International Trade after Brexit: rollover agreements concluded by the UK

In this blog post, Professor Panos Koutrakos of Monckton Chambers and City University of London examines the UK’s “rollover” international trade agreements concluded since Brexit.

In a previous blog post, I wrote about the status of international trade agreements under the Withdrawal Agreement (the “WA”). This blog examines how the UK has drawn on these in order to conclude separate agreements with third countries.

What are rollover agreements?

The international trade agreements known as rollover agreements draw on the existing agreements that were concluded by the EU and that have been binding on the UK, first pursuant to its EU membership and, during the transition period, under Article 129(1) of the WA. As their name suggests, the main objective of the rollover agreements is continuity: they aim to avoid sudden disruption in legal relationships and to give the UK time to develop its own trade policy. To that effect, these agreements will enter into force once the transition period has expired.

With which countries?

The UK has concluded rollover trade agreements with the following countries:

• Andean Countries (Colombia, Ecuador, Peru) – see here;
• Cariforum – see here;
• Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama) – see here;
• Chile – see here;
• Eastern and Southern Africa (ESA) (Madagascar, Mauritius, Seychelles, Zimbabwe) Economic Partnership Agreement – see here;
• Faroe Islands – see here;
• Georgia – see here;  
• Norway and Iceland on trade in goods – see here;
• Israel (Trade and Partnership Agreement) – see here;
• Jordan establishing an association – see here;
• Kosovo (Partnership, Trade and Cooperation Agreement) – see here;
• Lebanon (Association Agreement) – see here;
• Liechtenstein (Additional Agreement extending to Liechtenstein certain provisions of the UK-Switzerland Trade Agreement) – see here;  
• Morocco (Association) – see here;
• Pacific States (Fiji, Papua New Guinea) Econonic Partnership Agreement – see here;
• Palestinian Authority (Political, Trade and Partnership Agreement) – see here;
• Southern African Customs Union (Botswana, Eswatini, Lesotho, Namibia, South Africa) and Mozambique Economic Partnership Agreement – see here;  
• South Korea – see here;
• Switzerland – see here; and
• Tunisia- see here.

Not all existing trade partners are covered

The number of agreements negotiated by the UK at the time of writing is not inconsiderable. It is not comprehensive, either. The above do not cover all the agreements originally negotiated by the EU and currently governing trade between the UK and third countries. For instance, no rollover agreements have been concluded with Canada, Turkey, or Japan (with which negotiations have just been launched).

It is no accident that the UK has not concluded trade agreements with all its existing partners. Trade agreements are the outcome of long and complex negotiations and of package deals and compromises reached in a very specific policy context. Once the UK relies on the good will of a third country to extend in a new context deals reached by the EU, the temptation to unravel specific aspects of the deal may prove too strong for third countries to resist.

There are also other factors to take into account. These include the outcome of the UK-EU negotiations that may inform the policy choices of third countries towards the UK. They are also about the unilateral decisions taken by the latter, for instance regarding its temporary tariff rates policy, and whether they provide third countries with sufficient incentives to extend their existing trade agreements. 

 Content of rollover agreements

The main premise of the rollover agreements is that, in essence, they duplicate the existing agreements between the EU and its trading partners. Each agreement, however, needs to be examined closely as, in fact, there are differences.

A case in point is the Agreement with Switzerland. The EU-Switzerland Mutual Recognition Agreement applies to twenty sectors, whereas the UK-Switzerland rollover Agreement applies only to three sectors (including motor vehicles). This has been explained in the light the interdependencies with EU laws and systems. In other words, as Switzerland is committed to legislative equivalence with the EU, it cannot simultaneously commit to mutual recognition of UK practices, unless the latter also conform to the EU rules. The ensuing gap would entail additional cost, due to further testing and certification requirements, for exporters, unless a decision taken by the Joint Committee (under Article 1(2)(b) of the UK-Switzerland Agreement) to apply the Agreement to the additional product sectors. Such a decision would be predicated on an assessment of the level of divergence or alignment of the applicable technical regulations between Switzerland and the UK.  Given, however, the harmonisation between the EU and Swiss technical regulations, the UK-Swiss assessment would be based on an assessment of the alignment between the UK and EU rules over the product sectors currently not covered by the UK-Switzerland Agreement. This is a tangible, and by no means isolated, example of how intrinsically linked the negotiations between the UK and third countries are with the UK-EU negotiations.

There are other examples of the differing scope between the rollover agreements and the existing agreements that the EU has concluded, which the former were designed to replicate. Consider, for instance, the context of customs, as the UK Authorised Economic Operators will no longer qualify for expedited treatment on the Swiss border until the UK has adopted a scheme considered equivalent by the EU to its own scheme.

An illustration of the issues to which the negotiation of rollover agreements gives rise is provided by rules of origin. The agreements provide for cumulation: EU inputs will continue to be accounted for as being from the UK for the purpose of meeting the local content requirements necessary to qualify for the zero tariff treatment. On the one hand, this is an example of an approach that provides UK companies with time to adjust their supply chains until the UK has negotiated without having to draw on the EU’s trade policy. On the other hand, the application of the principle of cumulation is not uniform. The UK-South Korea Agreement, for instance, limits this rule to three years after the entry into force of the Agreement, hence providing companies just enough time to adjust their supply chains in the post-Brexit environment. Compared to the other countries with which the UK has negotiated a trade agreement, South Korea is the most important economy and had, therefore, the weight to negotiate with the UK the narrower application of the rules laid down in its original agreement with the EU.

New agreements

In addition to extending the existing agreements that the EU has concluded with third countries, the UK has made the negotiation of new agreements a main tenet of its trade policy. To that effect, the Government has just made public its strategic approach to trade negotiations with Australia and New Zealand. The UK’s approach to negotiating with the United States was also made public earlier this year. It remains to be seen what comes of these negotiations and, of course, those with the EU.

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