After nine months of negotiations, at the eleventh hour, on Christmas Eve, the UK and the EU finally reached agreement on their future relationship. This new Agreement will come into force on 1 January 2021 when the transition period ends.
This long read provides a summary of some of the key areas covered in the new EU-UK Trade and Cooperation Agreement (the Agreement). It is by no means comprehensive as the full Agreement runs to 1,246 pages.
What’s in the Agreement?
The new Agreement consists of three pillars:
- A free trade agreement.
- Law enforcement and judicial cooperation in criminal matters.
- Governance arrangements, including dispute settlement.
From the EU’s perspective, the Agreement is based on an Association Agreement which is described by the Institute of Government as:
“a treaty between the European Union and a non-EU country that creates a framework for co-operation between them. Its legal basis is defined in Article 217 of the Treaty of the Functioning of the EU (TFEU), which provides for “an association involving reciprocal rights and obligations, common action and special procedures”.
The EU has more than 20 Association Agreements, mainly with its neighbours, from Morocco to Ukraine.
The European Commission has chosen to use Article 217 as the legal basis rather than Article 218 which it used as the legal basis for its negotiations on the future relationship with Canada, and with Singapore).
A FREE TRADE AGREEMENT
Trade in goods
In terms of the economic partnership, the UK and the EU have agreed a basic free trade agreement. This means there will be zero tariffs and zero quotas on the trade in goods between the UK and the EU. This free trade agreement is supported by other measures such as level playing field provisions (discussed later in the blog).
The provisions of the new Agreement do not govern the operation of the trade in goods between the EU and Northern Ireland, where the Protocol on Ireland and Northern Ireland included in the Withdrawal Agreement will apply.
Whilst the deal addresses tariff barriers, it does not include any sort of agreement in terms of Non-Tariff Barriers (NTBs). As the UK in a Changing Europe outlines:
“Non-tariff barriers (NTBs) can also make trading difficult. For example, countries want to be confident that imported food is safe, that animals and plants are free from disease or pests, and that other goods meet safety or labelling requirements. Exporters must produce goods that satisfy the requirements of importing countries and provide paperwork to show that those requirements are met. Even after Brexit, UK manufacturers wanting to sell into the EU market will have to produce their goods in accordance with EU standards.”
The EU’s Q&A on the agreement addresses the issue of NTBs stating:
“Trading under ‘FTA’ (free trade agreement) terms – even one as ambitious as this one, with zero tariffs or quotas – will inevitably be very different compared to the frictionless trade enabled by the EU’s Customs Union and Single Market. In particular:
rules of origin will apply to goods in order to qualify for preferential trade terms under the agreement
all imports will be subject to customs formalities and will need to comply with the rules of the importing party;
and all imports into the EU must meet all EU standards and will be subject to regulatory checks and controls for safety, health and other public policy purposes.”
Are common regulatory standards covered?
The new Agreement does not provide for common regulatory standards for goods. As such, manufacturers who wish to place goods on both the UK and EU markets will need to comply with the regulatory rules for those goods in the UK and EU even where they are different. However, the Agreement does include:
“provisions aimed at preventing and addressing unnecessary technical barriers and requirements, including through bilateral cooperation, and simplifying procedures used to demonstrate compliance with them (conformity assessment procedures).”
According to the European Commission, both the EU and the UK have agreed to the continued use of self-certification of conformity by the manufacturer where this is currently applied in both the EU and the UK. The Commission has suggested that this covers a very large share of bilateral trade.
The Agreement also includes special arrangements for close cooperation on regulatory standards in the following areas:
- Organic Products.
What about sanitary and phytosanitary checks?
As Anna Jerzewska, the adviser to the Culture, Tourism, Europe and External Affairs Committee has previously set out:
“Sanitary and phytosanitary (SPS) requirements are measures designed to protect humans, animals, and plants from diseases, pests, or contaminants. Goods subject to these measures are food products, live animals, products of animal origin, animal feed as well as plants and plant products.”
Now that the UK has left the EU’s regulatory zone, exporters of agri-food products will be required to meet the EU’s SPS requirements. These exports will be subject to checks at the EU border and where appropriate will require the checking of export health certificates. Likewise, EU exporters to the UK will be required to meet the UK’s SPS standards.
The new Agreement includes limited measures to facilitate the trade of agri-goods more easily including “a simplified process for the approval of imports, where relevant by drawing up lists of establishments that are eligible to export to the other party, based on guarantees provided by the authorities of the exporting Party”. However, UK exporters of agri-foods will face new barriers (compared to EU membership) in the shape of SPS checks.
Trade in services
Whilst the new Agreement provides a number of measures to facilitate the trade in goods, it is more limited in its coverage of trade in services. At the end of the transition period, the UK will lose the right to free movement of persons and the right to provide services across the EU.
For financial services this means that UK based providers no longer have rights to passporting which facilitates the provision of financial services across the EU without the need for further authorisation. Instead, the UK will hope secure an equivalence agreement which would mean the EU recognising the regulations of the UK as compliant with, and equivalent to, the EU’s own. A decision on equivalence does not form part of the new Agreement and is expected early in the new year.
However, according to the UK Government:
“The Agreement also includes provisions to support trade in services (including financial services and legal services). This will provide many UK service suppliers with legal guarantees that they will not face barriers to trade when selling into the EU and will support the mobility of UK professionals who will continue to do business across the EU.”
The European Commission describes the approach for service providers in the Agreement as being based on the principle of non-discrimination:
“The non-discrimination obligations of the Agreement ensure that service suppliers or investors from the EU will be treated no less favourably than UK operators in the UK, and vice-versa. This entitles them to receive more favourable treatment than that granted to service suppliers or investors of third countries without similar provisions in place.
Naturally, given that the UK will no longer be in the Single Market, all UK service suppliers and investors must abide by the domestic rules, procedures and authorisations applicable to their activities in the countries where they operate.
For UK service suppliers, this means complying with – often varying – host-country rules of each Member State, as they will no longer benefit from the ‘country-of-origin’ principle, mutual recognition or ‘passporting’.”
Professor Sarah Hall writing for the UK in a Changing Europe highlighted that the new Agreement was not intended to cover financial services adding that:
“In order to continue to access the single market without passporting, UK based financial services firms will either have to comply with the different requirements of individual member states or rely on equivalence decisions.
Neither is a like for like replacement for the EU wide common access facilitated through passporting. Seeking permissions on a state by state basis would add complexity and hence costs for financial services firms.
Meanwhile equivalence does not cover the same range of financial services activities. Core banking services such as lending, payments and deposit taking are excluded, for example. Neither do they guarantee permanent access rights. The EU can withdraw equivalence determinations with 30 day’s notice.”
Professor Hall added that without an equivalence decision, “financial services trade from the UK to the EU will be based on more limited single market access than firms based in other leading financial centres such as New York and Singapore”.
Mutual recognition of professional qualifications
The Agreement provides very little in the way of mutual recognition of qualifications. Instead, as a result of the end of the transition period, EU qualified workers wishing to work in the UK and UK nationals wishing to work in the EU will have to meet the qualification requirements of the UK and each individual Member State respectively.
However, the Agreement includes a commitment from both sides that they may seek to negotiate more detailed reciprocal arrangements on a sector by sector basis in the future.
Geographical Indications (GIs) are a distinctive sign used to identify a product as originating in the territory of a particular country, region or locality where its quality, reputation or other characteristic is linked to its geographical origin.
The Agreement does not include any advance in terms of the protection of geographical indications beyond what is covered in the Withdrawal Agreement. According to the European Commission:
“All EU geographical indications already registered in the EU by end December 2020 (the “stock”) will be protected in the United Kingdom by virtue of the Withdrawal Agreement. No provisions pertaining to the protection of geographical indications that the EU could register in the future could be agreed with the UK.”
The UK Government explainer sets out that this allows both Parties to “set their own rules and the future directions of their respective schemes”. However, the Agreement includes:
“a review clause on GIs, which provides that the UK and EU may, if both Parties agree it is in their interests, use reasonable endeavours to agree rules for the protection and domestic enforcement of their GIs.”
The Agreement seeks to ensure that UK and EU providers have equal access to each other’s public procurement markets. However, according to the UK Government:
“The Agreement ensures that the UK can maintain a separate and independent procurement regime and will enable the Government to enact reform of our system.”
The Agreement also seeks to extend market access beyond what is provided by the World Trade Organisation’s Government Procurement Agreement. As a result, a number of other sectors will be covered by the UK-EU Agreement including:
- the gas and heat distribution sector;
- private utilities that act as a monopoly;
- a range of additional services in the hospitality, telecoms, real estate, education and other business sectors.
The Agreement includes a number of provisions with regards to developing a new Energy relationship following the UK’s departure from the EU’s internal energy market. According to the European Commission:
“The EU and the UK have agreed to establish a new framework for their future cooperation in the energy field, ensuring the efficiency of their cross-border trading. This framework is underpinned by strong provisions in the Agreement aimed at creating a robust level playing field.
The Agreement also establishes an ambitious framework for cooperation in the fight against climate change, as well as provisions for cooperation in the development of offshore energy, with a clear focus on the North Sea.”
The UK Government’s explainer on the Agreement sets out how the two Parties will seek to cooperate:
“The Agreement commits both Parties to develop and implement new, efficient trading arrangements by April 2022. These will ensure that capacity on the interconnectors is maximised and that there is implicit trading in how this capacity is allocated (i.e. capacity and electricity are sold together). This will benefit UK consumers and help integrate renewables and other clean technologies onto the grid in line with our domestic commitment to net zero emissions. Whilst this system is being implemented, alternative trading arrangements will be in place for electricity. We have also agreed arrangements that will ensure we continue to trade gas efficiently via the PRISMA platform.
The UK and EU have agreed to enhance our cooperation on renewable energy, including in the North Sea. This will facilitate the development of hybrid projects that combine interconnectors and offshore windfarms, and opens up the potential for a North Sea grid. This will help realise the region’s huge potential, enabling renewable energy to continue to power our homes and businesses in the future.
The Agreement provides for a new set of arrangements for extensive technical cooperation between the respective regulators and system operators, particularly with regard to security of supply, market abuse and network development.”
How has the level playing field question been resolved?
A key area where agreement was difficult to reach was on the nature of the level playing field (LPF) provisions to be included in the deal. The notion of the LPF suggests that companies across the territory of the free trade agreement should observe comparable standards of environmental protection, labour rights and social responsibility. Compliance with these standards is usually expensive, and a company that could avoid them would save on costs and have an unfair advantage on its foreign competitors. LPF provisions also concern the kind of financial support that producers can receive lawfully from a public sector organisation.
The EU’s negotiating position sought to ensure that the UK was signed up to the EU’s regulatory environment in relation to level playing field matters such as environmental and labour standards, along with State Aid controls. According to the UK Government:
“The EU was forced to drop its ambitious demands for dynamic alignment and for the UK to be legally required to maintain equivalent legislative systems to the EU’s in some areas. The system that has been agreed upon does not compromise the UK’s sovereignty in any area, does not involve the European Court of Justice in any way, and is reciprocal.”
The European Commission’s interpretation of what has been agreed in the LPF area is that:
“The nature of these commitments reflects the scope and the depth of the wide-ranging and ambitious economic partnership, including in particular the absence of tariffs and quotas for trade in all goods, comprehensive market access commitments and rules on services and investment, as well as very high level of openness for government procurement. The agreement also foresees unprecedented cooperation on energy and dedicated titles on aviation and road transport, all of which require appropriate level playing field guarantees.
These commitments will prevent distortions to trade and investment, today and tomorrow, and will contribute to sustainable development.”
In terms of specifics, the Agreement provides that some standards which currently apply in the areas of labour and social standards, environment, and climate cannot be lowered (so-called non-regression) in a way which impacts trade and investment. As the Institute for Government highlights, for labour and social standards, areas covered include fundamental rights at work, occupational health and safety standards and fair working conditions. In the areas of environment and climate change standards, the following areas are covered:
(a) industrial emissions;
(b) air emissions and air quality;
(c) nature and biodiversity conservation;
(d) waste management;
(e) the protection and preservation of the aquatic environment;
(f) the protection and preservation of the marine environment;
(g) the prevention, reduction and elimination of risks to human health or the environment arising from the production, use, release or disposal of chemical substances; or
(h) the management of impacts on the environment from agricultural or food production, notably through the use of antibiotics and decontaminants.
In terms of State Aid or subsidies, new rules will be in place to prevent distortions created by subsidies, anti-competitive practices, or discriminatory and abusive behaviour by state-owned enterprises.
In the event either side distorts the level playing field, the following measures are open to the other Party, these include provisions in the following areas:
- Effective implementation domestically
- Appropriate and effective governance and dispute settlement mechanisms
- Unilateral remedial measures.
According to the European Commission, in the event either side seeks to significantly diverge from the LPF commitments:
“The Agreement provides for the possibility to apply unilateral rebalancing measures in the case of significant divergences in the areas of labour and social, environment or climate protection, or of subsidy control, where such divergences materially impact trade or investment between the Parties. This might be relevant, for example in a situation where one Party would significantly increase its levels of protection related to labour or social standards, the environment or climate above the levels of the other Party. This may entail an increase in the costs of production and hence a competitive disadvantage. Another example would be a situation where one Party would have a system of subsidy control that would systemically fail to prevent the adoption of trade distorting subsidies, which would provide a competitive advantage for that Party.
In such cases, a Party would be able to adopt measures to rebalance the competitive advantage of the other Party.”
This interpretation suggests that if either side seeks to increase their labour or environmental standards unilaterally, it could seek to impose trade restrictions such as tariffs to ensure the other Party does not hold a competitive trading advantage. The UK explainer sets out that the Agreement allows the:
“Parties to formally review the balance of the Agreement over time and enter into a negotiation on amendments to the economic provisions of the Agreement at the request of one Party. It also provides for Parties to take strictly limited and proportionate rebalancing measures on a more short-term basis, subject to the approval of an independent arbitration panel.”
The LPF measures are not covered by the dispute settlement mechanism in the Agreement but instead are covered by the formation of a Panel of Experts comprising three panellists who may be asked by either Party to examine and report on the matter highlighted. Decisions by the Panel are not binding on the Parties.
What about fisheries?
Another area of policy which held up final agreement was fisheries. Continued control over access to UK waters was a red line in the negotiations for the UK Government.
The Agreement includes an adjustment period of five years for any changes of quota shares and provisions on access to waters along with a period of five and a half years during which the current rules will remain in place regarding reciprocal access.
According to the UK Government, the new arrangements mean:
“a significant uplift in quota for UK fishers, equal to 25% of the value the EU catch in UK waters. This is worth £146m for the UK fleet phased in over five years.”
The agreed quota shares are set out in the annexes of the Agreement.
The Agreement sets out that the EU and the UK will hold annual consultations to jointly determine the total allowable catch (TAC) for each stock that may be caught over a given period. These ‘TACs’ will then be allocated to each party in accordance with the quota shares set out in the agreement. According to the European Commission, at the end of the adjustment period:
“Access to each other’s waters will be granted to make use of the available fishing opportunities. After an adjustment period, when current full access remains in place, levels and conditions of reciprocal access to waters will be decided in annual consultations.”
Finally, in the event the Agreement on access is terminated at the end of the adjustment period, the other Party may apply compensatory measures. The European Commission explains that this means:
“After the adjustment period, if one party withdraws access to the other party due to a lack of agreement on total allowable catches, the other party may apply compensatory measures, including the suspension of tariff concessions for fisheries products or the suspension of access, in part or in whole, to its waters. Such compensatory measures shall be proportionate to the economic and societal difficulties caused by the withdrawal of access.
A party can also take measures, for example, to suspend parts of the Agreement, under the general safeguard clause of the Agreement, in case the closure of waters creates serious or social difficulties for fisheries activities and the communities that depend on them.”
Whilst the reduction in EU access to UK waters will take place over five years, it has been suggested that the quota levels at the end of that period are presumed to be subject to no further cuts from 2026. The Agreement says that the annual “consultations should normally result in each Party granting” the quotas shown in the annexes. Again, it has been suggested that this means, there is a presumption of enduring shares after the 2021 -2026 25% cut
The Institute for Government has summarised the dispute resolution mechanisms for fisheries:
“There are arrangements for compensation if the UK or the EU decides not to grant or to reduce access to its waters and for dispute resolution if either side breaches its obligations. This could include suspending or limiting access to waters and ending the preferential tariffs on fishery products or other goods on each other’s market. An arbitration process will follow sanctions and assess whether there was a breach and whether the sanctions were proportionate. If either is not the case, they must be removed or altered.
The UK or the EU can terminate the agreement with nine months’ notice, though if the agreement is terminated any obligations will continue until the end of the year. Terminating the fisheries section would automatically terminate the trade, aviation, and road transport sections of the agreement.”
Responding to the deal, Elspeth Macdonald, Chief Executive of the Scottish Fishermen’s Federation (SFF) expressed disappointment and suggested the deal did not meet the aspirations of the SFF:
“What has been outlined so far is that full access will be granted to EU vessels for effectively six years from January.
“Over the same timescale the increase in quota shares for UK vessels will be 25 per cent.
The Government has not yet provided the full text of the agreement or how this increase will apply to particular species, so it is very difficult to make a detailed assessment of the impact on our industry.
However, the principles that the Government said it supported – control over access, quota shares based on zonal attachment, annual negotiations – do not appear to be central to the agreement.
After all the promises given to the industry, that is hugely disappointing. We expect to be able to study the detail in the coming days and will issue a further statement when we have been able to do so.”
LAW ENFORCEMENT AND JUDICIAL COOPERATION IN CRIMINAL MATTERS
The Agreement also covers cooperation on law enforcement and criminal justice. The European Commission highlighted cooperation between the EU and the UK in agreeing to establish a new framework for law enforcement and judicial cooperation in criminal matters, allowing for strong cooperation between national police and judicial authorities, including extradition arrangements, and the swift exchange of vital data.
Exchange of information
The Agreement includes provisions for exchange of data and information to allow continued cooperation on law enforcement and investigate crimes in the following areas:
- Exchanges of DNA, fingerprints and vehicle registration data
- Transfer and processing of Passenger Name Record data
- Cooperation on operational information
- Cooperation with Europol
- Cooperation with Eurojust
- Surrender – streamlined extradition arrangements
- Mutual Assistance – supports effective cooperation on mutual legal assistance in criminal matters
- Exchange of criminal record information
- Anti-Money Laundering and counter-terrorist financing
- Freezing and confiscation.
Whilst the Agreement includes information sharing approaches in a number of areas, it does not include UK continued access to the Schengen Information System (SIS). The SIS is the EU’s information-sharing system for security and border management and is used by police and border guards, to enter and consult alerts on persons or objects. However, the European Commission explained that it cannot continue to be used by the UK because:
“The UK, like other non-Schengen third countries, cannot have access to SIS. Indeed, SIS is intrinsically linked to the free movement of persons and access is provided only to Member States and very closely associated countries that accept all accompanying obligations (e.g. third countries building Schengen together with Member States).
Instead, the agreement sets up new ways of data sharing taking into account the UK’s future status, including information on wanted and missing persons and objects.”
All future cooperation will be based on the UK’s new status as a third country. Another example of the change in relationship is that the UK will no longer be able to participate in the European Arrest Warrant. Instead, according to the European Commission:
“The draft EU-UK agreement will nevertheless enable the swift surrender of criminals between the EU and the UK, avoiding lengthy extradition procedures thanks to streamlined procedures, strict deadlines, robust safeguards, procedural rights and judicial control. This level of cooperation is unprecedented for a non-Schengen third country.
Under the agreement, the UK or EU Member States can still refuse surrender or ask for additional safeguards in a number of specific cases, namely in respect of own nationals.”
A key issue for the EU in the negotiations was to ensure that the UK upheld data protection standards. The European Commission has suggested that a decision on data adequacy with regards to the UK will be made early in 2021:
“For law enforcement and judicial cooperation, high levels of data protection standards are essential. These are to be ascertained by adequacy decisions taken unilaterally by each side. On the EU side, this means decisions attesting that UK standards are essentially equivalent to the EU standards set out in the EU’s General Data Protection Regulation (GDPR) and Law Enforcement Directive, and that they respect specific additional data protection standards stemming from opinions of the EU Court of Justice.
The European Commission has been intensively working on its adequacy decisions for the UK since March. Once it is satisfied with the information received, the Commission will launch the adoption process without delay.”
As there may be a delay between the new Agreement coming into force and a data adequacy decision, a bridging arrangement has been included in the new Agreement.
Participation in EU programmes
As a non-EU Member State, the UK is no longer entitled to automatically participate in EU programmes such as Horizon Europe and Erasmus. However, the Agreement makes provision for UK participation in the following EU programmes for the 2021-2027 programme period:
- Euratom Research and Training programme
- International Thermonuclear Experimental Reactor (ITER)
- EU Satellite Surveillance & Tracking (SST).
The Agreement sets out the terms of the UK’s continued participation in these programmes.
Agreement could not be reached on continued UK participation in the Erasmus programme. According to the European Commission:
“The Erasmus programme is open to the participation of third countries under the conditions set out in the basic act establishing the programme. Among these, third countries that become associated to Erasmus have to participate in the programme in full, to ensure the synergies between the different areas in the programme.
The UK requested partial participation in the programme, which is not foreseen in the basic act establishing Erasmus. The UK subsequently decided that it did not want to participate in Erasmus.”
GOVERNANCE OF THE FUTURE RELATIONSHIP
As the new Agreement covers areas beyond a basic free trade agreement, such as transport, energy, fisheries and law enforcement, it includes a framework to oversee governance of the arrangements. The governance framework is similar to the frameworks which oversee the EU’s Association Agreements.
The operation of the Agreement will be overseen by a Partnership Council which will be co-chaired by a Member of the European Commission and a representative of the UK Government at ministerial level. It will meet at least once a year or more regularly at the request of either party.
Beneath the Partnership Council, a number of Specialised Committees will be established to oversee particular elements of the new Agreement. The following image (produced by Anton Spisak, Policy Lead at the Tony Blair Institute) provides details of the specialised committees (19) and working groups (4) that will sit beneath the Partnership Council. The governance infrastructure includes a Parliamentary Partnership Assembly which can be formed by the European Parliament and the UK. The Parliamentary Partnership will consist of Members of the European Parliament and of Members of the UK Parliament as a forum to exchange views on the UK-EU partnership
As with most trade agreements, the UK-EU Agreement includes provisions for dispute resolution. According to the European Commission:
“The Agreement includes a robust mechanism to resolve disputes that may arise between the EU and the UK on the interpretation or implementation of their commitments.
This mechanism covers disputes arising in any economic area, including trade and level playing field commitments, as well as social security coordination, energy, transport or fisheries.
Law enforcement and judicial cooperation has its own mechanism to resolve disputes swiftly”
In the event of a dispute which cannot be resolved by the UK and EU, an independent arbitration panel will be established. The UK and EU will choose three arbitrators jointly, if necessary drawing from pre-agreed lists of potential arbitrators. The tribunal will be required to deliver a binding ruling within a set timeframe.
Failure by either side to comply with a ruling from the arbitration panel may lead to the complaining party suspending its obligations under the new Agreement in a proportionate manner. According to the European Commission:
“This includes the suspension of obligations across all economic areas, for instance by imposing tariffs on goods if the other Party persists in breaching its obligations on social security, transport or fisheries. Such “cross-suspension” mechanisms are an essential tool to ensure that both Parties ultimately comply with all their commitments under the Trade and Cooperation Agreement.
The use of cross-suspension mechanisms must be proportionate and appropriate; it can be challenged before an arbitration tribunal.”
The details of the dispute resolution arbitration panel mean there is no role for the European Court of Justice in the process. This had been a UK Government red line during the negotiations.
Whilst a dispute resolution system is established, it will not apply in cases of disputes in areas such as fisheries, subsidy control and regulatory cooperation. In areas such as these, temporary trade remedies or rebalancing measures can be used by either the UK or the EU.
RATIFICATION IN THE UK AND THE ROLE OF THE SCOTTISH PARLIAMENT
Given the new UK and EU relationship was agreed just 7 days before the end of the transition period, the time available to ratify the deal is very short. The UK Government has announced the deal will be ratified using primary legislation which is expected to be considered by the UK Parliament on 30 December 2020.
It is possible that the Bill will engage devolved competences. If this is the case, the UK Government is likely to seek the legislative consent of the Scottish Parliament. The Scottish Parliament will also meet on 30 December 2020 to consider the new Agreement.
From the EU perspective, the European Commission has stated that the Agreement requires the unanimous consent of the Member States in the Council of the EU and the consent of the European Parliament. However, given that time is short, the Commission has proposed to apply the Agreement on a provisional basis, for a limited period of time until 28 February 2021. This provisional application would allow the Agreement to come into force ahead of being formally ratified on the EU side. On 28 December, the Council unanimously approved the EU-UK post-Brexit trade deal, paving the way for it to be provisionally applied.
EXTERNAL ANALYSIS OF THE AGREEMENT
Business organisations, in particular, had been clear that a deal was preferable to a no-deal outcome, particularly given they were also dealing with the challenges created by COVID-19. The lateness of the deal, led some (including the Institute of Directors) to highlight the lack of time available for implementation ahead of 1 January 2021 when the new Agreement will replace the transition period in governing the UK-EU relationship.
Writing for the UK in a Changing Europe, Senior Research Fellow Jill Rutter suggested the Agreement means that decision about UK domestic policy will continue to be influenced by the European Union as a result of the new Agreement:
“On Thursday, the PM claimed to have a Brexit deal that combined a free trade agreement with the return of UK sovereignty. He is right – for now. He has delivered his objective of tariff- and quota-free trade, and the UK will not be tied to EU laws nor ECJ jurisdiction.
But what will only become clear in the months and years to come is how far that new elastic can be stretched.
He has committed to non-regression on environmental and labour laws but there are provisions to remove some of the privileges of the agreement if either side takes measures that “weaken or reduce” that protection “in a manner that affects trade and investment”…
… But if relatively minor divergences trigger action, ultimately leading to ‘rebalancing’, aka changing the terms of UK access, the UK could find its scope for action much more constrained and the value of the agreement in terms of offering certainty to business reduced.”
In a similar vein, Sam Lowe, senior research fellow at the Centre for European Reform writing for the Observer newspaper suggested that the Agreement does not mean that the arguments and negotiations with the EU are over:
“The government explicitly prioritised regaining the ability to set its own laws over retaining the economic benefits of EU membership. Against this metric, the negotiations can be deemed a partial success. The UK successfully rebuffed EU demands to follow its subsidy rules now and for ever, to keep specific environmental and labour rules, and to have the European court of justice involved in trade disputes.
But it did not avoid signing up to strict conditionality. Great Britain now has the ability to diverge from EU rules in future – but doing so could lead to it losing the benefits of the trade agreement, and tariffs being reimposed, for example. Freedom, but not cost-free.”
Sam Lowe added that:
“The UK will also need to decide whether to use the new-found freedom to diverge from EU rules and approaches, and if so whether it is willing to accept the consequences of doing so. If it chooses to do so, years and years of disputes and reviews await.”
The UK’s new settlement with the European Union will not mean the end of negotiations between the two Parties nor will it mean the UK is completely detached from considerations about the EU in its decision making about policy in areas such as subsidies and environmental and labour regulations.
It is also clear that the details and implications – for both the EU and the UK – of the new Agreement will only become clear over the coming months and years. As those implications become clearer further negotiations may be deemed necessary by either Party.
Iain McIver, SPICe Research