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Brexit Vote Likely To Require New Trade Relationship Mexico - UK

Author:Berdeja Abogados SC
Profession:Berdeja Abogados SC
 
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Introduction

The United Kingdom decided to leave the European Union. Mexico has a trade treaty with the European Union. A UK departure would cause the trade relationship between Mexico and the UK to no longer be governed by the treaty. A trade agreement may need to be negotiated between Mexico and the UK. Upon Brexit, in the absence of such agreement, the trade relationship between Mexico and the UK would be governed by World Trade Organization rules.

Departure from EU

The UK has to notify its departure from the EU and carry out negotiations for (i) its departure, (ii) a new arrangement with the EU, and (iii) possible trade agreements with other countries, such as Mexico.

It is not clear what WTO obligations the UK delegation will have to reconfigure once it stands alone. The UK may need to update the terms of its WTO membership where commitments applied to the EU as a whole. This may require to update schedules with 161 WTO members.

Leaving the EU will mean the EU would have to be updated to accommodate the splintered trade block. A new agreement on trade and wider cooperation would require approval by each of the 27 member states plus the EU. A member state can block the agreement.

Interlocking time-frames would be significant. The process for a new agreement with the EU (excluding the UK) would require in sum, a mandate from the European Council to negotiate, the preparation of an agreement by the EU with the departing state and the approval of the new agreement by the European Council acting by a qualified majority, after obtaining the consent of the European Parliament (Article 50 of the Treaty on European Union).

The complexity of negotiations to access the Single Market after the UK leaves the EU may require longer than the two year deadline. An extension requires the agreement of the 27 remaining states.

The UK has other options outside the EU. It could re-join the European Economic Area (EEA) which gives European countries not part of the EU a way to become members of the Single Market. EEA members must implement EU rules on employment, consumer protection, environmental and competition policy. The EEA would not provide for free movement of people or free trade in services between the UK and the EU. Alternatively, the UK could follow the Switzerland bilateral treaty approach, which covers insurance, air traffic, pensions and fraud prevention and picks up European Free Trade Association provisions (EFTA) which provide...

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