The Brexit vote last month came as a surprise to many people (including me), and there is still a lot of uncertainty -- both legal and political -- as to how the United Kingdom (UK) will proceed. In order for Brexit to go forward, the UK will have to invoke Article 50 of the Lisbon Treaty, and then enter into a complex negotiation with the European Union to establish a new UK-EU economic relationship.
As things move ahead, I will have more to say on the UK-EU negotiations, but for now I wanted to weigh in on the UK's trading relationship with the rest of the world. There are questions about when the UK can actually begin any such trade negotiations, but putting that aside, I wanted to address two points: (1) With whom should the UK negotiate? And (2) what should the UK negotiate about in these trade agreements?
My long answer is here, in a new Free Trade Bulletin (a shorter, op-ed version is here), but here's a quick summary.
In terms of negotiating partners, I would ask these questions: (1) Which countries have the most to offer in terms of a substantial economic relationship; (2) with which countries would the negotiations be the smoothest; and (3) which countries would involve the least external controversy in a trade negotiation. Weighing and balancing all of these factors, it seems to me that the best candidates for the initial set of trade negotiations would be Australia, Canada, New Zealand, and the United States; and perhaps developed countries such as South Korea and Japan.
As to the substance of the negotiations (that is, what to negotiate about), I suggest the following:
-- Push for zero tariffs on all products, with limited or no phase-out periods.
-- With services liberalization, pick a couple substantial and uncontroversial sectors and focus on liberalizing those.
-- Open up government procurement markets as much as possible.
-- Rely on existing WTO trade rules for issues such as intellectual property and product standards, so as to avoid getting bogged down negotiating on complex regulatory issues.
-- With some trading partners, exclusion of trade remedies -- e.g., anti-dumping -- may be possible. This may sound politically challenging, but it has happened before. For example, Australia and New Zealand have agreed not to take anti-dumping measures against each other, and perhaps these countries would consider doing the same for their trade with the UK.
Some people in a few of these potential trading partners are already pushing for trade deals, so there is a good chance something will go forward in the near future, although it looks as though the UK leaders may need to settle in and make some key decisions -- such as when to invoke Article 50 -- first.