The UK’s post-Brexit trade policy options

The Queen’s Speech on 21 June announced that the government “will seek to maintain a deep and special partnership with European allies and to forge new trading relationships across the globe. New bills on trade and customs will help to implement an independent trade policy, and support will be given to help British businesses export to markets around the world”.

Although appearing to indicate an exit from both the customs union and single market, the government’s trade policy plans post-Brexit are not yet certain, with companies unaware as to how the new arrangements, once made, will impact their business.

So, what are the government’s trade options, and what do they entail?

The single market

The single market allows for the free movement of goods, services, capital and people within the European Union, creating a barrier-free trade zone for the EU member countries. Membership of the single market requires subscription to the four freedoms and acceptance of the jurisdiction of the European Court of Justice.

Full access to the single market can be negotiated without being a member of the EU – Norway being an example. In exchange, contributions to the EU Budget must be made.

The Conservative Party has affirmed on numerous occasions that the UK will leave the single market, allowing restrictions on the movement of people and divergence from the authority of the ECJ.

The customs union

If the UK leaves the single market, it can retain membership of the customs union, a trading bloc that removes tariffs on goods traded between the union members and sets tariffs for good imported into the union. Membership of the customs union however would restrict the UK’s ability to negotiate free trade agreements with other countries.

Chancellor Philip Hammond has previously backed temporarily maintaining membership of the customs union under a transitional arrangement post-Brexit in order to allow the UK time to negotiate new trade agreements.

Free trade agreements

Leaving both the single market and the customs union would allow the UK to negotiation trade agreements with other countries, and the EU. However, the duration of negotiations can be extremely lengthy, and there are potentially serious implications for the border between Northern Ireland and the Republic of Ireland. In addition, the services industries would need to overcome obstacles, such as differences relating to legislation and standards between trade partners.

World Trade Organisation

Where the UK doesn’t have a free trade agreement in place, it could always rely on its World Trade Organisation membership. Under WTO rules, countries are prohibited from discriminating between WTO members, therefore the same tariffs must apply to countries similar circumstances. In a situation where the UK hasn’t negotiated a free trade agreement with the EU, the EU would have to apply to same tariffs to the UK as it does to other WTO members.

What’s next?

The EU has been firm that conditions relating to the UK’s withdrawal from the EU must be agreed first before any trade talks can begin. All options remain on the table, yet not one will be implemented without major challenges and implications for the UK economy.

 

With Brexit uncertainty casting volatility on the foreign exchange market, it’s more important than ever to obtain visibility into margins and fees charged on currency exchange services.

marginexpert.com provides full costs visibility, allowing consumers and businesses to see the costs of the trade as a fixed spread on top of the mid-market rate, exposing hidden costs and potentially saving businesses thousands of pounds.

Take the first step towards transparency with a free online quote from marginexpert.com.

Related reading