U.K. May Glean Brexit Clues as Court Rules on EU-Singapore Pact

(Bloomberg) -- U.K. Prime Minister Theresa May could get a taste of what’s in store for Britain when the European Union’s top court spells out how the EU should ratify a free trade pact with Singapore, the tiger economy some want post-Brexit Britain to emulate.

Judges at the EU Court of Justice will say on May 16 whether the Singapore deal must undergo a tortuous process of endorsement by national parliaments and regional assemblies on top of approval from the EU -- a step that the U.K. would be anxious to avoid as it gears up for its own trade talks with its former EU partners.

“May’s objective of a comprehensive trade deal being agreed within two years were never very realistic,” said Steve Peers, a professor of EU law at the University of Essex. “If it has to be ratified by all national parliaments, that’s even less realistic.”

Singapore and the EU have been negotiating their free trade agreement since 2010. An adviser to the EU court signaled in December that individual nations should also ratify it because some aspects, such as dispute settlement, labor and environmental standards and trade in air transport services, fall under national jurisdiction.

Step Back

A ruling upholding this would be an obvious step back for Singapore, the largest trading partner of the EU from the Association of Southeast Asian Nations, according to Lawrence Loh, director of the Centre for Governance, Institutions and Organizations at the National University of Singapore Business School.

"EU-Singapore trade has been growing faster for services than for goods, so any dampener in free trade will affect the services industry more," said Loh.

But the case “is a big deal” for the U.K. too, because the decision “will clarify a lot of issues that might arise when negotiating a long-term, post-Brexit trade deal between the U.K. and the EU,” said Peers. “To some extent, it might map out a ‘minefield’ of issues to avoid, if the U.K. seeks to avoid all member states having vetoes.”

While the formal two-year countdown until Britain leaves the EU was triggered on March 29, European Commission President Jean-Claude Juncker said that the real political negotiations on Article 50 will start after the U.K. has held parliamentary elections on June 8. EU governments are debating a set of directives for the bloc’s negotiator Michel Barnier, outlining the method and objectives of withdrawal talks.

Comprehensive Deal

Even if Tuesday’s ruling sets a legal precedent for an accelerated trade deal by allowing just EU institutions to sign off, that “does not necessarily mean that the U.K. would be able to achieve an agreement of the style it wants with the EU in a matter of two years,” said Aarti Shankar, a policy analyst at London-based think tank Open Europe.

The Singapore accord remains quite limited and the U.K. would likely be looking “for a more comprehensive trade deal than what we have seen so far,” both in trade and services, and potentially even a chapter on migration, said Shankar.

Even after Brexit, when the court’s rulings may no longer have binding powers over the U.K., they will still bind the EU and as such “determine what constraints the other party to the agreement is under as it negotiates,” said Peers. “That is bound to impact upon the U.K. indirectly.”

--With assistance from Keith Zhai and Nikos Chrysoloras

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net.

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Peter Chapman, Richard Bravo