UK-EU Brexit trade deal at a glance
Here’s what the pact means for sectors including goods
and services trade, fishing and energy.
The EU and the U.K.'s Brexit deal touches on fishing,
energy, services and numerous other sectors | Image via iStock
BY ANNA
ISAAC, ELEANOR MEARS AND BARBARA MOENS
December
24, 2020 8:05 pm
https://www.politico.eu/article/uk-eu-brexit-trade-deal-at-a-glance/
The deal
between the U.K. and the EU is the largest bilateral trade pact in history, the
two sides said on Thursday. It is also the first modern trade deal to
disintegrate a trading partnership, erecting and defining barriers between
markets.
The deal,
which covers a collective market worth $905 billion as of 2019, has not yet
been published in full but a suite of documents released by the EU and the U.K.
paints a picture of the agreement.
The
agreement covers goods and services trade, but also includes investment
chapters, provisions on fish and data protection.
Here's a
breakdown of the key elements known so far.
Goods
The pact
allows for tariffs and quota-free trade in goods, provided they meet so-called
rules of origin that determine how much content in a product must be derived
from a nation bound by the agreement. But these can be self-certified, a boon
for business that makes it easier to comply with the rules and therefore
benefit from the deal. Nevertheless, there will be fresh paperwork and
procedures for businesses to grasp within a short period of time.
The
agreement enables both the EU and U.K. to set their own rules on geographical
indications, rules designed to protect the quality and reputation of foodstuffs
produced in a particular region. A review mechanism in the agreement means the
two sides can choose to coordinate on rules at a later date.
In a
separate agreement, the EU granted the U.K. so-called third-country listing,
confirming the U.K. has met the necessary animal health and biosecurity
standards required to export live animals and animal products to the EU.
Moving
goods will also be eased by keeping access for transport by road and by air
unlimited and there are detailed commitments on how to allocate the handling of
air freight and passenger rights.
There's
also a chapter on how the EU and U.K. will tackle regulatory barriers, building
on the World Trade Organization trade in technical barriers agreement in areas
like labeling and the testing, inspection and certification of products before
they are allowed on the market. There are sector-specific annexes on the
automotive, chemical, pharmaceutical, organic produce and wine sectors, the
U.K. said.
The chapter
allows the two sides to “regulate goods in the way most appropriate for their
own market,” according to U.K. negotiators, but anticipates that the two sides
will share information on “dangerous and non-compliant products."
Retaliation
The need to
sustain the deal’s commitments through so-called level playing field rules,
which the EU wanted to ensure British business can't undercut the bloc, was
given strong emphasis in the European Commission’s briefings on the agreement.
Such rules had been contentious in the negotiations and were highlighted by
many EU member states as a top priority.
The
briefings said these provisions were crucial to ensuring fair competition. They
cover areas like climate change and labor rights, tax and the politically
sensitive area of state aid, which had been a key stumbling block in talks.
There are
mechanisms baked in, should either side renege on these aspects: "Both
parties can engage in cross-sector retaliation in case of violations of the
agreement. This cross-sector retaliation applies to all areas of the economic
partnership," one EU guidance document reads.
State aid
was a key priority for the U.K. side too, with negotiators keen to ensure Britain
could have its own system to support sectors after the transition period ended
and wasn't tied to EU rules.
The U.K.
documents says of subsidies: "The Agreement ensures that each Party will
have in place its own independent system of subsidy control and that neither
Party is bound to follow the rules of the other."
Fish
The EU and
the U.K. have agreed on a transition period until June 2026 to switch from the
current quota shares in U.K. waters to new quota shares. That gives the EU
guaranteed access to U.K. waters in the coming years.
Both sides
also agreed on a 25 percent cut in the share of fish caught by EU vessels in
U.K. waters. That's a compromise for both sides. The EU initially wanted to
maintain its current access but then compromised to a 25 percent cut. The U.K.
wanted to see a 60 percent cut.
After the
transition period, there will be annual negotiations on access and to decide on
the volume of fish the other party can catch in each other’s waters.
Energy
Although
the U.K. is no longer part of the single market, the agreement will make sure
that energy continues to flow between the U.K. and EU through new trading
arrangements over interconnectors — international connections between
electricity and natural gas networks.
Securing an
arrangement on energy was hugely important to both sides, because they trade
gas and electricity in real-time, share a lot of technology, and a number of
energy companies operate in both markets.
The
agreement also commits the two sides to cooperating on renewable energy and
tackling climate change. The agreement can be suspended if either party
breaches their commitments under the Paris climate accord. A separate agreement
deals with nuclear energy cooperation.
Services
On services,
by quitting the single market, it was made clear during the negotiations that
the U.K. lost some market access for trade in financial services. This is still
the case since there is no provision for the sector in the agreement. More than
40 percent of the U.K.’s exports to the EU are services, and the sector
accounts for around 80 percent of the U.K.’s economic activity.
Passporting,
which allowed automatic access to the single market, is gone, as is a key ask
from British business lobbying groups: Mutual Recognition of Professional
Qualifications (MRPQs), the mechanism that allows workers such as doctors,
engineers and architects to have their qualifications recognized across member
states. This will not be simply rolled over.
The devil
will be in the detail of the full document on MRPQs and other frameworks for
recognition of standards. The short summary document from the EU on the deal
says there will be: “Facilitations for short-term business trips and temporary
secondments of highly-skilled employees.” The U.K. side said: "From early
2021, the government will provide help and guidance to U.K. regulatory
authorities and professional bodies" on how to make use of a framework for
MRPQs within the deal.
For smaller
contracts — the size of which is not yet detailed — the two parties will be
able to access one another’s public procurement markets. This is particularly
significant given the huge levels of government investment likely on both sides
as they try to recover from the devastating impact of the coronavirus pandemic.
There's a
provision for the flow of data until the two sides decide that each other's
data protection rules are strong enough to allow data to move between the U.K.
and the EU. But this temporary provision will last for "no longer than 6
months," the U.K. said.
In an
acknowledgement of how embedded EU and U.K. citizens are within one another's
jurisdictions, the deal will provide for coordination of some social security
benefits such as pensions.
What
happens next
The deal
will be examined by EU ambassadors in Brussels on Christmas Day at 10.30 a.m.
Brussels time. For the deal to enter into force provisionally, it will have to
be approved by the bloc's member governments via the Council of the EU by
December 31. The European Parliament is expected to vote on the agreement
retrospectively early next year.
Meanwhile,
the U.K.'s House of Lords and House of Commons have both been recalled for
December 30 and are expected to vote on the deal. Given Prime Minister Boris
Johnson's huge majority in the Commons, he is not expected to face significant
opposition. Labour leader Keir Starmer said Thursday afternoon his party would
reluctantly back the deal, but only because the choice was "this deal or
no deal."
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