May Set to Defy EU by Opening Pre-Brexit Global Trade Talks

EghtesadOnline: U.K. officials are preparing to fire the starting gun on trade negotiations with countries outside the European Union within months, defying warnings from the bloc that such action would be illegal.

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24 January 2017

After Prime Minister Theresa May triggers the formal process for leaving the EU, which she intends to do by the end of March, her team will be free to start trade talks around the world, a senior official said, speaking anonymously about the confidential plans.

According to Bloomberg, the move would directly contradict senior EU politicians, who say Britain cannot legally begin negotiations on trade deals with countries outside Europe until it has left the bloc. Despite this, officials in May’s team believe the EU will have no authority to stop the U.K. once the Brexit process has started, and little political appetite for a fight on this issue.

“From a legal standpoint, there is a lot the U.K. can do in terms of scoping and negotiating new trade agreements while still in the EU,” said Shanker Singham, director of economic policy at the Legatum Institute think tank in London. “The EU obviously won’t like that. The question becomes, does the U.K. lose a lot by annoying the EU or are they sufficiently annoyed already that it doesn’t make a difference?”

Global Britain

May has said she wants to use Brexit to make Britain the leading champion of global trade, reaching new agreements with countries such as the U.S., China, New Zealand and Australia. British Trade Secretary Liam Fox has already begun informal discussions with more than 12 countries on removing barriers to commerce.

The premier will fly to Washington to meet President Donald Trump this week, with the new U.S. administration preparing the ground for a new trade accord with Britain. Trump’s team has signaled that the president wants to strike an early deal with May.

“We’ve always had that special relationship with Great Britain," White House press secretary Sean Spicer said at a briefing Monday. “We can always be closer.”

The U.K. government’s private legal advice states that no trade agreements can be signed while the country remains a member of the EU and no negotiations should begin before May formally starts the process of leaving by triggering Article 50 of the Lisbon Treaty, the senior official said. May has promised to invoke Article 50 by the end of March.

After this point, with the U.K. firmly on the legal path out of the EU, May’s team will have to act in the best interests of the country to secure new trade partners around the world, whatever the sensitivities in Brussels, the official said. Such a stance, if it translated into action, would risk inflaming relations with the EU at the moment when the U.K. is seeking to negotiate good exit terms and a favorable new trade deal with the bloc.

Souring Relations

On Monday, the European Commission underlined its warning that the U.K. will not be allowed to do more than discuss trade in broad terms with countries outside the EU until it has left the union.

“There’s nothing in the treaties that prohibits you from discussing trade,” European Commission spokesman Margaritis Schinas told reporters in Brussels, but he added that countries can’t hold official negotiations on formal trade agreements while still members of the EU.

“EU rules mean the U.K. cannot legally begin negotiating a trade deal with the US before the U.K. leaves the EU,” said Gregor Irwin, chief economist at Global Counsel in London. Defying the EU would risk “further souring the relationship with Brussels just as the Brexit negotiations are starting,” he said.