After the United Kingdom leaves the European Union there are two options for trade relations between the EU, including Hungary, and the island country. In the event that the parties manage to reach an agreement on the terms of the withdrawal by April, a transitional period would enter into force, which would guarantee equal treatment to the current internal market status until the end of 2020. This would not fundamentally change the regulations regarding trade relations with the UK. In the event that the UK withdraws from the EU without a deal, trade relations between the two parties would radically change and be transformed, and WTO terms would apply instead of the current customs union and internal market rules. Accordingly, tariffs would be reintroduced and non-tariff barriers (e.g. customs procedures) would also make trade relations more difficult.

The WTO, whose current membership (1)  includes most of the players in the global economy, is based on the principle of non-discrimination of trading partners and foreign and domestic products and services. According to the most favoured nation (MFN) principle, a member state cannot differentiate between the products and services of trading partners, i.e. concessions to one partner are not possible, and should be granted to all WTO partners. The principle of national treatment means that imported and locally-produced goods and foreign and domestic services should be treated equally.

In the WTO, the specific commitments and concessions of member states in relation to trade in goods and services are listed in schedules of the conditions under which the economic operators of member states, including Hungary, can enter the market of the United Kingdom. With the withdrawal of the UK from the European Union, it will be necessary to define the UK’s independent list of commitments. The UK has already begun to prepare for its withdrawal from the EU and has submitted its schedules. In the event of a withdrawal with no deal, trade between the United Kingdom and its trading partners will take place based on these commitments. It is important to emphasise that, based on the above principles, the United Kingdom cannot in principle treat other countries more favourably than Hungarian products and services. This is also true for discrimination between foreign and domestic companies. Exceptions to these rules can be found in the UK schedules.

A further difference is that, based on WTO rules, the free movement of persons is different and much more limited than the current basic freedoms of the EU. The General Agreement on Trade in Services (GATS) allows the presence of natural persons for the provision of services (mode4), i.e. the provision of services by Hungarian citizens in the United Kingdom. However, this only constitutes the opening of the sector to foreign service providers and does not include other rights (e.g. establishment, visas). Schedules also contain the service sectors that the parties liberalise and the sectors in which the same treatment is not granted to foreign service providers.

The trade in services commitment list prepared by the country also fully takes on board the current EU restrictions, while in the area of trade in goods the list submitted similarly mirrors or duplicates the EU’s current external tariffs. EU trade in more sensitive (mainly agricultural and partly fisheries and industrial) products is currently regulated by quantitative restrictions, called tariff rate quotas which will be divided between the European Union and the United Kingdom using a specific method.

The WTO plays an important role in public procurement. The Government Procurement Agreement (GPA) provides clarity and transparency and guarantees equality in procurement procedures for suppliers, supplies and services originating from GPA member states. The United Kingdom is currently part of the agreement through its EU membership. This means that after the country leaves the EU it should join the agreement in its own right. Currently it seems that the parties can reach agreement before the withdrawal date and therefore the United Kingdom will be able to ensure a continuity of its membership. According to the proposed UK GPA market access schedule, EU member states will be treated similarly to EFTA countries in the UK procurement market.

For further information:

https://www.gov.uk/guidance/exporting-and-importing-goods-if-the-uk-leaves-the-eu-with-no-deal

(1) https://www.wto.org/english/thewto_e/countries_e/org6_map_e.htm  

Trade in goods 

Corporate tax 

VAT 

International taxation

Excise duty

Financial regulation 

The consequences of the withdrawal of the UK from the EU on company law

Roaming 

Road and passenger transport

Chemicals 

Further useful information