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Andrés Delgado Casteleiro – Taking Back Control Over Trade Policy: Art 50 TEU and the Repatriation of Trade Powers

By Dr Andrés Delgado Casteleiro (Durham Law School, Durham University)

Regardless of the model for the future relationship between the UK and the EU following the BREXIT referendum, it seems clear that at the end of the withdrawal process the UK will have gained the power to design and implement its own international trade policy. Any of models for the future relationship between the EU and the UK, be it Switzerland, Norway, Albania or Canada, have a common feature: the agreements governing the relationship between those countries and the EU do not involve the transfer of any competence on the field of trade. Whereas now it was the EU concluding international trade agreements, negotiating within the WTO and applying its trade defence instruments, at the end of the withdrawal process all of these will be done by the UK.

However, it is not clear if the UK could start laying down the grounds for its trade policy before the end of the withdrawal process. While there is no doubt that once the UK has completely withdrawn from the EU, it could start negotiating and concluding international agreements, could the UK start laying the grounds before the end of the process enshrined in article 50 of the Treaty of the European Union (TEU)? This is a crucial question because if the UK has no power to negotiate trade deals in parallel to the withdrawal procedure, its position in the global trade arena once it has withdrawn could be severely curtailed.

 

Article 50 TEU and the exclusive nature of trade policy

Can the UK negotiate international trade agreements once article 50 TEU has been triggered? The short answer is no. Article 3 of the Treaty on the Functioning of the European Union (TFEU) establishes that trade policy is matter of EU exclusive competence, which means that only the EU can legislate negotiate international agreements in the area. Moreover, Article 50 (3) TEU provides that the Treaties will only cease to apply once the exit negotiations have finished and agreement has been reached.

 

What are the practical implications of this prohibition?

First, the UK could not even start the negotiations of its own international trade agreements (let alone conclude them) until its withdrawal from the EU takes effect. It does not matter if a country wants to open negotiations with the UK before the process has finished: as matter of EU law it cannot enter into those negotiations. Any attempt to do so not only would amount to a breach of EU law, but could also endanger the outcome of the withdrawal negotiations.

Third, the UK could not adopt any trade defence instruments, such as an antidumping act or a subsidies act, until it has withdrawn from the EU. This would be an essential tool especially for the steel sector which has been featured in the news recently over the closure of Tata steel’s plants in the UK. An UK antidumping act would allow the UK to impose charges to Chinese steel. However, given that the UK’s position within the WTO will have to be renegotiated, these trade defence instruments would prove fundamental. Yet, it cannot be discarded that the application of those trade instruments might spark some concerns among the other WTO Contracting Parties, and that the UK might face litigation under the WTO Dispute Settlement Bodies.

 

A possible legal framework to allow a smooth development of the UK’s trade policy

Yet, there could be a way in which the UK could start negotiating and laying down the foundations of its international trade policy during the article 50 TEU negotiations. That possibility is enshrined in Article 2 (1) TFEU which provides that in matters falling within exclusive competence the Member States could act only if empowered by the Union or for the implementation of Union acts. What does this mean? In principle, alongside the withdrawal process the EU could adopt a regulation under article 207 TFEU (the legal basis for trade policy) authorizing the UK to negotiate international trade agreements. Has it ever been done? As with anything having to do with article 50 TEU it has never been done before. Yet, there have been instances in which the EU authorized EU Member States to continue to act in a field covered by EU exclusive competence. Most recently, it has done so in relation to the Bilateral Investment Treaties between EU Member States and third countries. This regulation establishes a very detailed procedure by which the EU through the Commission might authorize a Member State to negotiate and even conclude an international investment agreement. A similar piece of legislation could be proposed by the Commission once article 50 TEU has been triggered. But would it be adopted by the Council and the European Parliament? As the political climate between the EU and the UK stands right now it is seems rather unlikely, but it cannot be discarded. While it is in the interest of the UK to be able to lay down its trade policy while negotiating its withdrawal of the EU, it is unclear to what extent should the EU help the UK through that transition. It appears that for the UK to effectively take back control over its trade policy, cooperation with the EU institutions is going to be essential.

‘Brexit: Democracy, Markets and the Regions’, DELI/LGJD Joint Insta-Symposium

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