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Brexit: China looking at 'top-notch' trade deal with UK after EU withdrawal

Formal talks cannot begin until Britain officially leaves the EU and could take years to conclude

Sunday 26 August 2018 13:33 BST

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China and Britain are trying to secure a “top-notch” free trade agreement after the UK leaves the European Union, China has said.

Zhong Shan, the country’s commerce minister, confirmed talks with British international trade minister Liam Fox had set the stage for an agreement that would be mutually beneficial for both countries.

A statement from China’s commerce ministry said that the two countries agreed to “actively explore the possibility of discussing a top-notch free trade agreement between the two sides after Brexit”.

The biggest issues facing UK on leaving EU

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1/8The biggest issues facing UK on leaving EU

The biggest issues facing UK on leaving EU

Post-Brexit immigration

workers sorting radishes on a production line at a farm in Norfolk. One possible post-Brexit immigration scheme could struggle to channel workers towards less attractive roles - while another may heighten the risk of labour exploitation, a new report warns.

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The biggest issues facing UK on leaving EU

Customs union

A key point in the negotiations remains Britain's access to, or withdrawal from, the EU customs union. Since the referendum there has been hot debate over the meaning of Brexit: would it entail a full withdrawal from the existing agreement, known as hard Brexit, or the soft version in which we would remain part of a common customs area for most goods, as Turkey does? No 10 has so far insisted that “Brexit means Brexit” and that Britain will be leaving the customs union, but may be inclined to change its position once the potential risks to the UK’s economic outlook become clearer.

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The biggest issues facing UK on leaving EU

Northern Ireland-Irish border

Though progress was made last year, there has still been no solid agreement on whether there should be a hard border between Northern Ireland and the Republic of Ireland. To ensure borderless travel on the island, the countries must be in regulatory alignment and therefore adhere to the same rules as the customs union. In December, the Conservative Party’s coalition partners, the DUP, refused a draft agreement that would place the UK/EU border in the Irish Sea due to its potential to undermine the union. May has promised that would not be the case and has suggested that a “specific solution” would need to be found.

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The biggest issues facing UK on leaving EU

Transition period

Despite protests from a small number of Conservative MPs, the Government and the EU are largely in agreement that a transitional period is needed after Brexit. The talks, however, have reached an impasse. Though May has agreed that the UK will continue to contribute to the EU budget until 2021, the PM wants to be able to select which laws made during this time the UK will have to adhere to. Chief negotiator Michel Barnier has said the UK must adopt all of the laws passed during the transition, without any input from British ministers or MEPs.

EPA

The biggest issues facing UK on leaving EU

Rights of EU citizens living the UK

The Prime Minister has promised EU citizens already living in the UK the right to live and work here after Brexit, but the rights of those who arrive after Brexit day remains unclear. May insists that those who arrive during the transition period should not be allowed to stay, whereas the EU believe the cut-off point should be later.

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The biggest issues facing UK on leaving EU

Future trade agreement (with the EU)

Despite this being a key issue in negotiations, the Government has yet to lay out exactly what it wants from a trade deal with the EU. Infighting within the Cabinet has prevented a solid position from being reached, with some MPs content that "no deal is better than a bad deal" while others rally behind single market access. The EU has already confirmed that access to the single market would be impossible without the UK remaining in the customs union.

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The biggest issues facing UK on leaving EU

Future trade agreements (internationally)

The Government has already begun trying to woo foreign leaders into prospective trade agreements, with various high profile state visits to China, India and Canada for May, and the now infamous invitation to US President Donald Trump to visit London. However the UK cannot make trade agreements with another country while it is still a member of the EU, and the potential loss of trade with the world's major powers is a source of anxiety for the PM. The EU has said the UK cannot secure trade deals during the transition period.

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The biggest issues facing UK on leaving EU

Financial services

Banks in the UK will be hit hard regardless of the Brexit outcome. The EU has refused to give British banks passporting rights to trade within the EU, dashing hopes of a special City deal. However according to new reports Germany has suggested allowing trade on the condition that the UK continues paying into the EU budget even after the transition period.

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The move has the full backing of Eurosceptic MPs keen to boost investment and expand trade in services in a post-Brexit world.

China is also in need of allies in its fierce trade dispute with the United States. President Trump’s administration has imposed tariffs on Chinese imports and has accused the second-largest economy in the world of stealing American intellectual property and discriminating against foreign firms.

As the Brexit date of 29 March 2019 draws closer, Britain has tried to reassure Chinese companies that it is fully open for business.

Chancellor Philip Hammond initiated talks of a deal during a visit to China in June.

“As a firm supporter of trade liberalisation and a free market, the United Kingdom is China’s long-term trusted partner,” he wrote in a Chinese financial magazine at the time.

“Britain is committed to promoting free and open trade, and as Britain and its European cooperation partners form a new relationship, we will deepen our relations with other regions around the world.”

However, formal talks cannot begin until Britain officially leaves the EU and could take years to conclude.

Liam Fox attends a ceremony in Beijing on Friday (AP)

Mr Fox recently said that Britain aimed to boost exports to 35 per cent of gross domestic product after leaving the EU.

Mr Zhong said today that he hoped Britain would use the opportunity of a major import fair in November in Shanghai, which President Xi Jinping is overseeing, to expand its exports to China.

Mr Fox, along with Prince Andrew, will be tasked with leading the UK’s delegation to the import fair.

Additional reporting by Reuters

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