Stephen Booth is Head of the UK’s World Project at Policy Exchange.
Much of the analysis of the UK-EU Trade and Cooperation Agreement will emerge from the underlying prejudices. “Britain shouldn’t have left”, “we don’t need a trade agreement with the EU”, “Britain should or could have had X or Y”. However, it is more instructive to evaluate the agreement against the stated goals of the government and, moreover, against the goals desired by the EU.
Brexit will have economic and geopolitical consequences. Ultimately, however, it is a constitutional issue for both Brexiter and Brussels. In the foreword to the British declarer, the Prime Minister names the “restoration of national sovereignty” as the “central purpose of leaving the EU”.
The EU brochure is quick to stress that the UK will lose the benefits of membership even under the new agreement. “This will create barriers to trade in goods and services and to cross-border mobility and exchanges that have not existed for decades,” it said. In other words, freedom has its price.
The past year of negotiations was not just an exercise in haggling over the price of Britain’s legal independence from the EU system. Sometimes Brussels just seemed unwilling to accept this principle as part of a negotiated solution. The EU had initially called for a dynamic alignment with EU law, which was enforced by the European Court of Justice (ECJ). And it called for the existing EU fishing rights to continue in UK waters even though the UK is deviating from the common fisheries policy.
A Brexit government with a significant majority could not have accepted such a deal. Nevertheless, it is a significant achievement for the negotiating team led by David Frost to convince the EU to conclude an agreement that Great Britain recognizes as “sovereignly equal”. The agreement is based on international law, there is no role for the European Court of Justice (ECJ) and no obligation for the UK to continue to comply with EU law. According to the provisions of the Northern Ireland Protocol, the case law of the ECJ on certain issues of the province. Still it has was a comfort of Northern Irish tensions over the subject.
As mentioned earlier, this negotiation was unique in that it was driven by a desire for separation rather than integration. Hence, any agreement had to essentially do two things. First, establish the new basis for UK-EU economic relations (or degree of displacement) and second, how further divergence (or convergence) should be managed in the future.
The main feature of the agreement is to ensure that there are no tariffs or quotas on goods traded between the UK and the EU where they comply with the relevant rules of origin. This is important as this is the first time the EU has signed a zero tariff and zero quota agreement with another trading partner (e.g. the EU maintains a small number of tariffs on Canadian agricultural exports). Sure, companies would have wished for more time to adjust to the new relationship, but the deal provides vital stability for the sectors most vulnerable to a no-deal Brexit, such as agriculture, automotive, aerospace and chemicals.
The UK has ensured some simplifications to customs formalities and important regulations for transportation, but there will be new tensions in trade between the UK and the EU. For example, the EU refused to reduce the frequency of controls on food imports and insisted that some products be certified by the EU rather than by UK inspection bodies. The provisions on services are limited. This increases the cost of doing business with the EU.
There are several problems that could develop in the future. UK professional qualifications are not recognized initially, but there is a mechanism to do so in the future. The regulation of personal data and financial services remains dependent on unilateral EU decisions to be taken in the next year that could form a basis for further cooperation.
A delicate balance has been found in fishing. 25 percent of the quota of EU boats in UK waters by value will be transferred to the UK fleet over a period of five and a half years. The government says This will increase the share of British ships in total catches in British waters to around two thirds. After this period there will be annual talks on how much EU boats are allowed to catch in UK waters (and vice versa). The UK would then have the right to completely withdraw EU access to UK waters. In response, however, the EU could impose tariffs on fish or other goods exported from the UK. These measures would have to be proportionate to the effects of the loss of access and are subject to arbitration. This means that the annual negotiations from 2026 onwards could turn into a difficult political battlefield.
Britain has probably given a little more than it would like. However, the amount of fish caught by UK vessels in UK waters will increase, the UK has maintained duty-free and quota-free access to the EU market, where much of UK catch is sold, and the agreement establishes the principle of status United Kingdom firmly as an independent coastal state. This is undoubtedly an improvement in the status quo and at this point it is not clear whether the UK will be able to catch all the fish available.
The other major contentious issue during the negotiations was a level playing field. The deal is a sensible solution to meet UK demands for regulatory independence and to address EU concerns that future deviations could lead to trade or investment distortions.
The UK has agreed not to lower its existing employment and environmental standards or use subsidies to unfairly distort trade. Both sides would also have the right to take countermeasures such as the introduction of tariffs if they believe they will be harmed by future changes in subsidy policy, labor and social policy or climate and environmental policy. Therefore, any dispute would only concern the effects of changes in UK legislation and not whether UK rules exactly match EU rules.
This “balancing mechanism” can get messy with frequent use. However, it is crucial that countermeasures are subject to independent arbitration, which means that EU tariffs must be solidly justified in response to the divergence in the UK. Tariffs can no longer be used arbitrarily by the EU for leverage against Great Britain. Ultimately, a race to the bottom on standards has always been a bigger problem for the EU in theory than in practice. The reality is that in many of these areas, like climate change or animal welfare commitments, the UK is likely to be as ambitious as the EU, and maybe more.
In summary, this agreement is a considerable political achievement, as it succeeds in combining independence from the EU regulatory system with a high degree of market access (compared to comparable trade agreements instead of EU membership). At times this seemed impossible and so Britain’s strategy was confirmed.
The agreement recognizes that UK-EU relations will continue to develop. There could be future disputes, but the deal should offer stability for the next five to ten years, when the world is no doubt different again.
It is just as important that the country can use its energy for the future, both in terms of domestic politics and international relations outside Europe.
This is the first in a new series of posts from Policy Exchange for Conservative Home, which looks at the various issues arising from the Brexit trade deal.