Donald Trump made waves this week after throwing a mighty rock in the Brexit pond. Asked about Mrs May’s proposed withdrawal agreement, the President told reporters:
“Right now if you look at the deal, [the UK] may not be able to trade with us. And that wouldn’t be a good thing. I don’t think they meant that”
So is Trump right?
The real deal?
It’s not entirely clear what the President was referring to. His exact words seem to suggest that he thinks the UK – if it implements Mrs May’s proposed withdrawal agreement – will be unable to exchange goods and services with the US after we leave the EU in March 2019, when we enter the “transition period”.
We put that interpretation to David Collins, Professor of International Economic Law at City, University of London. He was clear: under May’s plan, “trade will continue between the UK and the US as it does now with the UK being a member of the EU” through the transition period.
So under a strict interpretation of his words, Donald Trump is wrong to say that the proposed withdrawal agreement will mean the UK “may not be able to trade” with the US.
But many media outlets and commentators have taken a broader reading of the President’s comments: perhaps he meant to say that Mrs May’s plan could threaten the UK’s ability to strike a trade deal with the US during the transition period.
If that’s what he had in mind, then Mr Trump may well be right – at least for as long as the UK stays in the transition period.
Professor Collins again: “Article 126 of the [draft withdrawal agreement] specifies that the UK will essentially be treated as a [member of the EU] during the transition period. This means that it will not have control over its economy or external trade policy.
“Article 129 says that the UK will be bound by the EU’s external treaties during the transition, again indicating that the UK will not be able to make its own trade policy because it will be tied to the EU’s obligations.”
Professor Collins notes that while there is a clause in the draft plan that allows the UK to negotiate, sign and ratify trade agreements during the transition period, “this is meaningless because no country would bother negotiating a trade treaty with a country not knowing when it can go into effect.”
As currently drafted, the withdrawal agreement pencils in a proposed end date for the transition period (December 2020), but leaves open the possibility of extension. Any trade deals the UK strikes during that time are only allowed to take effect after the transition period ends.
So it’s fair to say that Theresa May’s draft withdrawal agreement will mean that the UK is unable to implement any new free trade deals, including with the US, until the end of the transition period.
The end of the beginning
But remember: there isn’t just one Brexit deal… there are two. We’ve been looking at the (proposed) first agreement, which covers the practicalities of the UK’s withdrawal from the EU during the transition period.
Negotiations for the “future relationship deal”, haven’t even started yet. This will set out the terms of UK-EU relations after the transition period, i.e. once we have fully left the trade bloc.
What that future relationship with the EU looks like may have knock-on effects for our long term relationships with the US and other major economies.
James Harrison, Associate Professor at the University of Warwick’s School of Law told FactCheck: “The longer term issue that Trump may be hinting at, is that even if the UK does eventually get its own independent trade policy, regulatory alignment may be too close to the EU for such a deal to be attractive to the US [his emphasis].”
In other words, it’s possible that we could strike a “future relationship deal” with the EU that requires us to mirror regulations made in Brussels on products imported from abroad.
This could make the UK less attractive to countries like the US who don’t think it’s worth upping their own regulatory standards just to get access to the UK market.
But Dr Harrison was was keen to stress that this is “pure speculation, as it is difficult to work out exactly what Trump meant by those remarks.”
Indeed, if that is what Mr Trump was talking about, it seems rather premature: there is no future relationship deal currently on the table, so it’s hard to see what he could be basing his comments on, if not the proposed withdrawal agreement.
Talking about Theresa May’s proposed withdrawal agreement, Donald Trump said that “if you look at the deal, [the UK] may not be able to trade with [the US].”
On a strict interpretation of his words, this is wrong: during the transition period, which is what the withdrawal deal covers, trade will continue between the US and the UK as it does now.
But if he was referring to the ability of the UK to implement trade deals during the transition period under the terms of Mrs May’s plan, the President may well be right.
The draft withdrawal agreement says that the UK can negotiate trade deals with other countries during the transition period. But these can’t be implemented until after the transition period ends – and the draft agreement allows for that date to be extended, potentially until the end of the century.
In practice, this means it’s unlikely that countries like the US will want to negotiate a trade deal with the UK during that time as no-one knows when (or indeed if) it will be enacted.