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Post Brexit Trade between the European Union and the United Kingdom


Post Brexit Trade between the European Union and the United Kingdom

Post Brexit Trade between the European Union and the United Kingdom
Photo credit: Shutterstock

The new EU-UK trade relationship will be very different from when the UK was a Member State. Major governance challenges lie ahead. Concluding a trade agreement is one thing, implementing it is another; re-inventing trade governance and trade policy at home is something else.

A new Agreement between two separate jurisdictions has been agreed. It encompasses a trade agreement for free and fair trade, with zero tariffs and no quotas. It provides, in addition, for a broad economic, social, and environmental partnership; a partnership for citizens’ security; and a common governance framework.

As of 1 January 2021, the UK finally leaves the EU Single Market and Customs Union. It will no longer benefit from the free movement of goods, services, capital and persons. To preserve mutually beneficial trade in goods, the two sides agreed to establish a Free Trade Area (FTA) with no tariffs or quotas on products, but with rules of origin, regulatory and customs cooperation mechanisms, as well as provisions ensuring a level playing field for fair competition, within a larger economic partnership.

Even with the new agreement in place, businesses will face new non-tariff trade barriers, leading to increased costs and adjustments to EU-UK supply chains. EU and UK traders will have to meet rules of origin comparable to those which the EU and the UK have with other trading partners. Since the UK will no longer be part of the EU Customs Union, all customs controls and formalities required under EU law (the Union Customs Code), including entry and exit summary declarations, will apply to all goods entering the customs territory of the EU from the UK, or leaving that customs territory to the UK. This does not apply to goods traded between the EU and Northern Ireland, where the Protocol on Ireland and Northern Ireland (in the Withdrawal Agreement) will apply.

Products exported from the EU to the UK will have to comply with UK technical regulations and will be subject to any applicable regulatory compliance checks and controls. Similarly, all products exported from the UK to the EU will need to comply with EU technical regulations and will be subject to all applicable regulatory compliance obligations, checks and controls for safety, health, and other public policy purposes.

The TCA contains provisions aimed at preventing and addressing unnecessary technical barriers and requirements, through bilateral cooperation, and simplifying conformity assessment procedures. In particular, the two sides agreed a definition of international standards that identifies the relevant international standard-setting bodies. This will ensure that both sides' domestic product standards and technical regulations are based on the same international standards. This will make compliance of products with the other Party's rules easier and less costly, while safeguarding each side's ‘right to regulate'. In the field of conformity assessment, the Parties agreed to maintain simplified access to each other's markets through the continued use of self-certification of conformity by the manufacturer where this is currently applied in both the EU and the UK.[1]

As of 1 January, the UK will no longer benefit from the principles of free movement of persons, free provision of services and freedom of establishment. As a result, UK service suppliers will lose their automatic right to offer services across the EU. They may need to establish themselves in the EU to continue operating. They will have to comply with the – often varying – host-country rules of each EU Member State, as they will no longer benefit from the ‘country-of-origin' approach or ‘passporting' concept, according to which authorisations issued by one Member State under EU rules enable access throughout the entire EU Single Market.

The Trade and Cooperation Agreement (TCA) provides for a significant level of openness for trade in services and investment, going beyond the baseline provisions of the WTO's General Agreement on Trade in Services (GATS), to which both the EU and the UK are parties, and commensurate with the commitments taken by the EU with other industrialised third countries throughout the world. As in all its free trade agreements, the EU fully maintains the right to regulate its own markets.

The Declaration of Financial Services provides that the Parties will establish structured regulatory cooperation on financial services, to establish a stable relationship between autonomous jurisdictions. This will allow for bilateral exchanges of views and analysis, transparency, suspension and withdrawal of equivalence decisions, and enhanced cooperation. Both Parties will, by March 2021, agree a Memorandum of Understanding establishing the framework for this cooperation.

A package of Agreements has been concluded: The Trade and Cooperation Agreement (which includes several Annexes and Protocols),[2] Security and Information Agreement, Civil Nuclear Agreement, and 15 additional Declarations.[3] They range from a Joint Declaration on Financial Services Regulatory Cooperation to Countering Harmful tax Regimes, on Subsidy Control Policies, RoadHauliers, Law enforcement and Judicial Cooperation in Criminal Matters, Exchange and Protection of Classified Information, to Data Protection.

[1]  pdf Questions & Answers: EU-UK Trade and Cooperation Agreement (235 KB)

[2]  pdf Draft Trade and Cooperation Agreement between EU and Euratom, and UK and Northern Ireland - 24 December 2020 (9.21 MB)

[3]  pdf EU-UK Declarations - 24 December 2020 (711 KB)

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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