Following the UK’s withdrawal from the EU, the UK regained its ability to negotiate trade agreements independently. The EU negotiates international trade agreements on behalf of its member states, under the common commercial policy.
Trade priorities for the UK Government
The UK holds the 2021 G7 presidency. The UK’s tenure will feature a dedicated ‘trade track’, which will be led by the Department for International Trade. The G7 trade ministers’ website states it will be “an opportunity for the UK to work with our G7 partners to shape a bold global vision for economic recovery that sees us build back better together—greener, more prosperous, resilient, and fair”. The trade track will focus on World Trade Organisation (WTO) reform; trade and health; digital trade; and trade and climate policy.
In a speech at the inaugural trade track meeting, Liz Truss, the International Trade Secretary, stated that the WTO should “reflect the world as it is now, particularly in areas like digital and data, the environment and women’s economic empowerment”. She said that progress needed to be made on data and digital, addressing the issue of ‘carbon leakage’ and improving the inclusion of women in trade.
These priorities were reflected in the joint statement issued by G7 trade ministers following the meeting. The next meeting is scheduled to be held in May 2021.
- That the NHS “is not, and never will be, for sale”; that the Government was committed to it being universal and free at the point of need; and that the price the NHS paid for drugs would not be on the table.
- The UK would not compromise its environment protection or food standards in its trade negotiations. The UK would also promote animal welfare standards “at every opportunity” in negotiations.
- Trade deals would be “free but fair”, in particular those with developing nations “whose economies could be transformed by access to the UK’s markets and expertise”.
The Government stated its ambition was to “cover 80 percent of total UK external trade with free trade agreements by 2022”. However, the Government was also “prepared to walk away [from negotiations] if that is in the national interest”. It also wanted to open trade in services and “help protect and reform” the WTO. The Government said it wanted the UK to be a champion for global free trade.
Integrated Review: trade
The Government published the outcome of its year-long Integrated Review (IR) of Security, Defence, Development and Foreign Policy in March 2021. The IR sets out a strategic framework for achieving the UK’s national security and international policy objectives between now and 2025. This includes “putting trade at the heart of Global Britain”.
The IR states that the Government would use its “full range of trade tools” to pursue its national goals. It set out a range of things it would seek to do, including:
- Championing free and fair trade and “reinvigorating” the WTO. The UK would seek to modernise trading rules, support sustainable trade and “ensure all countries are fairly treated”.
- Negotiating bilateral and regional free trade agreements, which would reduce barriers to trade and increase opportunities for UK exporters “maintaining high standards and reinvigorating relationships with trading partners, old and new”.
- Securing market access to the UK’s trading partners and influencing their rules, regulations and standards. This would be done through international organisations as well as “using government-to-government dialogues such as Economic and Financial Dialogues, Joint Trade Reviews, Joint Economic and Trade Committees (JETCOs), mutual recognition agreements and bilateral investment treaties”.
The IR also sets out a framework for what it describes as an “Indo-Pacific tilt”. Prime Minister Boris Johnson’s vision is for the UK to be “deeply engaged in the Indo-Pacific as the European partner with the broadest, most integrated presence in support of mutually-beneficial trade, shared security and values” by 2030. This approach is said to recognise “the importance of powers in the region such as China, India and Japan and also extends to others including South Korea, Vietnam, India, Malaysia, Thailand, Singapore and the Philippines”. The IR identifies the Indo-Pacific region as being of “increasing geopolitical and economic importance, with multiple regional powers with significant weight and influence, both alone and together”. Specifically, on China, the Government said that it would seek a closer trading relationship with China whilst seeking to balance security concerns:
We will continue to pursue a positive economic relationship, including deeper trade links and more Chinese investment in the UK. At the same time, we will increase protection of our CNI [critical national infrastructure], institutions and sensitive technology, and strengthen the resilience of our critical supply chains, so that we can engage with confidence. We will not hesitate to stand up for our values and our interests where they are threatened, or when China acts in breach of existing agreements.
Trade-related actions set out as part of the Indo-Pacific tilt include:
- Concluding and implementing bilateral trade agreements with Australia and New Zealand;
- “[A]greeing an Enhanced Trade Partnership with India as a stepping stone towards a comprehensive trade deal, in addition to new trade dialogues and reviews with partners across the region” (on 4 May 2021, the prime minister’s office announced that an enhanced trade partnership had been agreed with India); and
- Acceding to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
UK’s current trade negotiations
The Government has said that its priority has been to launch trade negotiations with the US, Australia and New Zealand. It has run consultations and has published policy papers outlining its approach to each of the trade negotiations. The Government also intends to join the CPTPP. The CPTPP is a free trade agreement between several countries in the pacific region. It is discussed further below.
The Government also stated in March 2021 it would re-open negotiations with Canada and Mexico this year “which supports our strategy to accede to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)”.
The Government has also said that it has a “shared ambition” to build on an interim trade agreement on goods with Norway and Iceland to “deliver a comprehensive free trade agreement between the United Kingdom and Norway, Iceland and Liechtenstein”.
The UK has also agreed a large number so-called continuity agreements to replace trade agreements it benefited from as part of its membership of the EU.
The first round of negotiations between the UK and the US took place between 5 and 15 May 2020. The fifth and latest round of negotiations between the UK and the US took place from 19 to 30 October 2020. In a written statement, Liz Truss said almost all the chapter areas were in the advanced stages of talks and that a “significant proportion” of legal text had been agreed in several chapters. The Government said in February 2021 that the negotiators had also continued working level technical discussions since the end of round five of negotiations.
Press reports have indicated that the UK had hoped to take advantage of a US provision called the Trade Promotion Authority (TPA), which could be used to expedite procedures on the US side and help fast-track the agreement of a trade deal. The Congressional Research Service has explained that the TPA is “a time-limited authority that Congress uses to establish trade negotiating objectives, notification, and consultation requirements, and procedures to consider implementing legislation for certain reciprocal trade agreements provided that they meet certain statutory requirements”. The current TPA was reauthorised in 2015 and runs until 1 July 2021. In an article on 25 March 2021, the Financial Times reported that the negotiators were “set to miss a critical deadline for securing swift passage through Congress”. The newspaper reported that were a trade deal agreed it could be “bogged down in disputes” in Congress, or the UK could wait for a new TPA to be negotiated. Bloomberg has reported one source as saying the power was unlikely to be renewed before 2023, due to the US midterm elections in 2022 making trade legislation politically sensitive.
The first round of negotiations between the UK and Australia took place between 29 June 2020 and 10 July 2020. Several rounds of negotiations have taken place. On 23 April 2021, the UK and Australia issued a statement saying they had reached consensus on the “vast majority of elements of a comprehensive free trade agreement”. Both countries would now “enter a sprint” to agree outstanding details with the aim of reaching an agreement in principle by June 2021.
The first round of negotiations between the UK and New Zealand took place between 13 and 24 July 2020. Several rounds of negotiations have taken place. In its update following the third round of negotiations with New Zealand, the UK Government stated that it expected the fourth round to start in April 2021 and that by that point it expected “the majority of text proposals to have been tabled”. On 30 April 2021, Politico reported that the fourth round had finished. It quoted Liz Truss as saying “we have made great progress and a deal could be done as early as the summer”.
Comprehensive and Progressive Agreement for Trans-Pacific Partnership
On 1 February 2021, the UK Government submitted its notification of intent to begin the process of acceding to the CPTPP.
Parliamentary scrutiny and the need for legislation
The UK is a dualist state. This means that international treaties do not automatically become part of domestic law. In instances where agreements need to be implemented in domestic law, Parliament will need to pass legislation. Depending upon their scope, some future free trade agreements may need implementing in domestic law.
The negotiation and signature of international treaties is conducted by the Government under the royal prerogative. However, Parliament has a role in the ratification of treaties under the Constitutional Reform and Governance Act 2010 (CRAG). The House of Lords Constitution Committee considered CRAG in a report published in April 2019. Amongst its conclusions the committee argued that CRAG’s provisions for enabling parliamentary scrutiny of treaties were “limited and flawed” and that reform was needed to allow for effective scrutiny. In its response to the report, the Government said that CRAG remained a “viable legal framework for scrutiny”, but it agreed that “improvements can be made to the operation of the scrutiny mechanisms and processes within that framework, and that information provision between the Executive and Parliament can also be improved”. The House of Lords has debated the Constitution Committee’s report, and reports by the European Union Committee, on the scrutiny of treaties. For further information see the following Lords Library briefing: Parliamentary scrutiny of treaties: Debate on committee reports (19 August 2020).
In the House of Lords the International Agreements Committee scrutinises all treaties that are laid before Parliament under CRAG. It also considers ongoing negotiations.
In the House of Commons international trade agreements would typically be scrutinised by the International Trade Committee, which is conducting an ongoing inquiry into the UK’s trade negotiations. The House of Commons Public Administration and Constitution Committee is currently accepting evidence for an inquiry into the scrutiny of international treaties and other international instruments. The inquiry has a particular focus on the role of the House of Commons.
The Government has said that it is committed to facilitating the scrutiny of future trade deals with the US, Australia and New Zealand, and its proposed accession to the CPTPP. This includes publishing the objectives for new free trade agreements and scoping assessments when negotiations begin. It also stated that it would continue to publish ‘round reports’ to keep Parliament and the public informed. The Government would also work with the Commons International Trade Committee and the Lords International Agreements Committee to “ensure they have treaty text and other related documents or reports on a confidential basis, a reasonable time prior to them being laid or deposited in Parliament under the Constitutional Reform and Governance Act procedure”. The aim would be to facilitate any reports the committees might wish to produce. Should either committee recommend a debate on a deal the Government said it would “seek to accommodate such a request subject to Parliamentary time”. The Government argued that its approach to scrutiny by Parliament and other stakeholders was “at least as strong as any other Westminster-style democracies such as Canada, Australia and New Zealand”. It also said that the arrangements were appropriate for the UK’s constitutional make-up and separation of powers. It also stated that if Parliament was not happy with a trade deal “it can raise concerns by resolving against ratification and delay any implementing legislation indefinitely”.
Other potential trade-related legislation
Subsidy control regime
From 1 January 2021, the UK is no longer subject to EU state aid policy (except where relevant provisions of the Ireland/Northern Ireland Protocol in the withdrawal agreement apply). The UK is now following WTO rules and any commitments on subsidy control set out in its free trade agreements. Between 3 February and 31 March 2021, the Government consulted on a new approach to subsidy control outside the EU. The Government’s objectives for the future subsidy control regime are:
- Facilitating interventions to deliver on the UK’s strategic interests.
- Maintaining a competitive and dynamic market economy.
- Protecting the UK internal market.
- Acting as a responsible trade partner.
The Government has said that, subject to the outcome of the consultation, it would bring forward primary legislation to implement a new regime.
Legislation may also be required to implement the commitment in the 2021 budget to create eight freeports in England. The Government has said that areas granted ‘freeport status’ would “benefit from generous tax reliefs, simplified customs procedures and wider government support”.
In February 2021, Steve Barclay, Chief Secretary to the Treasury, stated the policy on freeports sat under a combination of existing and new powers. Where new powers were required the Government would put relevant legislation in place. However, he said that he did not envisage a ‘freeports bill’. Luke Hall, Minister for Regional Growth and Local Government, said there may be a need for a “number of individual changes to be made to existing legislation”. Additionally, clauses 109 to 111 of the Finance Bill, which is the subject of a carry-over motion from the 2019–21 session, contain provisions which relate to the following freeport subjects: designation of freeport tax sites; capital allowances for freeport tax sites; and relief from stamp duty land tax for freeport tax sites.
A House of Commons Library briefing analyses the policy in more detail. The House of Commons International Trade Committee is currently conducting an inquiry into freeports.
- House of Lords Library, ‘Integrated Review of Security, Defence, Development and Foreign Policy’, 16 April 2021
- House of Commons Library, Integrated Review 2021: Summary, 17 March 2021
- House of Commons Library, Global Britain and the Integrated Review in Parliament, 24 March 2021
- House of Commons Library, Global Britain, 6 January 2021
- Steve Woolcock, ‘A big challenge for ‘Global Britain’ is digital trade’, London School of Economics and Political Science, 21 April 2021
- Gabriel Elefteriu, ‘The Integrated Review—Policy Exchange’s reflections’, Policy Exchange, 22 March 2021
- London School of Economics and Political Science, UK Economic Diplomacy in the 21st Century: The LSE Economic Diplomacy Commission Final Report, 9 February 2021
- Robin Niblett, Global Britain, Global Broker: A Blueprint for the UK’s Future International Role, Chatham House, January 2021
Cover image by Rinson Chory on Unsplash.