STATE OF PLAY – Trade Deal Agreed Christmas Eve 2020

Following months of negotiations, the UK and EU have agreed a post-Brexit trade deal which secures ‘tariff and quota-free access’ to European markets worth £668 billion to the UK economy, and allows UK companies to do business with the EU ‘relatively freely’. The announcement follows a final phone call between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen, the fifth such call in the past 24-hours.  

The deal was published on Christmas Eve and is over 1,200 pages long including annexes.   It is understood the Government has conceded that UK firms will have limited rights to sell services into EU markets after 1 January 2021 and that there will be additional checks on food, chemicals and medicines exported to the EU. RTÉ reports that the draft deal includes a new arbitration mechanism intended to ensure a ‘level playing field’ between the UK and EU, with provisions for sanctions in the form of tariffs if either side seriously diverges from existing regulations. Furthermore, the BBC reports that the agreement removes the role of the European Court of Justice in the dispute resolution mechanism, and that the two sides have agreed to follow international law in its place.

https://www.gov.uk/government/publications/agreements-reached-between-the-united-kingdom-of-great-britain-and-northern-ireland-and-the-european-union

In a statement on the deal, von der Leyen said EU rules and standards “will be respected” and “effective tools” have been agreed to “react if fair competition is distorted”. She said a review of the deal will be conducted after four years to ensure level playing field provisions are being abided by, and that quotas and tariffs could be introduced if they are breached. There will also be a “Joint Partnership Council, who will make sure the Agreement is properly applied and interpreted, and in which all arising issues will be discussed”. She added that the UK and EU will “continue cooperating in all areas of mutual interest”, such as climate change, energy, security, and transport, adding that while the UK will be a third-party country, it remains a “trusted partner”. However, she said no agreement had been reached on a shared defence and foreign policy.

EU-UK Trade and Cooperation Agreement (europa.eu) 

In a subsequent press conference, Prime Minister Boris Johnson said the deal ensured “UK goods [could] be sold without tariffs and quotas in the EU market, [and] allow companies to do even more business” with Europe. He said, “This deal above all means certainty for the aviation industry, the hauliers”, adding that it is a “good deal for the whole of Europe”. Johnson stressed that “there will be change” for businesses from 1 January 2021, but that the treaty “resolved a question that has bedevilled our politics for decades”.

Next steps  

For the UK, Parliament is likely to be recalled next week to approve the deal, with Wednesday 30 December provisionally earmarked for a vote. Labour Party leader Sir Keir Starmer has hinted Labour will vote in favour of the deal “in the national interest” in order to “allow the country to move on”. However, 20 members of the hard-line-Brexit European Research Group (ERG) of backbench Conservative MPs have reportedly said they intend to hold a ‘star chamber’ meeting of legal experts to assess the deal before signing off on its contents and are prepared to vote against it.  

For the EU, the European Parliament (EP) has said previously that it is too late for it to formally ratify any deal with the UK before 31 December, but the European Council – in which Member States’ governments are represented – has indicated that it is prepared to grant “provisional application” status to any Brexit deal with the UK if it can be agreed to by the 31 December deadline. If the Council agrees to a Brexit deal in principle, the European Commission can side-line the EP in practice and notify the respective trade depositories that it is “provisionally applying the agreement, either fully or in part”.  

Irrespective of the deal, the Brexit transition period will conclude on 31 December, with the UK officially becoming a third country to the EU as of 1 January 2021. The Northern Ireland (NI) Protocol also takes effect on 1 January. For as long as it is in force, NI remains in the EU Customs Union and Single Market. This will entail some new administrative process for traders, notably new electronic import declaration requirements, and safety and security information, for goods entering NI from the rest of Great Britain. 

OTHER KEY DEVELOPMENTS

The EU has granted the UK ‘national listed status’ to export live animals and products of animal origin to the EU and Northern Ireland after 1 January, “providing certainty for a market worth more than £5 billion a year”. However, some agricultural products, such as seed potatoes, have not been granted the same status.

https://www.gov.uk/government/news/uk-secures-listed-status-to-protect-5-billion-animal-export-market?utm_source=1a537cfe-54b8-4cfc-a51c-b7daf77a48e2&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

Parliament has adopted the fourth draft UK REACH statutory instrument for chemicals, setting into law extended data submission deadlines for registrations, as well as provisions under the Protocol on Ireland/Northern Ireland. It changes the requirements to ensure that EU REACH applies in Northern Ireland, while UK REACH – known as GB REACH – will apply only in England, Scotland, and Wales. 

https://www.legislation.gov.uk/uksi/2020/1577/made

The Cabinet Office has published a 2025 UK Border Strategy which sets out the Government’s ambition of developing “the world’s most effective border that creates prosperity and enhances security” for the UK. It sets out the “major transformations that government and industry will need to deliver by 2025 and beyond to implement the Target Operating Model”.

2025 UK Border Strategy – GOV.UK (www.gov.uk)

 The right-wing political website Guido Fawkes has published a leaked version of the Government’s ‘scorecard’ for 65 key negotiating issues, which claims the “UK has won more than twice as many victories as the EU”.

Government’s Own Deal Analysis Scorecard Reckons UK Won 43% of Negotiating Issues, 40% Were Compromises, 17% EU Wins – Guido Fawkes (order-order.com)

The US investment bank JP Morgan Chase has warned that the trade deal with the EU risks permitting the EU to maintain its existing “advantages” from trading with the UK, but also allows for the EU to now use “regulatory structures to cherry pick among the sectors where the UK had previously enjoyed advantages”.

Guy Faulconbridge on Twitter: “JPMorgan on the Brexit deal: https://t.co/V3itxeqnVJ” / Twitter

Companies based in Great Britain have reportedly begun warning businesses in NI that they will stop supplying them with goods at the end of the transition period or may ask customers to cover increased shipping costs for goods. The UK supermarket chain Coop has sent a letter to suppliers warning that it expects them to absorb tariff increases for the first three months of 2021.

Brexit: Firms in Britain warn they will no longer supply goods to North (irishtimes.com) Co-op tells suppliers to absorb Brexit tariff increases on promoted stock | News | The Grocer

The Commons Select Committee on the Future Relationship with the EU has warned in a report that delay in preparing the UK for the transition to Brexit risks “the worst possible start” to the new year for UK businesses.

Progress of the negotiations on the UK’s Future Relationship with the EU (parliament.uk)

The Netherlands port of Zeebrugge has published a new Brexit Circulation Plan to mitigate congestion for traffic to and from the UK on 1 January.

UK Government has published the following –

  • The final details of the agreement reached by Withdrawal Agreement Joint Committee on implementing the Northern Ireland Protocol, which “in principle upholds unfettered access for Northern Ireland businesses to their most important market, eliminating any risk of Northern Ireland to Great Britain export declarations.”

The Northern Ireland Protocol – GOV.UK (www.gov.uk)

  • Regulations which set out “how customs duty charges will be calculated and arrangements for relief and repayments” for businesses who import goods to, or move certain goods between, Great Britain or Northern Ireland.

The Customs (Northern Ireland) (EU Exit) Regulations 2020 – GOV.UK (www.gov.uk)

  • Guidance on its Customs Handling of Import and Export Freight (CHIEF) system, which can “be used for declaring goods entering Northern Ireland from outside the UK and EU from 1 January 2021, for a limited period of time.”

Using CHIEF for declaring goods into or out of Northern Ireland from 1 January 2021 – GOV.UK (www.gov.uk)

  • Guidance on “Starting and ending transit movements in Northern Ireland using common and Union transit”.

Starting and ending transit movements in Northern Ireland using common and Union transit – GOV.UK (www.gov.uk)  

International trade deals –

The UK has signed a Memorandum of Understanding with Canada on the Trade Continuity Agreement from 1 January 2021, guaranteeing preferential tariffs for bilateral trade in goods, establishing tariff rate quotas, rules of origin, and removing technical barriers to trade.

Memorandum of Understanding between the UK and Canada – GOV.UK (www.gov.uk)

Very many thanks for this final Brexit weekly round-up compiled by public affairs and communications consultant Nicky Donnelly. Nicky started recording the negotiation progress on a weekly for haleys from the first week in February 2020 – before Covid-19 struck. What a trial this has been!

Thank you Nicky!