Just before the Christmas period and the cut off time limit to a no deal Brexit, the UK and the EU reached a draft agreement on an economic partnership settlement that will govern large swaths of bilateral trade worth more than £650bn.
The Bank of England has said that, even with a trade deal, Britain’s gross domestic product is likely to suffer a 1% hit from Brexit in the first quarter of 2021. And Britain’s budget forecasters have said the economy will be 4% smaller over 15 years than it would have been if Britain had stayed in the bloc.
Some of the important points from the draft EU-UK Trade and Cooperation Agreement are as follows:
- A Free Trade agreement: The 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.
- A new framework has been established for law enforcement and judicial cooperation in criminal and civil law matters. Taking account of the fact that the UK, as a non-EU member, outside of the Schengen area, will not have the same facilities as before.
- A horizontal agreement on governance: Binding enforcement and dispute settlement mechanisms will ensure that rights of businesses, consumers and individuals are respected. This means that businesses in the EU and the UK compete on a level playing field and will avoid either party using its regulatory autonomy to grant unfair subsidies or distort competition.
- Aviation and travel: The deal allows flying rights between the EU and the UK to continue, but UK carriers will not be able to fly between two points within the EU. For travellers, visas will be required for visits of more than 90 days, and there may be additional passport checks.
- Food and drink: The EU will immediately implement tough new checks on agri-food products, with no grace period. While food and farming businesses welcomed the deal but they warned that leaving the customs union and single market in a week’s time would still disrupt the food supply chain.
- Foreign policy, external security, defence cooperation as well as certain financial institutions and their mechanisms are all yet not covered by the agreement. Therefore there is 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.
Big changes on the way
Even with the new EU-UK Trade and Cooperation Agreement in place, big changes will continue to take place.
The UK has withdrawn from the EU Single Market and Customs Union, as well as from all EU policies and international agreements. The free movement of persons, goods, services and capital between the UK and the EU has come to an end. Thus, the EU and the UK will begin to incorporate two separate markets, two distinct regulatory and legal spaces.
Lastly, bearing in mind that this is a draft Agreement between the EU and the UK, the Commission has proposed to apply the Agreement on a provisional basis, for a limited period of time until 28 February 2021. Therefore, the conclusiveness of the Agreement is yet up for debate.