The first quarter of 2018 is proving an exciting if unpredictable time when it comes to the politics of Brexit. As I write, it’s very unclear what form the final relationship between the UK and the EU will be after the appointed date for Britain to leave the EU — March 29, 2019 — just over a year from now. However, the nature of that relationship will have a highly significant effect on the way in which future UK-China trade develops, and on the relationship more generally.

At the moment, one possible result seems to be a compromise between the UK and EU sides, in which everyone has to accept some downsides to the result. There are several possibilities. One is a version of the existing customs union, meaning that the UK continues to be bound by the EU common external tariff. The second is what is known as the “cliff-edge” scenario, in which the UK drops out of the EU without any kind of deal. In the first scenario, it’s likely that the UK’s trade relationship with China will change only minimally. In the second, it’s likely to change significantly.

If the UK remains in a customs union with the EU, which is now almost certain until 2020, then its ability to implement new trade deals will be relatively limited, although it can negotiate them. However, the UK will still have a significant advantage in that there won’t be barriers between it and the rest of the EU. Provided that outside investors are convinced that the situation in the UK is likely to remain stable (and many were alarmed by the 2016 referendum, having assumed that the UK’s membership of the EU was permanent), then the reassurance that tariffs won’t be imposed on, say, machine parts that travel between different countries in Europe, should make investment in the UK more attractive. There are other factors that encourage investment in Britain, including high levels of access to technical skills in cutting-edge areas such as nanotechnology and cybertechnology. However, for many overseas investors, not having to wait for a new and perhaps lengthy free trade agreement with the UK — because they can piggyback off the EU’s arrangements — could be attractive in its simplicity. This is a much less politically attractive solution from the point of view of UK politicians who are unhappy at the loss of input that the UK will have in drawing up the terms of any trade agreements. But that, of course, is not China’s problem.

There is a high likelihood that any transition period between the end of Britain’s EU membership and the beginning of some sort of new UK-EU relationship will mirror this scenario closely. If another government, in which Labour is the largest party, is returned in the 2022 election (or before), then the hard-line opposition to any involvement with the EU which marks a minority of Conservative MPs will no longer be a factor. Although the top leadership of the Labour Party is Eurosceptic, the party membership and its voters in general tend to be more favorable to Europe and, a few years on, the emotions surrounding the referendum will likely have died down. New leaders in the UK and Germany might be able to agree to a fresh start, which would be more difficult for Merkel, May and Macron.

However, the less likely but possible scenario of the UK crashing out of the EU could mean that China suddenly becomes a lot more prominent in the minds of Brexit Britain’s ministers. Almost all economists’ predictions suggest that falling out of the EU without an agreement would do immense damage to Britain’s trading position and its already low growth rate. In that scenario, it would be highly likely that the UK would seek trade deals with a great deal of urgency, because politically it would be essential to find ways to show the electorate that the promise of lucrative, attractive arrangements with new partners could substitute for the loss of easy access to the EU. The United States, Japan, Australia, India and of course China would all become key targets of British lobbying. However, these countries all have their own priorities and demands. If the UK wished to obtain a fast trade deal with China, it would place a great deal of negotiating power in China’s hands and create a different set of political obstacles. For instance, China, like India, would seek easier visa access to the UK, in particular more access for students. However, the current British prime minister has made controlling student numbers — and access to the UK more generally — a key target. In this scenario, the UK’s international aims and its leaders’ domestic priorities might come into conflict.

At the moment, UK-China trade is a relatively small proportion of either country’s total trade, although it is growing. A year ahead of Brexit, the UK’s future trading relationship with the EU and the wider world is still utterly unclear. One suspects that clarity on this issue would be welcomed not just in Birmingham and Belfast but also in Beijing.

Rana Mitter is Professor of History and Politics of Modern China at Oxford University and director of Oxford University China Centre. The views do not necessarily reflect those of China Watch.

All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.