How can the UK continue trading on current terms with third countries covered by EU trade deals?

Analysis: The EU has more than 50 trade deals of various sorts with third countries either in place, partly in place, or pending. What happens to UK trade with them after Brexit? Ben Chu looks at the state of play

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As a full member of the European Union since 1973 the UK has effectively outsourced responsibility for making trade deals with other countries to the EU institutions.

And those institutions have been busy.

The EU now has more than 50 trade deals of various sorts with third countries either in place, partly in place, or pending. A full list can be found on the European Commission’s website here.

These range from deals with large economies such as Canada and Japan, to middling ones such as Mexico, South Korea and Turkey, to small states such as Moldova and Botswana.

The prospect of Brexit – whether a no-deal rupture in March or an orderly departure after several years – raises the question of what happens to the UK vis-à-vis those EU trade deals?

Will the UK be able to simply roll them over, so the terms of a laboriously negotiated deal that previously only covered, say, the EU and South Africa, now also covers the UK and South Africa too?

Or would we need to renegotiate them from scratch?

The UK government had hoped to simply roll them over or “grandfather” them.

But the Department of International Trade was forced to admit earlier this month that not a single agreement to do this had so far been signed, with only two months to go when they may be needed.

Trade Secretary Liam Fox told the BBC: “I hope they will be but there are not just dependent on the UK. Our side is ready. It’s largely dependent on other whether countries believe that there will be no deal and are willing to put the work in to the preparations.”

This means that that UK firms which export to countries covered by those EU third country deals could suddenly the need to pay tariffs on 29 March.

One of the reasons why it might be taking longer than hoped to grandfather those arrangements is something called “rules of origin” found in all in trade deals.

Rules of origin specify that a certain proportion of an imported good has to have been made in the country or bloc to qualify for the preferential tariff.

The proportion varies with the product in question, but it’s often around 50 per cent. The goal is to prevent other countries free-riding on other countries’ deals.

According to British official, Korea is asking, in return for a rolling over of its EU trade deal to the UK, for Chinese inputs to its own cars to be treated by the UK as though they were Korean.

There’s another complication. Even if third countries did roll over their trade deals, when it comes to solving the rules of origin problem the UK would, for various technical reasons, often require not just the agreement of the third country but also the EU as well (something Peter Holmes and Michael Gasiorek of the UK Trade Policy Observatory have pointed out).

So the message is: when it comes to a no-deal cliff edge, don’t just worry about damage to UK trade with the EU. Worry too about UK trade with all those countries with which the EU has deals.

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