UK and Singapore Sign an Adaptation of a ‘Good-Enough’ EU Trade Deal

The UK has signed an agreement with Singapore on Thursday, which provides for a free trade regime between the two countries. The full text of the agreement has not been made public at the time of writing, but according to the BBC, it is “effectively a rollover of the EU Singapore free trade agreement”.

Under the EU-Singapore Free Trade Agreement, the EU will gradually lower its import tariffs over several years on goods coming from Singapore. By 2025, all tariffs covered by the agreement will have been eliminated. 

There is a significant difference in the approach of the two parties, however. The EU has set up a drawn-out process for which a huge number of goods are categorized and scheduled, and where import duties will change year to year in a chaotic manner. This process and these categories of goods are spelt out over the span of more than 100 pages in the Agreement. 

By contrast, Singapore has simply pledged to eliminate customs duties from the EU ‘as of the date of entry into force’ of the Agreement.

Reportedly, identical or very similar procedures have been adopted in relation to the UK-Singapore version.

The agreements include exceptions to the tariff abolition spelt out by Article XX of the GATT. This is not out of the ordinary, as this is a standard provision frequently included in free trade deals. Among others, the exceptions extend to measures:

(a) necessary to protect public morals;

(c) relating to the importations or exportations of gold or silver;

(f) imposed for the protection of national treasures of artistic, historic or archaeological value;

(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;

Perhaps the most important exception listed under the letter (i) involves allowing governments to restrict exports of goods when exporters react to price controls instituted by governments domestically. This ‘loophole’ enables governments to institute harmful and counterproductive policies, harming the economy instead of solving the underlying policy issue.

In the wider context of international trade law, a discussion should be held about the fitness for purpose of this provision. Removing it from GATT could have a far-reaching positive impact on the accountability of governments worldwide.

Roughly half of EU trade deals that the UK will be leaving behind after the end of 2020 have now been replaced with new agreements, often simply mirroring the previous EU deals. Notably, these include a trade deal with Japan, which the BBC claims will make 99% of UK exports into Japan free of tariffs. However, this agreement cannot be with a clear conscience called a ‘free trade’ deal. Instead of abolishing barriers to trade on as many goods as possible as quickly as possible, it sets up or preserves multiple quota categories. It also disappoints when it comes to the timetable of tariff lowerings and abolitions, as for some goods the process is set out to take more than six years. 

It has become common knowledge that when the UK Brexit transition period ends at the end of 2020, relationships with countries where a trade deal will not have been agreed to will be governed by default rules set out by the WTO. While such a representation of the situation is, strictly speaking, true, it omits an important option available to the UK. 

Apart from agreeing with other states on bilateral deals or entering into multilateral agreements, the UK can direct its own import policies unilaterally. It is understandable that states prefer trade deals to be reciprocal - to apply to goods travelling both ways between given two countries. This is not a requirement, however, and it should not be an expectation either. The UK could unilaterally abolish its import tariffs and quotas, making domestic customers as well as foreign suppliers instantly better off. To address worries about selected domestic industries possibly adversely affected by this, the UK government could offer to provide assistance to those affected, making such tariff proposals more politically acceptable. Even with such assistance offered, this would be a net financial benefit for the UK, with most of the benefits going to low-income individuals and communities.

This would not be unprecedented. As the Institute of Economic Affairs (IEA) shows, China’s famous growth since the 1970s was achieved in the absence of trade deals and even for a long time without WTO membership, as it only joined in 2001. Another example is that of Hong Kong, which has pursued the policies of unilateral free trade (with some exceptions) for well over a century. When it comes to smaller economies, the situation is even clearer (as is explained in an IEA report), even though “many commentators have failed to grasp the advantages of unilateral free trade”. Especially with the end-of-year deadline approaching, the UK would certainly benefit from a consideration of this option where it has not had the time or opportunity for extensive negotiations. In the long-term, it could even aim to replace current trade deals with unilateral declarations instead.