Brexit has turned Britain into a nation of trade nerds. In the past nine months, trade has gone from being too boring to mention into a subject about which everybody has a view. Those who eyes would once have glazed over at the mention of bound tariffs or trade facilitation agreements can now wax lyrical about what it would mean for Britain if it had to rely on World Trade Organistion rules after it leaves the EU.

The new sexiness of trade was illustrated last week when the former head of the WTO made a speech at the Institute for Government in London. Pascal Lamy spent some of the best years of his life struggling to polish off the Doha round of trade liberalisation and an overspill room was needed to hear what he had to say about Britain’s likely post-Brexit deal.

Battle-scarred as he is, Lamy has no illusions about the difficulties of the negotiations that will follow the triggering of article 50 by the government later this month. He had a nice metaphor for the likely complexity of the talks: separating an egg from an omelette. And a warning born of experience: it won’t be achieved within two years.



Lamy divided the issues facing the negotiators into three categories: things that will be simple; things that will be more complex; and things that will be really complex.

In what might come as a surprise to the UK’s new army of trade experts, Lamy said the creation of a free trade deal would be simple. It was a “no brainer” that there would be zero tariffs so that integrated supply chains did not suffer. It would also be easy enough for the UK to keep the trade with countries that have signed bilateral agreements with the EU. Fishing could also turn out to be less difficult than expected if the EU and the UK maintained mutual access for their fleets.

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Lamy then outlined a few of the more complex issues. The EU has defences to protect against the dumping of goods at below global market prices. It also has rules governing the state aid that member countries can provide to their domestic firms and a public procurement regime that allows German companies to bid for government contracts in the UK. There are competition laws, a common EU approach to environmental standards, and to climate change. The EU negotiators will say that a free trade deal with the UK cannot happen if Westminster wants to tilt the playing field in favour of British companies through state aid or public procurement.

Nor would the EU be willing to see any dilution of its regulations that set the technical standards for goods that can be sold across the single market. This, Lamy said, is where the issues become really complex. It is one thing, he added, to have a trade deal that is tariff-free and quota-free, but the EU has tough product standards.



“That’s a major problem unless the UK agrees systematically to follow the continental standards,” Lamy said. Agreeing to match a constantly evolving EU regime without having any say in making the new rules would likely prove politically unacceptable to the UK government.

Other issues that were likely to cause problems were tax, intellectual property protection and the departure of the UK from European Atomic Energy Community (Euratom). Tax is a particularly tricky issue because outside the EU it would be open to Britain to make radical changes to VAT. The boost to export competitiveness since Brexit is a demonstration of how the UK already has more monetary policy flexibility than those EU countries inside the eurozone: the EU 27 will want assurances that Philip Hammond and his successors will not exploit fiscal flexibility as well.

The recent history of trade talks suggests Lamy is right when he says the less obvious stuff will be the toughest to resolve. The negotiations between Washington and Brussels for a Transatlantic Trade and Investment Partnership (TTIP) ran into difficulties primarily because agreeing common technical standards is a long and arduous business. It had little to do with tariffs, which are already low.

Likewise, trade negotiations – whether at a bilateral or multilateral level – are now dominated by arguments about intellectual property rights. So when Lamy says it might take five or six years for the UK and the EU to finalise a deal, that seems a reasonable estimate.

One way of shortening the process would be for the UK to declare unilateral free trade no matter what the EU does. Another would be to take a leaf out of Donald Trump’s book and turn more protectionist. Lamy’s analysis suggests a third option is possible, though not easy.



The UK would not be a member of the single market or the customs union but it would get a free trade deal with the EU. That would mean Britain would not be subject to free movement of labour – the big prize for Theresa May in the negotiations.

But this would come at a price. The UK government would not have a free hand when it came to state aid or tax. It would have to accept EU regulations, not just now but in the future as well.

Would this be an acceptable deal? Perhaps not to the ultras on either side. There might be some across the Channel who would consider this as not tough enough on Britain. There are certainly some free-market zealots who believe one of the big advantages of Brexit is that it will lead to a bonfire of EU regulations.

Yet, as Lamy pointed out, anything that has costs for the UK has costs for the EU27 as well. And these are costs the Italian, Greek, Portuguese, French, Finnish and even German economies could do without.

The UK government, for its part, would have to consider whether such a deal would be sellable to the public. It probably would be. Brexit happened because of concerns about immigration not because voters wanted the freedom to have dirtier beaches or less safe nuclear power stations.

It will take time to arrive at this sort of compromise because negotiations always begin with both sides insisting that they get everything they want. It will prove impossible if there is no give and take.

Jeremy Browne, the former Liberal Democrat MP who is now the City of London’s special representative to the EU, said at the Lamy talk that the result of the referendum meant Brexit had to happen but that there was no reason why it should be as acrimonious as some are expecting.

“Negotiations normally start with a dysfunctional relationship. But this [the relationship between the UK and the EU] is a functioning relationship. The question is how much dysfunctionality do the politicians wish to inject?”

