Reality Check: Does Britain have to leave the EU before it makes a trade deal?
- 1 July 2016
- From the section EU Referendum
The claim: The UK has to officially leave the EU before it can make a new deal on trade.
Reality Check verdict: Under current EU rules, EU countries cannot make separate trade deals with individual member states or non-EU countries. However, there is no legal precedent for a country to leave the EU and renegotiate a trade agreement with the bloc. Legal experts say the UK could argue its official status has changed once it invokes Article 50, but this is largely hypothetical at the moment.
The EU Trade Commissioner Cecilia Malmstrom told BBC Newsnight the UK cannot begin negotiating trade deals with the EU until after it has left.
In an interview with the BBC's Mark Urban, she said: "There are actually two negotiations. First you exit and then you negotiate the new relationship, whatever that is".
The first set of negotiations to which she is referring are part of Article 50, an article of the Lisbon treaty which sets out the process by which countries can formally leave the EU. To invoke it, the UK government must inform the EU in writing or in an official statement at a meeting of the European Council.
The article states that the negotiations would take up to two years, but they can be extended if all the EU countries agree unanimously that they need more time.
Asked if the UK would be without a trade deal after the end of the two-year negotiation period, Ms Malmstrom replied: "Well yes, that comes after."
But is this correct?
Let's look at current EU legislation regarding trade deals.
Under EU law, the bloc cannot negotiate a separate trade deal with one of its own members, as rules have to apply to all member states equally.
Similarly, individual member states cannot make trade deals with third countries on their own.
This suggests that, because the UK will remain a full member of the EU throughout the negotiating period set out in Article 50, it could only formally sign trade deals with other countries once it has left.
The BBC's Chris Morris in Brussels says Ms Malmstrom's view appears technically correct and describes the official position of EU leaders who met on Wednesday without the UK. Our correspondent also said leaders could show some flexibility towards the UK, but not as much as some might expect.
A commission source told the BBC that while trade talks could begin alongside the formal exit negotiations, EU law would mean that they could not be concluded until the UK officially exited the EU. The UK would then revert to being a "third country".
This would imply the UK would face a period in which it is outside the EU but does not have a new trade deal with the single market. In this case, it would have to rely on World Trade Organization (WTO) rules until the final deal is concluded.
But we don't know yet what the UK's negotiating position might be. It could decide that the best option for the UK would be to conclude a deal similar to the one agreed by countries in the European Economic Area (EEA), like Norway, retaining access to the single market. Or it could decide that it would prefer the UK to remain outside the single market.
If it were to take the former option, there would be a lot less to renegotiate because staying in the single market means applying EU rules and regulations. The UK could make a case that it should be able to start such an arrangement once it leaves the EU, continuing to implement the current rules it already enforces. But this is not guaranteed.
'Reapply from scratch'
Steve Peers, professor of law at the University of Essex, says: "In principle, the EU could want the UK to reapply from scratch. However, this might be a negotiating tactic and the UK could convince them otherwise with some concessions on separate issues like agricultural trade. But this is very hypothetical at this point."
In the latter case, the EU could decide to wait until the UK officially concludes the exit negotiations.
Prof Peers says the UK could insist it has a different legal status once it has notified the EU of its intention to leave.
"Since the UK is going to be in a different situation, it could be argued the normal rules can't really apply and the UK should be able to have informal trade negotiations that could be enforced from the day it leaves."
As for whether the UK could open informal trade talks with non-EU countries like India or China, the UK could make the same legal argument about the change in its status.
But we have no way of knowing whether the UK could successfully argue this position regarding trade with EU or non-EU countries.
It is reasonable to expect that countries with a vested interest in maintaining trade links with the UK may wish to begin informal negotiations.
However, there is no legal precedent for such a situation, as Article 50 has never been triggered before. What a future trade deal with the EU might look like, and how long it will take to conclude, will be a matter for Parliament and the next prime minister.