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Brexit Starts Next Week and UK Trade Hangs in the Balance

On Wednesday, the U.K. is expected to begin the two-year formal process that will see it separate from the European Union. That means Britain has until March 2019 to outline how it will trade with the world.

“We are on the threshold of the most important negotiation for this country for a generation,” Britain’s Brexit minister David Davis told The Wall Street Journal. “The government is clear in its aims: a deal that works for every nation and region of the U.K. and indeed for all of Europe—a new, positive partnership between the U.S. and our friends and allies in the European Union.”

It remains to be seen whether the U.K. will take a more integrated stance on its relations with other nations, or whether it will opt for a more protectionist way forward in hopes of restoring domestic unity.

When it comes to trade, U.K. prime minister Theresa May has said she wants a clean break from the EU, yet she hopes to work out the best possible deal on trade between the two. EU leaders however, have said May has been inflexible in her positions and there’s no telling quite how the Brexit negotiations will go.

President Trump has said he wants to negotiate a quick trade deal with Britain, but some have argued that since certain member’s of the U.S. president’s administration want to get tougher with countries showing a trade surplus—of which the U.K. is one—the country may not want to take a deal as the U.S. could deliver it.

For the EU, it’s going to be full steam ahead, regardless of the loss of the U.K.’s membership.

In a white paper on the future of Europe presented by the European Commission early this month, the EU delved into potentials for its evolution in the coming years.

By 2025, the EU27, with Britain out, wants to speak and act as “one in trade.” The Commission says the single market could be strengthened through harmonization of standards and stronger enforcement. Trade agreements will be “actively pursued,” according to the Commission, and they will be initiated, negotiated and swiftly ratified by the EU on behalf of its members.

“In an uncertain world, the allure of isolation may be tempting to some, but the consequences of division and fragmentation would be far-reaching,” the paper noted. “It would expose European countries and citizens to the specter of their divided past and make them prey to the interests of stronger powers.”