardless of the scenario), we’ll have all the trading commodities and the trading agreements that the rUK were desperate to get their paws on whilst they’re scrabbling around for scraps.

  12. They chucked a stone over the Dover cliff edge. Nine months later we still await the ‘plop’ as it hits the water, so deep and threatening is the abyss into which May cast the UK today.
    They really do believe that former colonies have been hanging about for 44 years hoping that Merrie England an Queen Mamma Lisbet’ would some day return and carry them away to White Man’s Heaven.
    The stupidity and arrogance of the English Establishment knows no bounds.
    The other boot is about to hit the floor.
    Include Scotland out, Treeza.

  13. I don’t believe getting better global trade deals was the impetus for Brexit, or anything to do with trade at all. They hadn’t even thought that far ahead, and now commerce will become collateral damage. The underlying imperative was something else altogether. I suspect it’s quite simply the innate English dislike for obeying anyone else’s rules (even if they’re good rules) coupled with a very healthy dose of racism and xenophobia. So in this little skit, Derek has it spot on.

  14. And the Brexiters keep screeching about how poor an indy Scotland would be.

  15. It is simply absurd to suggest that countries around the globe are so desperate to do deals with an ‘independent’ U.K., England in truth: that to do so, they will willingly do harm to their own interests to achieve this.
    Much as I believe in the optimistic view of human nature, to along with this delusion would require unlearning every facet of History which I have laboured to master over the years.
    With every press review I watch or listen to or every political forum I encounter, I become more and more convinced that some form of mass delusion has taken hold of the once fairly rational English nation. I must say at this point that I’ve spent the greatest part of my adult life living and working in England. As such, it would be being economical with the truth to claim that I never encountered disdain for my political views over the years. However, the main reaction of most English people I mixed with over the years was polite indifference. In addition, I,have to say that I’ve met hundreds of decent anti-Tory English people over the years and it truly breaks my soul to see the state of England nowadays.

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