After 11 months of lengthy negotiations, an EU-UK post-Brexit deal has been reached in terms of customs and commercial arrangements.
UK lawmakers approved a post-Brexit trade deal on Wednesday the 30th of December, just a day before the end of the EU-UK transition period.
President of the European Commission, Ursula von der Leyen said: “It was worth fighting for this deal because we now have a fair and balanced agreement with the UK.”
A no-deal scenario would have spelled tough times ahead for both sides; nevertheless, the agreement will by no means match the significant advantages that the UK enjoyed as a Member State of the EU. Even with the current arrangements many things will change between the EU and the UK: Importing and exporting goods, travelling, living and working, none of these will go back to the way things were before.
Indeed, the agreement is narrowly defined by a free trade deal, while other issues, such as the EU’s Customs Union and Single Market or the freedom of movement between the UK and the EU states – except for Ireland, will not be in place from now on.
The draft Trade and Cooperation Agreement consists of three main pillars:
- a Free Trade Agreement, a new partnership for citizens’ security
- a new framework for law enforcement and judicial cooperation in criminal and civil law matters
- and a horizontal agreement on governance. This establishes a Joint Partnership Council, which will make sure the agreement is properly applied and interpreted, and in which all arising issues will be discussed.
In addition, thanks to intensive discussions between the EU and the UK in the Joint Committee and the various Specialised Committees, the Withdrawal Agreement and the Protocol on Ireland and Northern Ireland, in particular, have been implemented on 1 January.
Special rules are also now in place for Gibraltar, a British Overseas Territory on the southern Spanish coast. Talks between the governments in London, Madrid, and Gibraltar scrambled to achieve a deal that now sees Gibraltar enter the Schengen area.
Core points of negotiations
These last few months talks were focused on fair competition, monitoring the trade agreement and, ultimately, commercial fishing.
A trade agreement has been highly important since the EU is currently the UK’s largest trading partner, accounting for 43% of all UK exports in 2019. In a no deal scenario, Germany-based financial services provider Allianz has predicted the UK will experience an overall increase in import prices of 15%, triggered by higher tariffs, a forecasted 10% depreciation in the value of the British pound, as well as increased supply chain and administrative hurdles. Analysts have forecast a 5% drop in British gross domestic product (GDP) and a 15% drop in total exports.
Nonetheless, difficulties will have gone both ways. Cutting the EU off from a market of some 65 million British consumers, a no-deal Brexit would have cost the bloc as much as €33 billion in annual exports. Germany would have been hit the hardest (€8.2 billion), followed by the Netherlands (€4.8 billion) and France (€3.6 billion), representing over 10% of exports to the UK for each of the three countries.
On the other hand, fishing has also been particularly important during the trade talks. Without a deal, non-UK fishing boats would lose access to UK waters and vice versa. There were concerns UK fish exports to the EU would be badly hit by tariffs; U.K. fishermen, fish processors and retailers would have reduced access to the EU market and would have to pay tariffs on their fish exports imposed by the EU. This would hurt the U.K. fishing industry severely, as about 75 percent of its exported seafood is destined for the European market. EU fishermen would also no longer be allowed to fish in U.K. waters. That would be a major blow to them, as 42 percent of all fish caught by EU fishing crews are plucked out of British waters.
However, negotiations were not easy; to maintain quota-free, tariff-free trade relations, the British government had to update its rules on competition, labour standards and environmental protection, in order to ensure “dynamic alignment” of EU-UK laws.
Thus, regulations involving workers’ rights, environmental protection, taxation and state aid (or government subsidies for business) were crucial for the agreement.
The current agreement covers not just trade in goods and services, but also a broad range of other areas in the EU’s interest, such as investment, competition, state aid, tax transparency, air and road transport, energy and sustainability, fisheries, data protection, and social security coordination.
It provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin.
The EU and the UK also agreed on a new framework for the joint management of fish stocks in EU and UK waters. The UK will be able to further develop British fishing activities, while the activities and livelihoods of European fishing communities will be safeguarded, and natural resources preserved.
Having said that, customs border checks are to return for the first time in decades, and despite the free-trade deal, travellers and traders are expected to face queues and disruptions from additional paperwork among other things.
In addition, the British fishery industry are less than delighted about Boris Johnson’s Brexit deal, since the UK and Brussels agreed that 25% of EU boats’ fishing rights in UK waters would be transferred back to the UK over the next five and a half years while the UK had originally demanded cuts of 60-80%.
What is not included in the agreement?
On 1 January 2021 the UK has left the EU Single Market and Customs Union, as well as all EU policies and international agreements. The free movement of persons, goods, services and capital between the UK and the EU has ended.
The EU and the UK have formed two separate markets, two distinct regulatory and legal spaces. This will create barriers to trade in goods and services and to cross-border mobility and exchanges that do not exist today – in both directions.
Moreover, foreign policy, external security and defence cooperation are not covered by the Agreement as the UK did not want to negotiate this matter. As of 1 January 2021, there will therefore be no framework in place between the UK and the EU to develop and coordinate joint responses to foreign policy challenges, for instance the imposition of sanctions on third country nationals or economies.
Other concerns are:
- Mobility: UK nationals no longer have the freedom to work, study, start a business or live in the EU and vice versa; UK visitors to the EU need a valid passport; Visas are required for stays over 90 days in a 180-day period; Additional border checks; EU pet passports and roaming no longer valid.
- Immigration: Abduction cases much slower and bureaucratic for U.K. parents; countries can no longer send asylum seekers back to another member state if there is proof the claimant previously claimed asylum there or lived there for five months or more.
- Trade in services, digital and procurement: There won´t be automatic access to the entire EU Single Market; No more automatic recognition of professional qualifications; UK operators no longer free to supply audiovisual services in the EU with UK license
- Energy and climate: The UK no longer participates in a seamless EU internal energy market that ensures more efficient, cheaper, more secure supplies of electricity, gas and oil, neither is it part of the EU’s Emissions Trading Scheme (EU ETS) and its effort-sharing mechanism, nor of the European Atomic Energy Community (Euratom)- it cannot trade nuclear material and technology with Euratom.
- Aviation: The UK carriers no longer participate in the fully liberalised EU aviation market (European Open Sky), nor participates in or contributes to shaping standards in the EU Aviation Safety Agency.
- Road transport: The UK no longer participates in the EU Single Market for transport services. Thus, UK operators lose the right to conduct unlimited cross-border trade in the EU and up to three cabotage operations within the territory of a Single Member State.
- Union programmes: The UK no longer benefits from EU funding programmes such as NextGenerationEU, Erasmus+ regional development and cohesion funding, agricultural and rural development support…