Within days of Mr Johnson becoming Prime Minister, President Trump announced that talks about a “very substantial” trade deal with the UK are under way. In this joint Briefing Paper with colleagues from Georgetown University and UKTPO fellows, we consider the effects that Brexit uncertainty is likely to have on the capacity of the UK to agree a deal with the US and ask whether a deal is politically even possible in the UK.  We investigate key issues in negotiating a bilateral agreement: the backstop and the problems posed by the EU and US standards regimes. The paper also explores the prospects and pitfalls of the US Government guidelines for negotiations between the US and the UK; the US’s potential strategic position on services and the declining importance of the UK and Europe as traditional places of spending for US multinational corporations especially in the areas of information technology soft- and hardware. Overall we conclude that while the governments involved see obvious political attractions in a UK-US free trade agreement, a quick and economically significant conclusion to the talks seems unlikely. Read Briefing Paper 34 – THE FUTURE OF UK-US TRADE: AN UPDATE

Economists have long argued, and with good justification, that international trade brings overall benefits to economies. However, increasing trade is likely to create losers as well as winners. As the UK prepares to leave the EU and have an independent trade policy it is important to understand how future trade agreements, or policy changes, may affect economic outcomes such as prices, productivity and output, and through these, individuals and regions. In this Briefing Paper, the authors provide a conceptual background of how trade changes may result in winners and losers – be these consumers, workers, regions, or industries, and give an overview of what the empirical evidence tells us about how developed economies have adjusted to changes in trade. They also consider potential policy responses that could help losers from international trade adjust, and ensure that the winners can take advantage of the new opportunities created by trade liberalisation. Read Briefing Paper 33 – WINNERS AND LOSERS FROM INTERNATIONAL TRADE: WHAT DO WE KNOW AND WHAT ARE THE IMPLICATIONS FOR POLICY? Launch and Panel Discussion at British Academy, 18 July 2019

Post-Brexit, the UK will offer preferential market access to developing countries under a Generalized System of Preferences (GSP). To allow developing countries to export to the UK after it leaves the EU on the same terms as the present, the UK Government’s plan is to replicate the GSP of the EU. This paper shows that simply rolling over the EU’s GSP, in particular, the rules for preferences removal (graduation), will determine changes in market access due to the uneven distribution of developing countries’ trade between the UK and the EU27 bloc. The country most affected would be India, which would lose trade preferences in the UK on a volume of trade worth approximately € 1.27 billion per year. Adjustments to the GSPs of both the UK and the EU, necessary to avoid the loss of trade preferences, are also discussed. Read Briefing Paper 32 – A POST-BREXIT GENERALIZED SYSTEM OF PREFERENCES FOR THE UK: HOW TO GUARANTEE UNCHANGED MARKET ACCESS FOR DEVELOPING COUNTRIES?

In the case that the UK manages an orderly Brexit and has a transition period until the end of 2020, rather than just rolling over the existing agreements, what would be the possible options for future Free Trade Agreements? In the case of a future UK-Korea deal, the UK could potentially negotiate a new FTA built on the Korea-EU FTA (KorEU) or negotiate a completely new FTA modelled on the Korea-US FTA (KORUS). Our comparative analysis of KorEU and KORUS in services reveals that the two agreements took very different approaches for services trade liberalisation. Both achieved “GATS-plus” liberalisation commitments from Korea. KORUS seems to have achieved slightly more than KorEU. However, KORUS is more complicated and less transparent than KorEU. It also contains more WTO-inconsistent features. The KORUS option would enable the UK to better pursue its own specific needs since it would not be directly bound by KorEU. On the other hand, the WTO-inconsistent aspects of KORUS would need to be avoided, based on a clear vision of UK’s contribution towards the future multilateral trading system. Either way, the UK would face two stumbling blocks: the UK’s lack of negotiating power and the Most Favoured Nation (MFN) clauses [...]

Investor-State Dispute Settlement (ISDS) mechanisms have been globally criticised as out-dated and inappropriate fora for the settlement of disputes involving States. Attempted reform is underway at the United Nations Commission on International Trade Law (UNCITRAL) Working Group III, at which the EU is a key player. The role of the EU as a significant moderniser of trade agreements will have implications for the UK in negotiating any future trade deals with the EU. For example, the consequences of the recent Opinion 1/17 on the legality of a new form of court system to handle investor-state disputes in the EU-Canada Agreement (CETA) are significant in analysing how the CJEU was persuaded to reach the conclusion that new judicial fora in international Treaties may be compatible with EU law. The litigation around the modern trade agreements of the EU is a warning signal that conducting trade agreements from scratch with the EU is not painless, with ratification potentially being very prolonged when there are challenges to the agreement at the national and EU level. Read Briefing Paper 30 – Opinion 1/17: Towards A Modern EU Approach to Investor-State Dispute Settlement

This paper assesses the possible consequences of the Government’s proposed No Deal tariff regime. While there have been numerous previous assessments of the economic impact of a ‘No Deal’, the tariff proposal by the UK Government provides a new set of tariffs which have not been assessed in the existing empirical literature. In this briefing paper, the authors explain carefully the Government’s proposals and identify how much of UK trade would be affected by the changes in tariffs in a ‘No Deal’ scenario and provide an empirical assessment of the scale of the economic challenge which could face UK industries in the event of ‘No Deal’. They find that a ‘No Deal’ Brexit will pose a significant challenge to the UK economy with a negative impact on output, exports and imports driven largely by the increased cost of trading with the EU. The results highlight that in the event of ‘No Deal’ the Government’s room for policy manoeuvre is somewhat limited. Read Briefing Paper 29 – Deal or ‘No Deal’? The economic consequences of the UK’s ‘No Deal’ tariffs

Since the EU referendum, there has been a growing interest in the reintroduction of free zones in the United Kingdom. Those advocating free zones believe that they will help to boost British trade after Brexit and promote economic growth. This briefing paper presents a history of free zones in the UK and US and then looks at the EU context. Although there are potential benefits and savings that businesses can accrue from simplified customs procedures and relief on customs duties and tariff inversion, the authors explain that such benefits will be very limited in the UK context. This is due to state aid rules which limit the scale of assistance possible. The UK would still be affected by these in some way post-Brexit. Thus, while there is a scope for free zones shaping an export-oriented place-based regional development programme, policymakers should devise measures that counteract possible diversion of economic activity from elsewhere, and offer a wider set of incentives than just free zones, while keeping within our WTO and any ‘level playing field’ obligations that arise from our trade agreements. Read Briefing Paper 28 – What is the extra mileage in the reintroduction of ‘free zones’ in the UK?  

This briefing paper explores the likely content of a market access agreement for financial services between the UK and the EU. Despite the UK Government’s early hopes that all trade issues could have been settled in the Withdrawal Agreement, the actual situation is that this Agreement addresses only those trade issues necessary to ensure an open Irish Border.  The accompanying Political Declaration on the future relationship between the UK and the EU lays out some broad non-binding principles on which negotiations around financial services access are intended to proceed during the transition period, but important details are undefined. During the negotiation of the Political Declaration itself, some counter-briefing took place as to the meaning of some of these principles. The existence of such counter-briefing suggests that when these negotiations commence, the rules of access for UK financial services will again be a contentious issue. This paper uses what we know now to analyse the options that may emerge and the likelihood of their adoption. Read Briefing Paper 27 – EQUIVALENCE, MUTUAL RECOGNITION IN FINANCIAL SERVICES AND THE UK NEGOTIATING POSITION

This study focuses on the economic shocks that a ‘no deal’ Brexit would entail across the constituencies of Hampshire and Sussex. We take estimates of the effects of a ‘no deal’ Brexit on output and employment in different sectors of the UK economy and using the composition of employment in each constituency, estimate how each constituency will be affected. The novel feature of our analysis is that we allow for commuting and so convert the Brexit shock from referring to workers in a constituency to referring to residents in the constituency. With the South East region the most heavily engaged in cross-border trade, after allowing for the fact that people often live and work in different places, we estimate that the shock to residents of Hampshire and Sussex could be equivalent to the loss of about 43,000 jobs. Given that Brexit decisions will ultimately be taken on the floor of the House of Commons, this Briefing Paper provides a base from which Hampshire and Sussex MPs can start to assess the impact of Brexit on their constituents. Read Briefing Paper 26 – THE BREXIT BURDEN: A CONSTITUENCY LEVEL ANALYSIS FOR HAMPSHIRE AND SUSSEX See also: Online Appendix and subsequent work repeating the exercise for the full list of 632 [...]

This Briefing Paper provides a comprehensive overview of the EU’s Most Favoured Nation (MFN) clauses on services and investment. It discusses their scope and the exceptions they contain, and then considers how these clauses are likely to limit the extent of concessions that the EU and its existing partners are prepared to grant the UK. Read Briefing Paper 25 – MOST FAVOURED NATION CLAUSES IN EU TRADE AGREEMENTS: ONE MORE HURDLE FOR UK NEGOTIATORS