As Britain enters the final stages of talks with the European Commission in the hope of reaching a post-Brexit trade deal, experts at Edge Hill University are urging Brits to prepare for some major changes in 2021.
The UK’s transition period to reach a deal with the EU will expire on 31 December 2020, when the UK stops following EU trading rules.
While the UK and EU have recently reached an agreement on specific trade agreements for Northern Ireland, “significant differences” remain on business competition rules, fisheries and how a deal would be governed.
International political economist, Christopher Dent, is a Professor in Economics and International Business at Edge Hill University.
Prof Dent said: “Even after Brexit the EU will still be, by far, the UK’s largest trade partner for the foreseeable future and thereby the most important trade partner that we secure a deal with. If we are left in a situation without a deal, this will cause a number of disruptions and disturbances in our crucially important trade relationship with the EU – it will make many traded goods more expensive, and likely result in a significant long-term reduction in foreign direct investment (FDI) into the UK. To put this all in context, around 45 percent of our trade is with the EU – four times the figure for the United States – and FDI accounts for around a quarter of Britain’s economy.
“The EU has more than 40 free trade agreements with over 70 countries. While the UK has been working to secure continuity deals with some of these trade partners, like Japan for example, there will be many countries that we will cease to have these deals with.
“It’s in neither parties’ interest to walk away without some form of trade deal. Britain is Europe’s most globally connected nation, and this brought notable benefits both to us and the EU on the world stage. We were able to use the EU as a stronger platform to take more effective advantage of our international connections. Brexit leaves both the UK and EU weakened in this regard, and this during a time of increasingly turbulent geopolitics.”
Without a post-Brexit trade deal in place, the EU and UK are likely to have to trade on World Trade Organisation (WTO) rules, with tariffs imposed for both parties. This is an issue which Professor Francesco Rizzuto believes should be approached with caution.
Prof Rizzuto, an expert in European Law at Edge Hill, said: “It seems that trading on WTO rules will have an immediate impact on the cost to buy and sell, from big business to individual consumers.
“The EU is built on the idea of law and therefore, having enforceable rules that everyone respects is fundamental. The idea, which has been fed to many, that by trading on WTO terms the UK will be free to do trade deals as it pleases, is a profound misunderstanding.
“There is a legal system with rules and procedures that mean that you cannot compete unfairly, resulting in trade wars. If the UK is found to be in breach of WTO rules, other parties such as the EU will be able to retaliate against us and we could find ourselves in a very difficult situation.”