So the Brexit process has commenced. There has been a lot of commentary on the question of whether it would be possible to agree on the terms of Brexit but also the terms of a future UK-EU trade agreement within the next two years. A number of commentators, think not. Whether this assessment is correct, will no doubt become clearer in due course.
In any event, the UK Government is doing what it can to limit the effects of a “cliff edge” scenario, that is a situation where the negotiating period expires and there is no deal or an interim arrangement in place and EU laws simply cease to apply in the UK on Brexit. The Great Repeal Bill, under which existing EU legislation will become (to the extent possible) domestic legislation, will play a big part in that. However, certain other aspects of a “cliff edge” scenario look less easy to manage.
For example, a lot has already been said about the fact that without a new deal, or an interim arrangement, UK businesses would automatically lose the benefit of the more than 50 free trade agreements which the EU has in place on the day the UK leaves the EU.
However, a point less talked about is the effect of the “cliff edge” scenario on UK businesses and their access to international public procurement markets. The importance of public procurement should not be underestimated as, with a value of over €2,150 billion in 2008, EU public procurement is said to represent more than 16 per cent of total EU GDP.
On the day the UK ceases to be an EU member, absent a new trade deal with the EU or some form of an interim arrangement, UK suppliers will automatically lose access to the public procurement markets of the EU but also those of the other signatory parties to the WTO’s Agreement on Government Procurement (GPA).
The GPA is a non-obligatory “plurilateral” agreement between certain members of the WTO through which signatory parties agree to grant fair and transparent access to at least certain parts of their public procurement markets to each other’s suppliers. UK suppliers currently have access to GPA public procurement markets by virtue of the fact that the EU is a party to that agreement. In addition to the EU, GPA parties include the US, Canada, Japan and South Korea.
It has been argued that UK businesses wishing to continue benefitting from uninterrupted access to the EU/GPA public procurement markets should simply set up a subsidiary in an EU jurisdiction. It needs to be considered how realistic that option would be for most UK suppliers. Indeed, even assuming that this is an option for at least some of the larger businesses, such an approach is likely to lead to additional complexities and costs, putting them at a disadvantage vis-à-vis other competitors. Potentially, there is also the question of whether, in the absence of reciprocal rights for EU suppliers, the EU might adopt measures which would in effect limit the ability of non-EU/GPA suppliers bidding for public contracts through shell companies that they might have established for that purpose in an EU jurisdiction.
The separate but related question of whether in the absence of a deal the UK should continue to provide unilaterally protection to EU and GPA suppliers under domestic legislation also needs consideration. If EU and GPA suppliers no longer have protection and automatic access to UK public contracts under UK law, this may mean a smaller pool of suppliers from which UK public purchasers may choose from. This could have negative ramifications on competition, the promotion of greater efficiencies and innovation and ultimately value for money for the public sector.
These are important issues which deserve careful and urgent consideration as part of the wider Brexit debate.