Brexit: EU Reaches Free Trade Agreement with the UK

Photo source: European Parliament

After months of disagreements and intensive negotiations, the European Commission on Thursday, December 24, reached a free trade agreement with the United Kingdom on the terms of its future cooperation with the European Union.

On January 1, 2021, there will be big changes in the relations between the EU and the United Kingdom, as the UK will be considered a former member state.

On that date, the UK will leave the EU Single Market and Customs Union, as well as all EU policies and international agreements. The free movement of persons, goods, services and capital between the UK and the EU will end.

European Commission President Ursula von der Leyen

From the start of the new year the EU and the UK will form two separate markets; two distinct regulatory and legal spaces. This will create barriers to trade in goods and services and to cross-border mobility and exchanges that do not exist today – in both directions.

Boris Johnson: The deal is done

“We have taken back control of our laws and our destiny… We have completed the biggest deal yet worth £668 billion a year,” UK Prime Minister Boris Johnson said at a Downing Street press conference.

According to the Commission, the agreement reached with the UK focuses on Trade and Cooperation and covers a number of areas that are in the EU’s interest. It goes well beyond traditional free trade agreements and safeguards the integrity of the Single Market and the indivisibility of the Four Freedoms (people, goods, services and capital).

Commission: UK will no longer enjoy benefits of the Single Market

“It reflects the fact that the UK is leaving the EU’s ecosystem of common rules, supervision and enforcement mechanisms, and can therefore no longer enjoy the benefits of EU membership or the Single Market. Nevertheless, the Agreement will by no means match the significant advantages that the UK enjoyed as a Member State of the EU,” the Commission said.

It is noted that the text of the agreement has yet to be released.

The EU-UK Trade and Cooperation Agreement consists of three main pillars:

• A free trade agreement
• A new partnership for the security of EU and UK citizens
• A horizontal agreement on Governance

Source: European Commission

“It was worth fighting for this deal because we now have a fair and balanced agreement with the UK, which will protect our European interests, ensure fair competition, and provide much needed predictability for our fishing communities. Finally, we can leave Brexit behind us and look to the future. Europe is now moving on,” European Commission President Ursula von der Leyen said during a press conference in Brussels.

The agreement on free trade is considered a new economic and social partnership between the EU and the UK, as it 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.

On transport specifically, the agreement provides for continued and sustainable air, road, rail and maritime connectivity, though market access falls below what the Single Market offers. It includes provisions to ensure that competition between EU and UK operators takes place on a level playing field, so that passenger rights, workers’ rights and transport safety are not undermined.

Photo source: European Parliament

The Trade and Cooperation agreement establishes a new framework for law enforcement and judicial cooperation in criminal and civil law matters. It builds new operational capabilities, 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. The security cooperation can be suspended in case of violations by the UK of its commitment for continued adherence to the European Convention of Human Rights and its domestic enforcement.

To give maximum legal certainty to businesses, consumers and citizens, a dedicated chapter on governance in the Trade and Cooperation Agreement provides clarity on how the agreement will be operated and controlled. It also establishes a Joint Partnership Council, who will make sure the agreement is properly applied and interpreted, and in which all arising issues will be discussed.

What the agreement does not cover

Foreign policy, external security and defence cooperation is not covered by the agreement as the UK did not want to negotiate this matter. As of January 1, 2021, there will therefore be 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.

In addition, the agreement does not cover any decisions relating to equivalences for financial services.

Photo source: European Parliament

The Trade and Cooperation Agreement between the EU and the UK can be formally signed once the European Council, acting by the unanimity of all 27 Member States, adopts a decision authorising the signature of the Agreement and its provisional application as of 1 January 2021.

The European Parliament will then be asked to give its consent to the agreement. As a last step on the EU side, the Council must adopt the decision on the conclusion of the agreement.

Press here for an overview of the consequences and benefits of the EU-UK agreement.