Brexit: Where to next for North Atlantic Trade Relations? A plea for AFTA

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– By Armand de Mestral C.M. – Emeritus Professor of Law McGill University

The Rubicon appears to have been crossed by the UK Government and exit and re-entry negotiations with the EU must soon begin. What form should they take? The current assumption is that the UK must agree on the terms of its withdrawal from the EU and then immediately begin the even more complex process of defining its future trading relationship with the EU. It is also assumed that this relationship will take the form of some kind of bilateral free trade agreement (FTA). Thus, it would be both bilateral and would be a free trade arrangement. Implicitly, the suggestion has been that it must be an FTA rather than a customs union, as the UK wishes to retain the freedom to make trade agreements with other partners – most notably the United States and Canada.

This note seeks to challenge the notion that the UK will be best served by a bilateral FTA with the EU. Rather the UK should be more ambitious and seek to promote the establishment of a North Atlantic Free Trade Agreement (AFTA).

Canada and the EU have concluded a major new FTA, the Comprehensive Investment and Trade Agreement (CETA). The EU signed an FTA with Mexico in 1997 and is currently seeking to update this agreement. The EU Commission and the United States Trade Representative (USTR) held some 11 negotiating sessions on a Transatlantic Trade and Investment Partnership (TTIP) before the November 2017 US presidential elections. The groundwork has been laid. Chancellor Merkel spoke in favour of the TTIP with President Trump in her recent visit to Washington. The future USTR has indicated his own willingness to resume the TTIP negotiations. Thus, much of the groundwork for a future AFTA has thus already been laid.

It will be immediately pointed out that globalisation in general and trade agreements in particular, are not popular. There has been considerable opposition to the TTIP negotiations, even to CETA, in Europe due to the entirely unreasonable fear of trade with the US. But this makes little sense given that the EU and the US are each others’ principal trading partners and have roughly comparable economies. European governments have to do a better job explaining the advantages of international trade and assisting those who suffer from the effects of economic change. If Canada can manage trade with the US, surely Europe can do the same.  In the US, President Trump has spoken disparagingly of existing trading arrangements and has promised to do better by initiating “winning” bilateral agreements. But his views do not appear to be very fixed on these matters and he apparently listens to the advice of those who are actually involved in international trade. They are telling him a different story. A slim majority of the UK population voted against the best trade agreement ever negotiated; why would they support an AFTA?

What interest could the UK Government have in an AFTA? On reflection, a great deal. The UK Government is desperate to conclude FTAs with everybody in sight. Concluding an agreement with the EU before the time set by the Article 50 notice runs out will be a Herculean task. The UK does not even have a tariff schedule or a list of commitments on services agreed at the WTO to negotiate. How can it possibly conclude negotiations with the EU and subsequently with the US, Canada, Mexico and many other key trading partners? If ever the UK should see that advantages of a more global negotiation it is now.

The promoters of Brexit have asserted that, once free of the toils of the EU, the UK will become the great trading nation it once was. Surely these defenders of Brexit should be eager to take up the challenge of promoting the greatest FTA in history and one which would be designed to settle the UK’s trading relationship with all its major trading partners with one stroke of the pen and create the greatest FTA in history. Instead of beginning from scratch with the EU, the UK can pick up negotiations using CETA, the TTIP and the EU Mexico negotiations. If Britain could indeed pull this off it might well be hailed a great trading nation again!

Is an AFTA worth the effort? Surely it is. Europe and North America have roughly similar economies. Agreements between such trading partners are never easy but are by far the simplest to negotiate. Furthermore, Europe and North America are in ever increasing competition with Asia. China will soon have a middle class of over 500M people, able to support the launch of any new technology. Increasingly it may be necessary to launch new technologies in China.  Separately, Europe and North America do not have this advantage: but together they do. A successful AFTA would set trading standards for all the world for many years to come and would be by far the strongest defense of the economic interests of its people that governments could devise.

The current situation of the UK government, faced with attempting to negotiate on many fronts is close to desperate. There does not yet appear to be a coherent strategy of engaging the EU let alone the rest of the world. AFTA could be that strategy. Let Great Britain take up the challenge and become the great trading nation it once was!

Professor de Mestral has recently retired from the Faculty of Law at McGill University where he was the Jean Monnet Chair in the Law of International Economic Integration.  Armand taught courses in the law of the sea, public international law, international trade law, international arbitration, the law of the European Community, and public international air law. He has produced a huge volume of books, articles and studies in English and French on international trade law and international law.  He has also served on WTO and NAFTA dispute settlement and arbitration tribunals. He was made Member of the Order of Canada in 2007 and is the 2017 recipient of the John E. Read Medal.