Building capacity to help Africa trade better

Brexit Deal concluded: Main Implications, Architecture, and Institutions


Brexit Deal concluded: Main Implications, Architecture, and Institutions

Brexit Deal concluded: Main Implications, Architecture, and Institutions

On 23 June 2016, the United Kingdom (UK) voted to leave the European Union (EU). The parties then started negotiations on a Withdrawal Agreement,[1] followed by a new trade deal. Both proved politically difficult and technically complicated. On 1 February 2020, the Withdrawal Agreement came into force. It ensured the UK’s departure from the EU, avoided a hard border on the island of Ireland, addressed UK’s financial obligations and provided for a transition period until 31 December 2020, during which EU rules continued to apply to the UK. A new deal about future UK-EU trade had to be reached before the end of the year.

At times it looked as if a preferential agreement on trade in goods would not be reached. UK-EU trade would then have been taken place under World Trade Organisation (WTO) rules and higher Most Favoured Nation (MFN) tariffs, with serious economic and financial implications. Without this agreement, products like beef, dairy, poultry, pork, lamb, cereals, sugar, and several processed foodstuffs could have faced tariffs of 50% or higher; 25% on processed fish, 10% on cars, 12% on textiles and 17% on footwear.[2]

On Christmas Eve (24 December 2020), it was announced that a final Brexit deal had been agreed. There will be a preferential trade agreement between the UK and the EU. It is called the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community, of the One Part, and the United Kingdom of Great Britain and Northern Ireland, of the Other Part.[3] (Referred to as the Trade and Cooperation Agreement (TCA).

The UK Parliament met on 30 December. The European Parliament must also ratify this agreement, but this will only happen in 2021. The Commission has proposed to apply the TCA on a provisional basis, until 28 February 2021.

The final breakthrough in the negotiations came after concessions on fishing rights for EU fishermen. Fishing makes up 0.12% of the UK’s economy but the ultimate obstacle remained what EU boats could catch in UK waters. In future, 25% of EU boats’ fishing rights in UK waters will be transferred to the UK fishing fleet, over a period of five-and-a-half years. This particular part of the final agreement became the criterion for an important UK objective; to be able to demonstrate that it had regained national sovereignty. For the same reason it also insisted on an end to the jurisdiction of the European Court of Justice over all matters falling covered by the TCA.

The TCA covers trade in goods; services and investment; digital trade; intellectual property; public procurement and small and medium-sized enterprises; energy; a level playing field for fair competition and sustainable development; aviation; transport; social security coordination and visas for short-term visits; and fisheries. EU and UK carriers can transport cargo from anywhere in the other party’s territory subject to the agreed safety and working conditions.

The EU and the UK agreed to create a joint body, called the Partnership Council, to manage the Agreement. It will be co-chaired by a Member of the European Commission and a representative of the UK at ministerial level. It will meet at least once a year but can meet more often at the request of either the EU or the UK. Decisions are taken by mutual consent. The Partnership Council oversees the attainment of the objectives of the Agreement. The EU or the UK can refer to the Partnership Council any issue relating to the implementation, application and interpretation of the Agreement. The Partnership Council is assisted in its work by Specialised Committees and in some areas by technical working groups.

The Agreement includes a dispute settlement mechanism to resolve disputes between the EU and the UK on the interpretation or implementation of their commitments. It covers disputes on trade and level playing field commitments, as well as social security coordination, energy, transport, or fisheries. Law enforcement and judicial cooperation has its own mechanism to resolve disputes swiftly. In the case of a dispute the parties will first consult to resolve any issue. If disagreements persist, the complaining party may request the establishment of an independent arbitration tribunal. The parties will choose three arbitrators jointly, if necessary, by drawing arbitrators from pre-agreed lists of potential arbitrators. The tribunal will deliver binding rulings within a set timeframe. The Court of Justice of the EU will not have jurisdiction over disputes between the EU and the UK.

The TCA brings much needed certainty for business, travellers, and investors but frictionless trade will be a thing of the past. The UK loses all rights and obligations of being an EU Member State and UK nationals and businesses will no longer benefit from the free movement of people, goods, services, and capital as they existed under EU membership. The UK will no longer contribute to the EU budget and will not benefit from EU funding programmes, policies, and international trade agreements. There are big changes ahead for how people will travel between the EU and UK, and to the way they live and work. The UK will, for example, no longer participate in the Erasmus student exchange scheme of the EU.[4]

The negotiations for concluding the TCA had to bring about a comprehensive preferential trade arrangement between two parties with deep historical, geographical and trade ties. These were not standard negotiations about concluding a trade agreement de novo; they involved complicated technical issues about extricating, after more than forty years of being an EU member, from the world’s most deeply integrated trade arrangement and replacing that former relationship with a new deal based on separate jurisdictions. Both stood to lose substantial benefits if the talks had failed. Unique and sensitive issues had to be resolved. For the UK they were about regaining sovereignty, while securing access to the markets of its most important trading partner. The same consideration applied to the EU, but it had to protect the integrity of the EU and its legal regime.

[1]  pdf Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (Official text) - 12 November 2019 (1.64 MB)

[2]  pdf Questions & Answers: EU-UK Trade and Cooperation Agreement - 24 December 2020 (235 KB)

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

[4] ‘Erasmus: What could happen to the scheme after Brexit?’, BBC News, 24 Dec 2020 https://www.bbc.com/news/education-47293927

About the Author(s)

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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