Continuing application of EU trade agreements after Brexit Contents

4Post-Brexit “implementation” period

The Government’s negotiating position

37.It is the policy of the Government that, after the UK leaves the EU, there should be an “implementation period” lasting “around two years”,61 while the European Commission’s position is to have a 21 month period lasting until December 2020.62 The exact terms of the UK-EU relationship during this period are still a matter for negotiation, but the Government has said that it “could involve a new and time-limited customs union between the UK and the EU Customs Union, based on a shared external tariff and without customs processes and duties between the UK and the EU”.63

38.In the event of a post-Brexit transition period involving a temporary EU-UK customs union, it would seem to follow that without any action being taken to prevent it, the UK would still be bound by the EU’s common external tariff but would no longer be a party to the EU’s trade agreements. This would mean that third countries would be able to benefit from the terms of their trade agreements with the EU when exporting to the UK, but the UK would no longer enjoy the reciprocal benefits. This would leave the UK in a position analogous to that of Turkey in its current “asymmetrical” customs union with the EU.64 Government policy has been, as we have noted (see Chapter 3 above), to seek to roll over all agreements at the point of Brexit in March 2019—in which case the possibility of the UK finding itself in an “asymmetrical” position regarding EU trade agreements would not have arisen.

39.It has been suggested that, in the absence of successful roll-over at the point of Brexit, the UK’s current relationship to the EU’s trade agreements could be maintained by treating the UK as de facto EU territory for the purposes of international agreements during the transition period. (This has been termed the “Guernsey Model”.)65

40.As noted above, the Government’s policy was initially to roll over the agreements by March 2019. However, on 8 February 2018, the Government published a “Technical Note” on “International Agreements during the Implementation Period” in which it stated that its preferred approach to ensuring the continued application of trade and other trade-related agreements during the implementation was:

by agreement of the parties to interpret relevant terms in these international agreements, such as “European Union” or “EU Member State”, to include the UK.

[…] This approach is underpinned by international law and practice, including Article 31 of the Vienna Convention on the Law of Treaties (VCLT) […] The form of such an agreement under Article 31 VCLT is flexible and would be a matter for discussion. It would not be necessary, for example, to deal individually with each EU treaty. The key requirement would be the clear agreement of the parties that the underlying treaty continued to apply to the UK during the implementation period.

This was said to represent “the simplest way of ensuring the continued application of these agreements during the implementation period” while also “preserv[ing] the integrity of the EU legal order”.66 It clearly entails some form of trilateral (UK-EU-third country) agreement in each case, but the precise nature and form of that agreement is as yet unclear.

The EU’s negotiating position

41.The final version of the European Council’s supplementary negotiating directives regarding transitional arrangements was published on 29 January 2018. These stated that:67

During the transition period […] the United Kingdom should remain bound by the obligations stemming from the agreements concluded by the Union, or by Member States acting on its behalf, or by the Union and its Member States acting jointly, while the United Kingdom should however no longer participate in any bodies set up by those agreements.

[…] [A]ny transitional arrangements require the United Kingdom’s continued participation in the Customs Union and the Single Market (with all four freedoms) during the transition. The United Kingdom should take all necessary measures to preserve the integrity of the Single Market and of the Customs Union. The United Kingdom should continue to comply with the Union trade policy [ … ] During the transition period, the United Kingdom may not become bound by international agreements entered into in its own capacity in the fields of competence of Union law, unless authorised to do so by the Union.

42.We cautiously welcome the Government’s new policy to seek agreement of all parties to interpret relevant terms of EU free trade agreements, such as “European Union” or “EU Member State”, to include the UK during transition, while continuing to seek to roll over those agreements. While we welcome the Government’s willingness in this respect to be pragmatic, it is difficult not to see this as an admission that its policy of negotiating new agreements by March 2019 might not be achieved and may be failing. We seek urgent reassurance that the Government is allocating appropriate resources not only to this objective but to all its policy objectives, including the bilateral strand of negotiating these agreements, and that it is being realistic about how achievable those objectives are. The Government should write to this Committee setting out why it might not achieve and may be failing to achieve this policy objective in the time it originally set, and how it will change its future plans on these and other trade agreements to take account of the lessons learnt. If the EU’s agreement to the treating of the UK as a de facto EU territory for the purposes of the transition period is not agreed at the March 2018 EU Council meeting, the Government should publish a statement setting out its alternative approach for achieving continuity.

43.In addition, it is still far from clear that it will be possible to secure continued application of EU trade agreements during the post-Brexit transition period. The Government must urgently clarify the nature and form of the trilateral (UK-EU-third country) agreements whereby it is intended that the UK will remain a de facto party to the EU’s trade agreements during a transition period. It must also evaluate and set out the potential risks and benefits attached to this approach.

44.Meanwhile, the Government must still address the issues that we have raised in respect of its pursuit of “transitional adoption” and act on the assumption that this could still need to be in place at the point of Brexit in March 2019. Even if the new approach does prove successful, it will only buy the Government a limited amount of extra time in which to achieve roll-over and it would still need to redouble its efforts in that respect.

63 H M Government, Future customs arrangement, August 2017, paras 48–50

65 George Peretz, “How to ‘roll over’ EU and third country FTAs during the Brexit transition”, UK Trade Forum, 15 December 2017. The term “Guernsey model” stems from an analogy with Guernsey’s position as a UK crown dependency (sitting outside the UK) which is nonetheless treated as part of the UK for the purposes of international law.

66 H M Government, Technical Note: International Agreements during the Implementation Period, February 2018, pp 1–2. See also: Department for Exiting the EU, “David Davis’ Teesport Speech: Implementation Period – A bridge to the future partnership between the UK & EU”, 26 January 2018; Rt Hon Greg Clark MP, Rt Hon Philip Hammond MP, Rt Hon David Davis MP, Letter to business leaders, 26 January 2018; and Letter from Rt Hon Greg Hands MP to Angus Brendan MacNeil MP, 8 February 2018.

67 European Council, Supplementary Brexit (Article 50) directives, XT 21004/18, ADD 1 REV 2, 29 January 2018, paras 15–16

Published: 6 March 2018