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Brexit Update

U.K. Faces Arduous Trade Negotiations Post-Brexit


As international trade is an area of EU competence for its Member States, the United Kingdom will regain sole responsibility for the negotiation and management of trade agreements once it leaves the European Union. This will require the U.K. to conclude new trade agreements with its trading partners, including all the countries with which the EU has trade agreements from which the U.K. currently benefits as an EU Member State.

It is suggested that the U.K. could agree with certain key trading partners to apply provisionally the terms and conditions of existing trade agreements between those partners and the EU. This would be important to allow the U.K. to preserve the benefits of these preferential agreements pending finalization of the terms of its exit from the EU and the conclusion of new agreements. It would also ensure businesses enjoy a degree of certainty in ongoing trade.

Beyond such a provisional solution, the United Kingdom will have to engage in the difficult task of simultaneous detailed negotiations with many countries. This will require the rebuilding of a foreign trade service with hundreds of civil servants, when currently no more than twenty U.K. civil servants are thought to have significant trade negotiation experience. As a partial solution, the U.K. could recruit some of its nationals presently working for the EU in this context.

U.K. Members of Parliament have called for the immediate launch of trade talks with countries that have traditionally strong ties with the U.K., such as Australia, New Zealand, Canada, and the United States. Some of these calls have been reciprocated. For example, Canadian officials have shared with their U.K. counterparts details of the recently concluded EU-Canada Comprehensive Economic and Trade Agreement. In addition, Senate Finance Committee Chairman Orrin Hatch and House Ways and Means Committee Chairman Kevin Brady have formally introduced a joint congressional resolution calling for a new trade agreement between the U.S. and the U.K.

However, Brexit has not tempered other trading partners’ desire to prioritize ongoing negotiations with the EU, given its economic importance relative to the U.K. For example, free trade agreement (FTA) negotiations between the European Union and Indonesia began on July 18 and FTA negotiations with the Philippines launched in 2015 are proceeding unaffected. Similarly, bilateral FTAs were concluded in 2014 with Singapore and in 2015 with Vietnam and are expected to enter into force in 2017.

EU Trade Commissioner Cecilia Malmström has confirmed that regardless of Brexit the EU will pursue and conclude all the different negotiating processes in which it is currently engaged with key trading partners at the bilateral, plurilateral, and multilateral level. She has emphasized her determination to make as much progress as possible in the coming months, especially in negotiations on the Transatlantic Trade and Investment Partnership (TTIP) with the U.S.

The EU’s trading partners will likely seek to conclude bilateral trade agreements with the U.K. as well. However, they are unlikely to engage in anything other than informal discussions until the U.K. formally leaves the EU and the terms of its future relationship with the EU are clearly established.

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