The European Union’s top trade official says the UK cannot begin negotiating terms for doing business with the bloc until after it has left.
“First you exit then you negotiate,” Cecilia Malmstrom told BBC Newsnight.
After Brexit, the UK would become a “third country” in EU terms, she said – meaning trade would be carried out based on World Trade Organisation rules until a new deal was complete.
A recent trade deal with Canada took seven years to negotiate.
The Canadian agreement will also require ratification by all EU countries, adding another one to two years before it takes effect.
WTO rules restrict the circumstances in which countries discriminate in favour of each other in trade. Otherwise, they must apply to each other the tariffs they apply against the rest of the world.
Ms Malmstrom, the EU Trade Commissioner, underlined that detailed talks to shape the UK’s new trading relationship with the EU should not start until after the process of leaving politically, under an Article 50 process lasting up to two years.
“There are actually two negotiations. First you exit, and then you negotiate the new relationship, whatever that is,” she said.
“The referendum – which of course we take note of and respect – has no legal effect. First there has to be notification, which the next prime minister will do, I hope swiftly. And then that process can start.”
There is concern in the City that having to do business for years under WTO rules could be disastrous for the UK’s service industries.
Asked whether sticking to such a process wouldn’t harm the economies of all EU members, Ms Malmstrom replied: “Yes, but the vote was very clear.”
She said she was “saddened” that the UK – which has traditionally defended the principle of free trade – is leaving the EU, reports the BBC.
Under EU law, the bloc cannot negotiate a separate trade deal with one of its own members, hence the commissioner’s insistence that the UK must first leave.
It is also against EU law for a member to negotiate its own trade deals with outsiders, which means the UK cannot start doing this until after it has left the EU.
Taken at face value, these rules mean the UK cannot conduct its own trade talks for up to two years – a fearsome challenge to any prime minister trying to deliver Brexit.
EU officials say the UK’s options will soon refine themselves into a Norway-style package that keeps Britain within the single market – subject to EU rules and regulations – or a bespoke “third country” deal on the pattern of Canada’s.
They agree that because British businesses are already compliant with EU rules and regulations, choosing to remain within the single market would be “a little quicker”, than negotiating a deal like Canada’s.
But even a Norway-style single market access deal, they caution, could take years to negotiate, leaving the UK trading on WTO terms in the meantime.