30 May 2017

Financial Times: After Brexit: Let the haggling over treaties begin

[...] While Brexit is often cast as an affair between Brussels and London, in practice Britain’s exit will open more than 750 separate time-pressured mini-negotiations worldwide, according to Financial Times research. And there are no obvious shortcuts: even a basic transition after 2019 requires not just EU-UK approval, but the deal-by-deal authorisation of every third country involved.

“The nearest precedent you can think of is a cessation of a country — you are almost starting from scratch,” says Andrew Hood, a former UK government lawyer now at Dechert. “It will be a very difficult, iterative process.”

Britain finds itself at the diplomatic starting line, with the status quo upended and all sides reassessing their interests.

To Brexiters this is a liberation that allows Britain to negotiate better, more ambitious deals with trading partners, shorn of the encumbrance of Brussels dogma and politics. At worst, they say, existing arrangements would be continued through drafting tweaks replacing “EU” with “UK”; at best they would be improved. Boris Johnson, foreign secretary, said nations were “already queueing up” to do deals.

Even if it were this simple, critics still fear it will open a bureaucratic vortex, sapping energy and resources. Each agreement must be reviewed, the country approached, the decision makers found, meetings arranged, trips made, negotiations started and completed — all against a ticking clock and the backdrop of Brexit, with the legal and practical constraints that brings. Most inconvenient of all, many countries want to know the outcome of EU-UK talks before making their own commitments.

“We are talking about an enormous number of complex acts that we rely on today,” says Lord Hannay, Britain’s former EU ambassador. “The challenge of replacing them falls in the same category as Alice in Wonderland running furiously to stand in the same spot.”

At its most granular level, the sheer administrative scale of the “third country” question is striking. Through analysis of the EU treaty database, the FT found 759 separate EU bilateral agreements with potential relevance to Britain, covering trade in nuclear goods, customs, fisheries, trade, transport and regulatory co-operation in areas such as antitrust or financial services.

This includes multilateral agreements based on consensus, where Britain must re-approach 132 separate parties. Around 110separate opt-in accords at the UN and World Trade Organisation are excluded from the estimates, as are narrow agreements on the environment, health, research and science. Some additional UK bilateral deals, outside the EU framework, may also need to be revised because they make reference to EU law. [...]

Most prominent — and economically significant — are the trade deals. Liam Fox, the UK trade secretary, has promised “zero disruption” by securing transition agreements to continue old trading terms post-Brexit. Britain will in effect repurpose its EU inheritance, re-activating the existing free-trade deals, Mr Fox says. “It is hardly a picture of splendid isolation,” he told parliament this year.

For the most part there is a shared interest in continuing arrangements, since many nations will not want to lose preferential access terms to the UK. Some bigger economies see Brexit as “a window of opportunity”, in the words of one ambassador to the EU. Mr Fox has started preliminary discussions with a dozen-plus countries that want to further liberalise their existing arrangements; South Korea, Switzerland and Norway fall into this category. [...]

The political danger for Britain is that any WTO member can veto such revisions. It may be possible for the EU and UK to collaborate on finding a smooth transition at the WTO. But it will require consensus at some point, a vulnerability open to exploitation.

“It is a hell of a task. Trade will keep them very busy,” says Vladimir Chizhov, Russia’s ambassador to the EU. “All the quotas will have to be recalculated, and I assume anti-dumping calculations should be changed at some point. There are 164 members at the WTO. And all of them will have to agree.”

Asked whether this presented Moscow with a weakness to exploit against Britain, he said with a smile: “The Russian diplomatic service has been known for its tough negotiators. We are very proud of that.” [...]

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