It looks increasingly unlikely that the U.K. will reach a trade agreement with the European Union — and that could also harm the chances of a future deal with the United States.
The U.K. government outlined on Wednesday how it plans to manage trade following its full breakup from the EU at the end of the year with two significant announcements.
Firstly, it proposed legislation, called the Internal Market Bill, which gives the U.K. government stronger powers over trade rules in Scotland, Wales and Northern Ireland – something lawmakers in these countries have issue with.
Secondly, the government said the U.K. would not follow EU rules for state aid — a key stumbling block in the negotiations with Europe to date. Instead, it will apply state aid rules agreed at the World Trade Organization level, which are less strict.
“It’s a recipe for disaster,” Paolo Palmigiano, partner at the law firm Taylor Wessing, told CNBC.
The proposed legislation has to be approved by the U.K. Parliament before becoming law.
However, it raises questions about the U.K.’s ability to apply a WTO framework — which is meant to solve trade issues between two different nations — to its unique four-nation formation. In addition, the publication of the Internal Market Bill puts ongoing trade talks with the European Union at risk.
Ursula von der Leyen, European Commission president, said on Wednesday that she was “very concerned about the announcement from the British government.”
UK’s post-Brexit plan puts trade deal with the EU — and the U.S. — at risk – CNBC