Brexit, trade, and World Trade Organisation: what we need to know

//Brexit, trade, and World Trade Organisation: what we need to know

Brexit, trade, and World Trade Organisation: what we need to know

Pursuant to the United Kingdom’s vote to leave the EU, Theresa May has recently activated the official mechanism that will make it a reality, i.e. the article 50 of the Lisbon treaty which lays down the plan for either country that wishes to exit the EU.

This article spells out that either EU country may decide to quit the EU by notifying its decision to EU Council and bargaining its withdrawal with the EU within 2 years from the date in which the withdrawal is notified.

Going forward, the article lays out that:

  1. “Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.
  2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.
  3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.
  4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it. A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.
  5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.”

It is clear from procedural requirements that the negotiations on the terms of withdrawal will assume a huge importance wether for the UK as well as for EU, as no one has ever triggered the article 50 before.

Many issues will be addressed by the parties throughout the negotiation term, including, but not limited to, the price Britain must pay to “buy itself out” of existing EU commitments; the rights of EU citizens in the UK and of UK citizens in the EU; the relocation of EU agencies currently based in the UK; the regulation of the UK-EU border; and the UK’s withdrawal from the EU budget. Moreover, another crucial point in negotiations will be the required time periods necessary to agree a trade deal between the UK and EU.

What happens if any agreement is reached within the established term?

If the exiting state (UK) does not reach an arrangement within the above stated term of two years, then it will fall out of the EU with no new provisions in place, unless every one of the remaining EU states agrees to extend the negotiations.

What about the trade market?

If no trade agreement is reached within the negotiation term, then the Uk trade relationship with the Eu – and with other countries – will be governed by the World Trade Organisation (WTO) rules.

WTO membership

Whilst the UK is already a member of WTO, it will need to establish its own separate position therein to conclude new arrangement with other countries and organisations, as it is now operating jointly with the other EU member states.

For doing that, the Uk will need to establish its own schedules of market access commitments for goods and services, i.e. lists which set out its commitments – its rights and obligations – in the international trading system, as it is now sharing them with the rest of EU: the new schedules, once established, need to be agreed upon by the other 163 WTO members to be submitted and it can surely take time.

It is reasonable thinking of an UK’s attempt to conclude new arrangements with other countries as far as Eu has currently in place arrangements with third countries and organisations, whilst it might not be accepted by some WTO members: on a side, they might except a undervalue of the trade concession they granted to EU as result of the UK’s leaving, on the other side, they might claim to the UK to make a compensatory adjustments by lowering its import restriction.

#article 50

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Need help? Feel free to contact us.

Davide Palazzo – commercial lawyer at Palazzo Law Boutique – – – Tel. +44 020 32399065.

By | 2017-09-08T12:33:03+00:00 July 2nd, 2015|Uncategorized|0 Comments

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