The looming possibility of a retaliatory relationship between the UK and the EU

This ‘Brexit Countdown’ series rightly touches on a great many ways in which Brexit may affect very diverse aspects of Irish, British and EU politics and policies including culture and the arts, gender equality, higher education, and the ‘Backstop’. Here by contrast I will focus on European treaties as international trade treaties – arguably their central function – and briefly identify how Brexit has the potential to change an important and underappreciated aspect of the UK’s trade relationship with the EU states. 

Let us start by identifying the most distinctive feature of the European Union as a treaty system. The EU is often described as unique or ‘sui generis’ but only rarely is this special distinction clearly defined. For many international trade lawyers, however, the answer is clear – the unique feature of the European law as the Court of Justice has derived it from the treaties is its fundamental rejection of any form of inter-state retaliation between the EU member states as a means of enforcing its treaty obligations. 

This is really an extraordinary novelty. The World Trade Organization (WTO) allows its members to enforce trade obligations against each other by retaliatory trade sanctions. The North American Free Trade Area (NAFTA) of the US, Canada and Mexico allows its members to enforce trade obligations against each other by retaliatory trade sanctions. The Andean Community in Latin America allows its members to enforce trade obligations against each other by retaliatory trade sanctions. In each of these treaty systems inter-state retaliation is often threatened and sometimes occurs. And indeed general international law allows states to employ retaliatory actions against other states that fail to fulfil their treaty obligations. 

This prominent role of trade sanctions in international trade politics is perhaps most obviously on display in the current rounds of trade retaliation between the Trump Administration and the Chinese government, which everyone in China was talking about when I was in Beijing last summer. If there is a problem, a complaint, a dispute, in international trade politics then – with or without legal arbitration – the potential for retaliation is an essential part of the environment in which it is usually managed. 

But the EU completely rejects any such use of inter-state retaliation in trade disputes between its member states. This prohibition was not in fact set out in the Treaty of Rome, but was instead spontaneously declared by the Court of Justice in its 1964 Dairy Products judgment, perhaps under the influence of one of its most famous judges, Frenchman Robert Lecourt. The Court has stuck rigidly to that principle ever since. 

So in short, all those other trade treaty systems provide for the possibility of retaliatory enforcement of treaty obligations but the EU’s legal system firmly refuses to do so. 

But of course – and here we return to Brexit – the UK is going to be leaving the EU’s legal system. What does that mean? Retaliation – we might call it ‘Trump-style retaliation’ – is therefore moving onto the agenda for relations between the EU and UK, and thus between UK and Ireland, just as it has been a permanent part of the relations between the US and Canada in NAFTA. Of course the actual occurrence of such retaliation between the UK and the EU depends on the actions of each, but the possibility of such retaliatory behaviours, long buried by the UK’s membership of the EU, is now being unearthed as the UK heads for the exit. Indeed, the possibility of such a retaliatory relationship has been openly discussed in some of the UK’s papers on post-Brexit UK-EU dispute settlement.

So – we are in for an interesting new trade relationship between the EU and the UK after Brexit. 

William Phelan is Associate Professor and Jean Monnet Chair in EU Politics and Law at Trinity College Dublin.