Free Trade Agreements, Devolution, and Brexit

The UK’s ability to conduct its own trade policy and, in particular, to negotiate its own trade agreements has been consistently put forward as one of the key benefits of leaving the European Union.

Advocates of Brexit have consistently argued that freed from the constraints of the EU common commercial policy (the EU’s external trade policy which is conducted on behalf of all 28 EU Member States), the UK would be able to craft a trade policy that would allow it to reap the greater rewards that are offered by global commerce. The idea is that the UK would be free to pursue trade negotiations with countries of its choosing and design trade agreements that better reflect its own particular interests. The ability to sign its own trade agreements with other countries is viewed as such a central component of the UK’s post-Brexit future that it was identified by Prime Minister Theresa May as one of the infamous “redlines” in Brexit negotiations.

Unsurprisingly, therefore, the prospects and contents of future UK FTAs is an issue that has been at the forefront of political and legal debate following the UK’s decision to leave the EU. Indeed, barely a day goes by without some parliamentary committee inquiry exploring the potential trading relationship between the UK and countries such as Australia, New Zealand or the US.  However, it could be argued that future UK FTAs have taken a disproportionate importance in the public debate surrounding Brexit, given the limited economic impact that such agreements tend to produce.

Whilst much has been said and debated about the potential impact of future UK FTAs, it is notable how little attention has been devoted to exploring the interaction between devolved administrations and the FTAs. This is striking for two reasons. Firstly, because the economic interests and profiles of devolved territories are, at times, significantly different to those of the UK viewed as a whole. For example, whilst the UK is largely dominated by the service industry, in some devolved territories trade remains dominated by goods. Secondly, many of the issues that are increasingly regulated under trade agreements (e.g., agriculture, fisheries procurement) are devolved matters.

In other words, from an economic, political and constitutional perspective, there are good reasons why greater attention should be given to the role to be played by devolved administrations in the shaping of future UK trade agreements. Yet, there is very little evidence of this happening. For example, in the UK Trade Bill, not only is the role of devolved administrations with respect to trade agreements limited to the implementation of obligations, but their power to implement trade obligations which fall within the scope of devolved matters is in fact severely limited. Early indications suggest, therefore, that the UK’s future trade policy is likely to be extremely centralised and designed to exclude devolved administrations.

But a different approach is perfectly within the realms of possibility – it is possible to design an inclusive system that enables subnational entities to have a real influence in crafting national trade policy. Canada’s brand of cooperative federalism is the prime example of this. Canada has developed inter-governmental cooperation mechanisms whereby federal and provincial trade representatives meet on a quarterly basis to discuss the progress of ongoing trade negotiations. These regular interactions provide a platform for ongoing information exchange on the development of trade negotiations and a venue through which provinces can influence the negotiating positions of the federal government.

However, the Canadian system would not be easily transposable within the context of the UK. Unlike Canada, the UK is not a federal system but rather a territorially devolved constitutional system where legal sovereignty remains highly centralised. One of the reasons why an effective system of inter-governmental cooperation was necessary in Canada is because Canadian provinces have the exclusive competence to implement international obligations falling within their remit. As a consequence, Canadian provinces have enjoyed a significant amount of leverage in trade negotiations. In the UK, devolved administrations do not enjoy the same level of influence, with the central government maintaining the power to step in whenever a devolved administration adopts a measure that is incompatible with an international obligation.

That being said, the UK already has in place a system of intergovernmental cooperation, which is embodied by concordats included in the UK Memorandum of Understanding on Devolution. These set out guidance and frameworks for cooperation between the UK government and devolved administrations on various issues such as EU and international affairs. In practice, these concordats have not proved particularly effective, in part because they are not legally binding and therefore create no legal obligation to cooperate. Instead, they are based entirely on the goodwill of the relevant parties, meaning that meetings are organised on an ad hoc basis. On the few occasions when meetings have been organised, these have been described as mere box-ticking exercises where the views of devolved administrations are routinely ignored. For the UK to give a meaningful role to devolved administrations in trade policy, a significant reform of the current system would therefore be required. One which, at the very least, would establish a legally binding institutional mechanism of cooperation on matters pertaining to trade policy.

The specific features of the British constitutional system should not be used as an excuse to exclude devolved administrations from the realm of international trade politics. This, whilst perhaps tempting in the short term, will prove ineffective and even counter-productive in the long-term. It is a far better approach to develop mechanisms that empower devolved regions and acknowledge their interests in trade policy, whilst at the same time carefully delineating the limits of their involvement in the process of the negotiation and conclusion of trade agreements. Such an inclusive approach where trade policy is shaped by a broad-based debate would also send a far more positive signal in terms of the type of country that the United Kingdom wishes to be in a post-Brexit world.