On Global Trade & Investment
Published Three Times a Week By:
The Global Business Dialogue, Inc.
Washington, DC   Tel: 202-463-5074
No. 67 of 2016
Filed from Portland, Oregon

Click  here for Tuesday's Brexit quote from Rufus Yerxa.

"One of the people on the [UK's Department of International Trade] team said,
'Well, I guess if they don't like what we are doing, they can throw us out of the EU." 

Richard O. Cunningham
November 16, 2016 
Dick Cunningham is the Senior International Trade Partner in the Washington, DC, office of Steptoe & Johnson.  Brexit may be new to him.  It is evolving and new to everyone, but the UK and trade are not new topics for Dick Cunningham. He has been working on issues affecting UK trade for more than 40 years. Last Wednesday, November 16th, Mr. Cunningham kicked off GBD's new series on Brexit, a series that is being cosponsored by Steptoe and Johnson. Not long before that, Mr. Cunningham was in London, talking to officials of the new Department of International Trade (DIT) and others about the process of implementing the results of the UK's June 23 referendum on Britain's membership in the EU. 

One of the many issues - or rather, sets of issues - facing the UK has to do with the future of their trade with countries that have free-trade agreements with the European Union. Currently, those agreements cover the UK's trade with those same countries, but they won't once the UK leaves the EU. Today's quote was part of what Mr. Cunningham had to say on that topic. Here is a bit more:

"There are by my count sixty EU free trade agreements, of which the UK is now a party because it's a member of the EU. And in March 2019, assuming everything goes in that way, the UK will not be a party to those unless it has done some negotiations to put in line - they can't obviously sign a free-trade agreement until they have become officially out of the EU. Their position is that they can go ahead and negotiate. They've started preliminary talks with Australia and a couple of other countries. 
"The EU opposes that. The EU says, you have no power to negotiate, even to talk. One of the people on the DIT team said, "Well, I guess if they don't like what we're doing, they can throw us out of the EU." [That] actually shows a certain hard Brexit mentality, even among the DIT people who are basically not anti-Europe, but they are hard Brexit and in favor of the basic message of Ms. May." 
Mr. Cunningham's observations about the UK's dealings with countries outside the EU went far beyond their procedural differences with Brussels. Having noted that Prime Minister May wants the UK to be a "beacon of trade liberalization and open markets," he used the Q-and-A session to highlight two challenges in particular that the UK will face when the time comes to negotiate deals around the world. One of those is sequencing, deciding the order in which those agreements should be negotiated, and the other is upgrading and the fact that many in the UK business community will want to see agreements that go well beyond what is contained in the 55 or 60 free-trade agreements that the EU has already concluded. 

Regarding sequencing, Mr. Cunningham mentioned his experience earlier advising the Korean government as they negotiated a series of FTAs. One problem the Koreans encountered, he said, was that relatively minor concessions given to relative minor trading partners took on new and problematic importance when larger trading partners demanded the same thing, asking, "Why can't you give us the same deal you gave country x?"

More Modern Agreements. Mr. Cunningham explained that: 

"The UK business community absolutely, absolutely wants free-trade agreements that are like TPP, TTIP, KORUS, KOREA-EU, the ones that go behind the border, the ones that do a lot more in services, the ones that do a lot more in investment, the ones that do a lot more in intellectual property. And most of the EU's free-trade agreements are not of that ilk, because they are older, last generation, free-trade agreements. So there are going to be major pressures to do different types of free-trade agreements with different types of issues, with different prioritization questions, and different sequencing questions."
If, metaphorically, Dick Cunningham was one of the blind men trying to understand the elephant of Brexit, his was clearly a report from someone who walked about the beast and so was able to describe it from several perspectives. We will come back to some of those other perceptions in later entries. To note just a few, Mr. Cunningham observed: 

Prime Minister's May Political Challenges in navigating a path to Brexit are formidable indeed. In her own Conservative party, the "majority of them are remainers; they are not leavers. They are soft Brexit, not hard Bexit," Mr. Cunningham said. 

And in the electorate - especially those who voted to leave on June 23 - enthusiasm for the UK as a beacon of trade liberalization may be rather limited. As Mr. Cunningham put it:

"I was in the UK during the time leading up to the Brexit vote. ... It would have been hard to perceive in the leave constituency a dominant theme of 'Boy, we want more free trade. We want more imports. We want the lowering of barriers and that sort of thing." 

A Determined Prime Minister. And yet, those challenges notwithstanding, if Mr. Cunningham seemed convinced of anything, it was of Prime Minister May's commitment to following through on the Brexit referendum. This was especially clear when he discussed the current legal battle over whether the May administration needs to get a further okay from Parliament before triggering Article 50 of the Lisbon Treaty. "I think Ms. May and her administration are absolutely dug in," Mr. Cunningham said. "They are not going to go to Parliament and have Parliament be a partner in the negotiating positions that they are going to take. That goes to both [the negotiations with] the WTO as well as the EU."

We have left out as much if not more than we were able to include here from Dick Cunningham's fine presentation last week. But this is a big subject with a long way to go, and we are bound to come back to it. 

We hope you had a wonderful (and peaceful) Thanksgiving. Now,

Enjoy The Weekend!
Our Unpublished Transcript of Mr. Cunningham's Remarks was the source for today's featured quote and most of what followed. 

The Court Case is a link to the TTALK Quote of November 4, which focused on the November 3 decision by the High Court to the effect that Prime Minister May does have to consult Parliament before invoking Article 50. That decision is now being appealed.


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R. K. Morris, Editor