How Does the EU Membership Impact UK's Global Free Trade?

When the UK was part of the European Union (EU), there was constant debate over its position in global free trade. Critics have often asked why the UK would still continue to engage in trading as they did within the EU framework, especially when they believed it would entail more paperwork.

The Reality of Continuing Trade

It was argued that external trade for EU members is governed by the EU. The UK, despite its desire to engage in the global economy, would have to abide by EU-level trade agreements. This was a major argument against the UK remaining in the EU. Those who favored Brexit believed that the UK, as an independent nation, could negotiate more favorable trade deals than what the EU could offer.

For instance, many favoured the notion that the UK could move towards tariff-free entry for products from Commonwealth countries without being bound by the EU's agreements. However, experts argued that the EU's size and market leverage provided a significant advantage in negotiations.

Transition and Understanding the EU's Role

It took time for many to realize that they themselves were part of the EU and that it was them and other European powers like Germany who determined trade agreements. The recent request by the UK Prime Minister for a 2-year transition period has marked a significant shift in this understanding.

Common Trade Policies within the EU

To maintain a unified market, all EU countries are required to have a common trade policy. This means agreeing to the same tariffs and barriers with countries outside the EU bloc. This can often be a slow process due to the complex balance of interests involved.

The EU has a history of agreeing to free trade agreements at a slow pace. This is partly because they seek agreements that cover numerous sectors rather than a sector-by-sector approach. This means that any issue in one sector can delay the entire agreement.

Real-World Example: The EU-Australia Alcohol Agreement

Consider the case of the UK signing a Free Trade Agreement (FTA) with Australia on alcohol. The UK wine industry is not in significant competition with Australian imports, making the agreement relatively easy and uncontroversial.

However, if the EU as a whole tried to sign such an agreement, it would face opposition from EU wine producers like France, Spain, and Italy. Their concerns could delay or even stall the entire EU-Australia trade agreement, sometimes for extended periods.

This highlights the complexity and slowness of decision-making within the EU's trade policies. The need for agreement from each country to sign off on agreements means that any sector with a stake can significantly impact the process.

The Contrast with the United States

In stark contrast, the United States does not require each state to sign off on every trade deal. This makes US trade agreements more streamlined and easier to implement.

While the UK now has the option to pursue its own trade deals, the challenge remains in navigating the complex and sometimes slow processes of the EU. Understanding this dynamic is crucial for businesses and policymakers in the UK as they plan their future trade strategies.

For more information on European Union membership and its impact on global trade, keep visiting our blog. We aim to provide accurate and up-to-date insights to help you navigate the changing landscape of international trade.