Brexit and the EU–UK free trade agreement: dos and don’ts when drafting rules of origin

• DOI: https://doi.org/10.1108/JITLP-11-2018-0053
• Pages: 96-107
• Date: 25 April 2019
• Published date: 25 April 2019
• Author: Roberto Soprano
• Subject Matter: Strategy

Brexit and the EU–UK free trade

agreement: dos and don’ts when

drafting rules of origin

Roberto Soprano

Private and Economic Law,

Vrije Universiteit Brussel Faculteit Recht en Criminologie, Elsene, Belgium

Abstract

Purpose –The purpose of this paper is to highlight the prosand cons of different models of the European

Union (EU)-style Rules of Origin (RoO)that could be chosen by negotiators for a future UK–EU Free Trade

Agreement (FTA). It will also underline the impactthat any choice would have on economic operators and

certain criteriathat should be evaluated before taking any decisions on the adoption of RoO.

Design/methodology/approach –The paper will describe three different RoO models that could be

chosen by negotiators.For each of them, it analyses the pros and cons and the impact on economic operators.

Findings –The choice of a RoO would have an impact on future EU–UK trade relations.It will affect the

utilizationrate of the FTA as well as investment (and divestment) corporate strategiesin the UK and EU.

Originality/value –The paper introduces differentcriteria to evaluate the impact of RoO that should be

taken into consideration by negotiators. It emphasizes that RoO should be simple, predictable, coherent, IT

compatibleand easily adaptable.

Keywords European Union, WTO, Brexit, Free trade agreement, Tariffs, Rules of origin

Paper type Research paper

1. Introduction

On 29 March 2019, the United Kingdom (UK) will formally withdraw from the European

Union (EU). Although it is still not clear if the UK and the EU will reach an agreement to

regulate several aspects of Brexit, ranging from the free circulation of citizens to f‌inancial

matters, before that date, they do need, sooner or later, to f‌ind a solution to regulate their

trade in goods relations. In fact,every good that nowadays is freely transferred from the UK

to the EU and vice versa will be subjectto customs controls and possibly to tariffs.

Many corporations have expressedtheir deep concerns about Brexit. They are planning

to relocate their production facilities, as the reintroduction of customs borders and tariffs

could negatively affecttheir margins and supply chain operations.

In addition, UK goods would no longer be eligible for tariff preferences when exported

to countries with whom the EU has concluded Free Trade Agreements (FTAs). Despite

thefactthatthelargestpartofUKgrossdomesticproduct(GDP)isbasedonservices,its

industrial and agricultural sectors may still benef‌it from preferential access in FTA

partner markets. Moreover, FTAs tie links with allies and former colonies. Therefore, the

UK might be willing to negotiate with third countries new FTAs, allowing its goods to be

imported at preferential rates.

Moreover, Brexit will alsoaffect EU exporters as UK goods, in the absence of cumulation

clauses, would be treated as non-preferential for the calculation of preferential origin of

goods manufactured in the EU. This may affect exports of EU producers towards FTA

partner countries.

JITLP

18,2

96

Received29 November 2018

Revised20 January 2019

Accepted4 March 2019

Journalof International Trade

Lawand Policy

Vol.18 No. 2, 2019

pp. 96-107

© Emerald Publishing Limited

1477-0024

DOI 10.1108/JITLP-11-2018-0053

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/1477-0024.htm