A New Trade Regime: The Department for International Trade’s White Paper on the UK’s future trade policy published

As part of intensifying UK Government planning for Brexit, the Department for International Trade (DIT) has published a Trade Policy White Paper (complementing a separate paper on a new customs regime which we have covered here), detailing the trade arrangement the UK may put in place after it exits the EU.

The White Paper underlines the challenges faced by the UK government in acquiring the necessary information from industry and devolved administrations to create a framework for trade deals and disputes. Furthermore, the necessary arrangements will have to be operational the day the UK leaves the EU, which presents considerable difficulties given the range of Brexit outcomes still on the table.

The White Paper explores a range of issues raised by Brexit: increasing international trade through new trade deals; building a robust trade dispute resolution mechanism; and promoting free trade generally. The paper also considers ways in which the UK can provide strong voice for a rules-based international trade regime, and aiding developing countries through trade.

Global context

The paper’s focus should be seen within the context of the Government’s overall attitude towards trade. Trade is viewed as a driver of innovation, encouraging firms to move up the value chain and providing consumers with more choice. Upon Brexit, the UK will regain its independent seat on the WTO, and will use this platform to intensify its support for “robust, free and open international trade”. More specifically, the UK will ensure that it remains part of the Government Procurement Agreement (“GPA”) as it leaves the EU. The GPA allows UK businesses guaranteed non-discriminatory access to a public procurement market estimated to be worth over £1.3 trillion annually. The UK will also draw up UK-only Schedules to current agreements which will allow it to participate in existing multilateral deals. Preliminary work for this has already started, as the UK has agreed with the EU its share of WTO farm product quotas (which allow a certain quote of tariff-free imports). The new quotas do not expand overall market access, which accords with the position in the White Paper to keep changes to a technical nature.

Boosting trade relationships

Forming new trade relationships is of course the main purpose of DIT, and the White Paper sets out some detail on where it sees the opportunities and its approach to new relationships.

• Trade with the EU. The trading relationship between the UK and the EU is one of the “great unknowns” of Brexit. For its part, the DIT hopes for a “new, deep and special partnership” with the EU in trade terms, with “the greatest possible tariff and barrier free trade with the EU”. The matter will of course be central to Brexit negotiations.
• Trade with countries who have an EU trade deal. The UK will seek to “transition” existing EU trade deals and preferential arrangements, in essence re-signing them with the UK as a signatory in its own right. This fits the general desire for continuity, although the UK will also develop concurrent powers for the devolved administrations to implement them where appropriate.
• Trade with other countries. For “new” deals, the DTI will pursue an ambitious free trade agenda, creating an efficient system for signing new deals, balanced by due Parliamentary process. The overall approach is yet to be determined, and DIT will also seek to engage the devolved administrations, the business community and civil society. The precise framework for this will be the subject of a consultation (see below).

Exactly what kind of deals are envisaged? The White paper mentions full Free Trade Agreements, bilateral arrangements, and regional development partnerships among others. The DIT will use its existing systems of analysis to determine the best kind of deal, and will supplement this with a new Trade Commissioner network to enhance decision-making. The current practice of enshrining labour, environmental and consumer protections in trade deals will remain unchanged.

Trade dispute resolution

Handling trade disputes is currently an EU competence and it therefore falls to DIT to design a new UK system. The White paper sets out the principles upon which the system will be based:

• Impartiality: the trade disputes investigator will be an arm’s length body with investigatory powers. It will be advisory only. The new body will of course have to be operational by Brexit.
• Proportionality. Cases will be filtered on the basis of a quantitative “economic interest test”. DIT are seeking input as to how this might be constructed (see below). A de minimis threshold will also apply to the group of producers wishing to bring a claim: this is likely to be higher than the 25% market share requirement that exists under the basic WTO rules.
• Efficiency and transparency. DIT believe provisional measures, reviews on remedy effectiveness and a well-managed system of undertakings in lieu of duties will form the cornerstone of an efficient system. The system will also be as transparent as possible, while recognising that a certain level of confidential information is likely to be involved in disputes.

Existing EU-mandated trade remedies already in place will cease to have effect unless the UK specifically implements them. This could have serious effects on the UK steel, ceramics and chemicals sectors, and DIT will shortly call for evidence in regards to taking a view on the domestic implementation of these measures.

New legislation

Drawing together the themes above, the DTI states that the UK plans to introduce new legislation:

• Enabling continuity in the UK’s current trade and investment relationships;
• Enabling the UK to implement obligations under the GPA, once it joins the organisation in its own right;
• Creating a UK trade remedies framework to address unfair trade practices, or unexpected surges in imports, which is consistent with WTO obligations;
• Enabling the UK to enforce or abide by outcomes of international trade disputes;
• Creating a unilateral UK trade preferences scheme to enable the UK to continue to support development in the world’s poorest countries; and
• Providing a gateway for the collection and sharing of data which the DTI requires as it takes on functions from the European Commission, such as for monitoring trade flows.

Consultation

This is the first time in 40 years that the UK will have its own trade policy. The DIT would like to hear from interested parties, particularly on the design of the consultative framework for new trade deals, and the approach to trade dispute resolutions (the Government will consult separately on importing the EU measures into UK law). Interested parties should send their feedback to stakeholder.engagement@trade.gsi.gov.uk by 6 November 2017.

Co-authored by Sam Fisher, trainee solicitor.