First of all, it must be acknowledged that, contrary to what many have stated, the UK is a Member of the World Trade Organisation (WTO). One of the founding parties of the original General Agreement on Tariffs and Trade (GATT) which later became the WTO, the UK is automatically entitled to the benefits of the WTO’s key non-discrimination guarantees – both national treatment (prohibiting discrimination against foreign suppliers based on the origin of the good) and most favoured nation (prohibiting discrimination among WTO members based on the national origin of the good).
This means UK manufacturers are entitled to the same tariffs as the rest of the world from the day our EU membership terminates. These WTO tariffs are quite low already thanks to decades of multilateral negotiations. Free from the EU and as a WTO member, the UK will be able to set its own level of tariffs for the rest of the world. It will mostly likely keep these at the same level as the EU, entitling UK consumers to the same low prices on most goods that they have enjoyed for years.
The UK will also be free to offer the same terms of trade to the rest of the EU that it did while a member of the Common Market. Indeed, some UK politicians have suggested that this is precisely what will occur. Alternatively, leveraging its status as the largest export market within the (former) EU, the UK could secure very favourable deals with the EU, particularly in relation to manufactured goods like cars. Germany will not surrender their favourite market just for spite.
As the UK’s most important sector is services, specifically financial services, it will need to negotiate new commitments with the EU and the rest of the world under the WTO General Agreement on Trade in Services (GATS) agreement, which it will no doubt do in the coming months and years.
Unlike the GATT (which covers goods), the GATS admittedly offers fairly limited liberalisation for financial services, and in that sense the UK financial sector did benefit significantly from its favourable terms of trade as a member of the EU. Of course it also had to suffer under the EU’s burdensome financial regulations from which it will now be free, much to the delight of many London firms – which surely will stay where they are despite posturing to the contrary.
London has been the world’s financial centre for at least three centuries, after all. In addition to pursuing negotiations under the WTO GATS for greater services liberalisation, the new Trade in Services Agreement (TiSA) currently under negotiation among 23 states including the EU and the US, represents a fantastic opportunity for greater commitments in this sector. The UK can and almost certainly will now take part in these negotiations as an independent state.
Independent from the EU, the UK will now be able to negotiate future trade (as well as investment) agreements on its own, which it had been prohibited from doing by virtue of the Lisbon Treaty. Rather than wait years for these agreements to satisfy the needs of 28 member states, they can be negotiated quickly and without idiosyncratic reservations such as IP protections for Italian cheese.
The Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US has also languished for years because of delays and egregiously protracted public consultations. Such an agreement could be concluded rapidly, and indeed high-profile figures in the US government have indicated their willingness to get on with it.
Contrary to what many have argued, it is completely untrue that a country needs to be a member of a large bloc like the EU to secure good terms under these treaties. Many small states have done very well under FTAs. Of course, the UK is free to offer the same terms to countries with which the EU already has existing trade agreements.
For example, we could offer the same terms to Canada that the EU had offered under the Comprehensive Economic and Trade Agreement (CETA). Canada, along with India, appear willing to negotiate a free trade agreement with the UK. It appears the UK’s old Commonwealth allies are quite ready to pursue amicable and mutually beneficial trade relations.
The next few years will certainly be a busy time, but the outlook is unquestionably positive. The UK government has announced its intention to hire a swath of trade negotiators in order to facilitate this process. As always, there are a number of UK academics who are also quite willing to lend a hand if needs be!