An Update on the Brexit Trade Deal
The current state of the Brexit trade deal and looking ahead.
The Trade and Cooperation Agreement in outline
Having been agreed in principle on 24 December 2020, the UK-EU Trade and Cooperation Agreement, which governs the UK’s future trading relationship with the EU, was implemented in the UK by Parliament on 30 December.
The Agreement, divided into seven parts with annexes providing additional detail, covers economic and security co-operation between the UK and EU, and includes, among other things, intellectual property, aviation and road transport, energy and fisheries.
Part one of the Agreement sets out the general provisions, as well as principles of interpretation and definitions. Significantly, there is an obligation on the signatories to interpret the terms of the Agreement and any supplementing agreement in accordance with customary rules of interpretation of public international law, as opposed to EU law. These provisions also provide for a Partnership Council, supported by various other committees to assist with the implementation and operation of the Agreement.
Part two details the arrangements for UK-EU trade and numerous other aspects, such as aviation and energy. Crucially, it provides that there are no tariffs or quotas on trade between the UK and EU, however goods do need to meet rules of origin requirements to qualify for preferential tariffs under the Agreement. It also sets out rules relating to product regulations, standards and conformity assessment procedures, referred to as Technical Barriers to Trade (TBTs), as well as SPS measures to ensure food is safe and to protect against pests and diseases carried by animals or plants. These provisions will give rise to greater barriers to trade, although the Agreement includes commitments to mitigate the effects of this, such as providing for TBTs to be based on international standards.
There are also provisions addressing customs and trade facilitation intended to minimise red tape when goods are moved between Great Britain and the EU, for example through mutual recognition of trusted trader (AEO) schemes.
Parts three and four deal with cooperation on law enforcement and criminal justice, and on health and cyber security respectively. Part five addresses the arrangements for the UK to participate in Union (EU and Euratom) programmes and activities. Lastly, part six sets out the provisions in respect of settling disputes and enabling the UK and EU to take safeguarding measures in specified circumstances, while part seven contains the final provisions addressing matters such as reviewing the Agreement and termination.
After its first few weeks, the Brexit trade deal has started to come under scrutiny. On 6 January 2021, over 100 retail executives held a call with members of the Cabinet, in which they raised concerns about the implications of the complex rules of origin which mean that many businesses face tariffs on re-exports.
There will also be Parliamentary scrutiny over the coming weeks and months into the UK’s trade policy generally. On 11 January 2021, the House of Commons Treasury Committee launched an enquiry into the UK’s economic and trading relationship with the EU.
A significant area only covered briefly in the Agreement is financial services. As a result, the current passporting rights that enable UK firms to access the EU markets and vice versa have come to an end. However, the Agreement does state that both the UK and EU will by March 2021 agree a ‘memorandum of understanding’ to establish the framework for structured regulatory cooperation on financial services. Last week the Treasury Minister John Glen began talks with the EU with the aim of reaching a memorandum of understanding.
Undoubtedly, it will take some time for businesses to navigate the new trade rules and how best to operate in compliance with them that suits their business and we can expect more scrutiny and clarification of the rules over the coming months.