Brexit: The Milestone of 31 January 2020 and the Challenges ahead
On 1 January 1973, Prime Minister Edward Heath signed the EEC Treaty of Accession in terms of which the UK joined the EU. The same two parties have now finalized the formalities to end this relationship. At 23:00 GMT on Friday 31 January the UK stopped to be an EU member. The Brexit withdrawal saga came to an end (the referendum o EU membership took place in June 2016), but not the process of re-establishing national trade governance in the UK and concluding a new trade agreement with the EU, the UK’s most important trading partner. The Withdrawal Agreement provides for a transitional phase till 31 December 2020 to hammer out this arrangement. Thereafter London can conclude trade agreements with third parties such as the US and China. It will also return to the WTO as a member in its own right. This may require some adjustments to its schedules of commitments, which were negotiated as part of the EU offers during the Uruguay Round.
Why did the UK decide to leave the EU and why has Brexit taken so long? Brexit supporters will now say they are “taking back sovereignty” and that Brexit will restore the freedom of the UK to pursue its own interests. At the occasion of the final attendance by British Members of a meeting of the European Parliament a member from the UK said public opinion in Britain had turned against the EU when it became clear the EU was becoming “a quasi-state”.
At the time of the Brexit referendum three and a half years ago, the debate was a different one. The facts were not treated with much generosity and there were emotional claims that foreigners are taking over. Some objected to the supra-national powers of the EU. David Cameron felt he had to honour an election pledge. Since that time events around Brexit have been dominated by a paralysed UK Parliament, tough negotiations with Brussels and court cases directing the UK government to give Parliament a “meaningful vote” on Brexit and preventing Boris Johnson from proguing Parliament.
Most commentators now think British politics will never be the same again. Scotland is adamant to remain in the EU, while there are fears about keeping the peace in Ireland. The EU too will not be the same. There are tensions among the remaining 27 Members and new global challenges to meet.
The original Brexit date was 29 March 2019, but internal party-political divisions resulted in the rejection of the withdrawal deal negotiated by Mrs May, the prime minister at the time. Many Conservative MPs and the Democratic Unionist Party (DUP) of Northern Ireland opposed her backstop arrangement for Northern Ireland, arguing that the UK could remain trapped for years with no way out. After MPs voted down her deal for a third time, Mrs May resigned. She was succeeded by Mr Boris Johnson, who needed a Brexit extension of his own to get a revised deal passed into law. Parliament remained deadlocked, leading to the extension of the Brexit deadline to 31 January 2020 and an early general election, which took place on 12 December 2019. It resulted in a Conservative majority of 80, making it easy to pass the necessary Brexit legislation.
The UK will remain in the EU’s single market and customs union until the end of this year. A new bilateral trade deal must be negotiated and ratified by then. This is the period referred to as the transitional phase (which some call the implementation phase). During this period the UK will not be an EU member any longer (the last meeting of the EU Parliament attended by British MEPs took place on 29 January 2020) but will still be bound by the rules of the EU, such as its customs union rules on the common external tariff for goods. The UK will not be able to conclude its own new trade agreements till after it has left the EU customs union and single market. The UK can begin with new negotiations and has in fact already finalized a number of trade deals on this basis. The roll-over agreements which the UK has agreed with Kenya and with the SACU members and Mozambique respectively, to provide for uninterrupted trade under the EAC and SADC-EU Economic Partnership Agreements, fall in this category. They will only become operational and binding in their own right once the UK has finally left the EU customs union.
The Withdrawal Agreement also deals with the rights of EU citizens in the UK and British citizens in the EU (which will remain the same during the transition period) and how much money the UK must pay the EU (estimated to be about £30bn.) The Withdrawal Agreement is a binding treaty. According to the EU it carries sanctions for any “backsliding or half measures”.
If a new trade agreement between the UK and the EU cannot be agreed in time, and no extension is agreed, the UK faces the prospect of having to trade under stricter WTO rules and higher tariffs. Detailed rules of origin and technical standards will mean the end of frictionless trade with the EU.
Many other aspects (in addition to market access for goods and services) of the future UK-EU relationship must be decided, such as law enforcement, data sharing and security, aviation standards and safety, access to fishing waters, supplies of electricity and gas, and licensing and regulation of medicines
Northern Ireland may turn out to be a new problem. The “backstop” was designed to prevent a hard border between Northern Ireland and the Republic of Ireland after Brexit. Under Mr Johnson’s deal, a customs border will effectively be created between Northern Ireland and Great Britain. Some goods entering Northern Ireland from Great Britain will be subject to checks and will have to pay EU import duties. These would be refunded if goods remain in Northern Ireland.
The new UK-EU negotiations are unlikely to begin before March 2020. Mr Johnson is adamant that everything must be finalized by the end of the year. It will be a major feat if this happens. The Withdrawal Agreement provides for a joint committee of EU and UK representatives to oversee matters. It is still to be established. The EU has not yet given any indication of its preferences or red lines for negotiating a permanent deal with the UK. Given the tough negotiations on the Withdrawal Agreement, challenging times are to be expected. It will not come as a surprise if the 31 December deadline cannot be met.
One area which is expected to involve difficult negotiations, is fisheries. About 60% of the fish species caught in the UK waters are fished by European fleets. Danish fishermen, for instance, catch 50 to 60% of their fish in UK waters under the Common Fisheries Policy (CFP). French fishermen are particularly concerned; Brexit carries the risk that they will be excluded from British waters. They want the EU to ensure access to British territorial waters, where they have fished during the UK’s membership of the EU. If this proves to be impossible, they threaten not to accept British seafood entering France.
And then the new challenge of concluding comprehensive Free Trade Agreements with the likes of the US and China will have to be met. The difficulties around the involvement of Huawei, a Chinese firm, in installing the UK’s 5G network (to which the US objects) serves as a reminder of the pitfalls ahead. London will face them without the strength in numbers which EU membership brought.
 Leave won by 52% to 48%. The referendum turnout was 72%.
 For a discussion, see tralac Trade Briefs https://www.tralac.org/publications/trade-briefs.html
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