Table of Contents

  • In December 2017, European Union (EU) leaders assessed the progress of Brexit negotiations and agreed it was sufficient to move to the next phase, although these negotiations are not expected to begin until March. They adopted negotiating guidelines for the second phase, which allows the United Kingdom (UK) and the EU to discuss post-Brexit transitional arrangements (or a two-year ‘implementation period’ in the view of the UK government) and the framework for a future trading relationship, falling short of actual trade deal talks.

  • The EU and the UK have agreed to move to the second phase of the Article 50 negotiations, which will discuss arrangements for a post-Brexit transitional period after March 2019 and the framework for a longer-term future trading relationship. However, the latter falls short of actual trade deal talks. This means there is still considerable uncertainty about the final EU-UK deal and, by implication, the UK’s future trade regime for developing countries. The proposed transition period could also bind the UK as a ‘third country’ to the Single Market and Customs Union, allowing the EU27, EU free trade agreement (FTA) partners and developing countries to continue exporting to the UK on the same terms as now, although the UK is not guaranteed reciprocity (Lowe, 2018).

  • In considering the UK’s trade landscape post-Brexit, it is vital to bear in mind that the sort of deal the UK agrees with the EU will condition its relations with third countries and determine the scope for free trade agreements (FTAs) with them. In addition, the devil is in the detail. The nature of possible FTAs with both the EU and third countries depends on rules of origin, conformity assessment and authorised economic operator status for firms, among other things. If the UK has a full FTA with the EU, the terms of this, as compared with World Trade Organization (WTO) Most-Favoured Nation (MFN) terms, will affect the desirability of its market for third countries. The closer the UK’s regulatory alignment with the EU post-Brexit, the less scope there will be for deep agreements with third countries. Simplistically put, the UK cannot sign an FTA with the US that allows for the import of chlorine-washed chickens in the UK and have barrier-free trade in food products with the EU.

  • Despite the new information conveyed to policy-makers regarding the deeply integrated and connected nature of global trade organised within global value chains (GVCs) and coordinated by a few lead global firms, much of this seems neglected in the current debate on Brexit. The populist debate harks back to a far more mercantilist time, when the interests of nation states and domestic firms were far closer aligned than is the case today. Nowadays, most trade is in intermediate, not final, goods, with a large share being intra-firm. These new understandings of global trade, as well as the major information gaps revealed since the global financial crisis and the great recession, pose a major challenge to understanding the full implications of Brexit. Mercantilist-styled ‘beggar-thy-neighbour’ strategies can turn out to be ‘beggar thyself ’ miscalculations (Ahmed, 2016).

  • The UK will have an independent trade policy following Brexit, which could potentially have a huge impact on value chains integrated into the UK economy. Concerns about the impact of Brexit on developing countries are beginning to be explored, but the issue is urgent (Langan, 2016; Murray-Evans, 2016; Sanders, 2016). Although there are still many unknowns in this context, existing knowledge on the impacts of trade policy on global value chains (GVCs) can help us understand the likely effects of different policy options.

  • ‘Extreme uncertainty’ is a Brexit catchphrase that applies fully to the UK’s future trade with developing countries. There is uncertainty over policy: the UK’s post-Brexit relationship with the remaining EU members (EU27) and its future independent trade regime for developing countries. And there is uncertainty over business response: how firms react to any change in relative market access or to any new regulations affecting the transhipment to UK of goods initially imported into an EU27 port. Critically, this commercial uncertainty includes when firms will react – how long in advance of the Brexit day are their trading decisions made? How long have we got to get everything right: two years from the date UK formally notified Brussels of its decision to leave or only a fraction of this period? The answer will vary between firms and goods.

  • This collection of essays has examined specific aspects of the UK’s post-Brexit trade policy, especially in relation to third countries, which includes many Commonwealth member countries. The contributors agree Brexit presents important new opportunities for the UK – such as championing global free trade and launching pro-development initiatives for the world’s poorest countries – but also raises significant challenges in ensuring trade, investment and regulatory continuity in existing relationships.