The U.K. has just voted to divorce its biggest trade partner. Now it needs to find new markets, and quickly.
Negotiations on the terms of Britain’s exit (Brexit) from the European Union will take years, and that means prolonged uncertainty for exporters. Businesses are clamoring for government to come up with a plan.
U.K. Business Secretary Sajid Javid has traveled to India to kick off talks, which will include a discussion of what kind of trading relationship the two countries will have once Britain leaves the EU.
Javid will tell Indian officials that Britain wants a trade agreement in place “as soon as possible” after it leaves the 28-country economic bloc, the U.K. government said.
Before the referendum on June 23, President Obama warned that Brexit would put the U.K. at “the back of the queue” to negotiate a trade deal with the U.S. But India, which has tried for years to strike a deal of its own with the EU, does not appear to share that view.
The two countries already enjoy close economic links. Tata Motors (), for example, owns luxury automaker Jaguar Land Rover. The U.K., in turn, is a leading investor in Indian companies.
For decades, the EU has negotiated trading relationships on Britain’s behalf. Now the country faces the challenge of establishing new terms with the EU, as well as with 50 countries the EU has trade deals with.
As a first step, it will have to hire hundreds of trade negotiators. Javid said the government was aiming to have 300 specialist staff in place by the end of the year.
Javid is also planning to visit the U.S., China, Japan and South Korea for trade talks in the coming months.
But establishing a new relationship with the EU will be Britain’s top priority.
The U.K. could try to retain its membership in the European Economic Area, a treaty from 1994 that gives three non-member countries access to EU markets.
That would give it the same status as Norway, Iceland and Liechtenstein, but it would mean continuing to grant EU citizens the right to live and work in Britain — which many Brexit campaigners promised to stop.
Another alternative would be to negotiate a bilateral trade agreement with the EU, putting the U.K. in a group of countries that includes Canada, Switzerland and Turkey.
If all else fails, the U.K. could rely on a relationship with the EU based on the rules of the World Trade Organization.
Credit: CNN Money