pri Brexit 2020-2021: What does it mean to you or me? Brexit 2020-2021: What does it mean to you or me?

The expected event since 2016 has happened. On 1 January 2021, the United Kingdom will leave the EU Single Market and Customs Union, and all EU policies. This was its choice. As a result, it will lose all the rights and benefits it had as an EU Member State, and will no longer be covered by the EU’s international agreements. This will bring far-reaching changes, affecting citizens, businesses, public administrations, and stakeholders in both the EU and the UK.

I have reproduced from the following website the above information.

https://ec.europa.eu/commission/presscorner/api/files/attachment/867612/A%20new%20relationship%20-%20Brochure.pdf

Yes, I confirm whatever I may give you about Brexit will have the derivations from the above website or from the following which is again below for full information.

https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2531

After learning about details of the new agreement, let us also analyze what would happen to us, the member of Commonwealth, one of the oldest friends of the United Kingdom who has been discussing with us for a new free trade agreement, or the European Union, the giant which shall open a new chapter in our economic growth if a similar agreement is undertaken in the near future. With the inevitable event of development through both of them in the nearest future, we, the professionals need to learn the event under various heads.

Now the details of Brexit  

  • On 23 December 2020, EU and UK negotiators reached an “agreement in principle” on the text of a new “Trade and Cooperation Agreement” to govern their relations now that the UK has left the EU.
  • Both parties must now advance with the signature and ratification of this draft agreement in line with their respective rules and procedures, with a view to its application as from 1 January 2021.
  • While calling it not a free trade agreement like the EU does with any other nation, the new EU-UK Trade and Cooperation Agreement will by no means match the level of cooperation that existed while the UK was an EU member.
  • To a valid question of what does it consist of, let us quote the following from their own words:

It consists of:

1. an unprecedented free trade agreement,

2. ambitious cooperation on economic, social, environmental, and fisheries issues,

3. a close partnership for citizens’ security,

4. an overarching governance framework.”

By leaving EU, its common rules, supervision etc., U.K. can thus no longer enjoy the benefits of membership or the Single Market domain.

The Agreement reflects the fact that the UK is leaving the EU’s ecosystem of common rules, supervision, and enforcement mechanisms, and can thus no longer enjoy the benefits of membership or the Single Market. But It confers rights and obligations on each party, while fully respecting their regulatory and decision-making autonomy.

At the request of U.K. cooperation on foreign policy, external security and defense have been kept away from the agreement.

Not only this, what else will not be covered?

In addition, the Agreement does not cover any decisions relating to equivalences for financial services. Nor does it cover possible decisions pertaining to the adequacy of the UK’s data protection regime, or the assessment of its sanitary and phytosanitary regime for the purpose of listing it as a third country allowed to export food products to the EU.

These are and will remain unilateral decisions of the EU and are not subject to negotiation.

One deal, 4 major pillars of cooperation, as the details are given,

Trade, economic, social, environmental & fisheries.

Free, fair & sustainable trade

Trade-in goods, incl. customs & regulatory cooperation,

Services & investment,

Digital trade, intellectual property & public procurement,

Rules for fair competition and sustainability.

Connectivity, sustainability & shared opportunities

Transport

Energy

Fisheries & natural resources

Social security coordination

Union programs

Thematic cooperation

What about citizen’s security?

Law enforcement & judicial cooperation in criminal matters

Protection of fundamental rights & personal data

Data exchange

Anti-money laundering

Potential EU unilateral measures

 Not subject to negotiation:

Adequacy decision on data protection

UK third -country SPS listing

Equivalences in financial services (I shall discuss separately since professionals from the U.K. will no longer enjoy privileges like those from the EU and would have to undertake Herculean tasks through its government to get equivalencies from every member of the EU separately.)

What is the New EU-UK governance framework for lasting cooperation?

It is expected in the near future that hardliners from both the groups will enforce or try to force their views with new interpretations on this lengthy agreement. How to solve this problem?

Shared values & essential elements

Partnership Council

Dispute settlement, enforcement & sanctions mechanisms

Periodic reviews.

In which way this agreement is different from those agreed upon with other countries like Japan, Canada, or others for the EU?

The EU-UK Agreement goes beyond recent EU free trade agreements with other third countries such as Canada or Japan, by providing for zero tariffs and zero quotas on all goods. This is especially important for sensitive goods such as agricultural and fishery products.

For instance, without the agreement, exports of certain meat or dairy products would face tariffs above 40% under WTO rates, or 25% for canned fish – either way.

Exports of cars, vans, and trucks would also be hit by a tariff of 10% either way.

To benefit from these exceptional trade preferences, businesses must prove that their products fulfill all necessary ‘rules of origin’ requirements. This ensures that the trade preferences granted under the Agreement benefit EU and UK operators rather than 3rd countries, preventing circumvention. One can gleefully recollect how China misuses its relationship with other countries to export items to India by inputting the name of the third country by exporting from there to India. Even a Ganesh statue in clay was got from China for worship in India.

Customs procedures will be simplified under the Agreement, as both Parties have agreed, e.g., to recognize each other’s programs for trusted traders (“Authorized Economic Operators”). Nonetheless, as the UK has decided to leave the Customs Union, checks will apply to all goods traded. The Parties also agreed to cooperate on the recovery of customs duties, and in the fight against VAT and other indirect taxes fraud.

What about the technical barriers to trade?

One has to recollect that there was the seamless flow of traffic around EU previously and recent 7 miles of lining up of trucks in the U.K. – France border enforced the agreement coming into life enlisting the unsurmountable issues that would fathom the trade in future if U.K. leaves EU without any proper agreement.

The Agreement will prevent unnecessary technical barriers to trade, e.g., by providing for self-declaration of regulatory compliance for low-risk products and facilitations for other specific products of mutual interest, such as automotive, wine, organics, pharmaceuticals, and chemicals.

However, all UK goods entering the EU will still have to meet the EU’s high regulatory standards, including on food safety (e.g., sanitary and phytosanitary standards) and product safety.

One does remember that the EU has enforced the highest standards for its import of products.

Now comes the crux of trade in services, short-term business trips and temporary secondments of highly-skilled employees, mutual recognition (e.g., of professional qualifications), or passporting rights for financial services. What will happen to these subjects?

the EU and the UK have agreed to a level of openness going beyond the provisions of the WTO General Agreement on Trade in Services (GATS), but reflecting the fact that the UK will no longer benefit from the freedom to supply services across the EU.

It is possible that short-term arrangements among the nations with the U.K. are possible but service providers no longer enjoy those benefits available earlier under common membership.

About transport?

Transport is an essential driver of economic benefits in EU-UK relations. Some 210 million passengers and 230 million tons of cargo are carried between the EU and the UK each year. The EU-UK Agreement will ensure continued air, road and maritime connectivity, supporting these flows. Importantly, the Agreement includes provisions to ensure that competition between EU and UK operators takes place on a level playing field. The competition will be the order of the day.

On aviation, UK airlines will no longer be considered as EU carriers and will lose existing traffic rights in the EU.

On-road transport, EU and UK haulers will be able to carry cargo to and from any point of the other party’s territory, provided they meet agreed high standards on safety and working conditions. No more business-as-usual behavior.

Over the years, EU and UK energy markets have become deeply interlinked thanks to interconnectors (electricity cables and gas pipelines) built between them. Although the UK will no longer benefit from Single Market rights, the EU-UK Agreement will facilitate continued flows of energy – essential to the functioning of both economies – by putting in place new trading arrangements over interconnectors. This clearly indicates new trading arrangements will have to be made for smooth functioning.

Climate change in terms of the Paris agreement and cooperation in nuclear energy would continue to get the required importance and cooperation.

The Agreement sets out new arrangements for the joint management of more than 100 shared fish stocks in EU and UK waters. Under the Agreement, EU fishing vessels will continue to have the current level of access to UK waters for a transition period of 5.5 years, with a gradual and balanced reduction of EU quotas in UK waters over time.

Thereafter new consultations will have to be undertaken for smooth functioning.

What about social security coordination regarding citizens from both places?

The Agreement contains a number of social security coordination measures aimed at protecting the entitlements of EU citizens temporarily staying in, working in, or moving to the UK and of UK nationals temporarily staying in, working in or moving to the EU after 1 January 2021.

A wide range of benefits are covered, including old-age and survivors’ pensions, healthcare (e.g., European Health Insurance Card) pre-retirement benefits, maternity/paternity benefits related to the birth of a child, or accidents at work.

This is a good arrangement particularly with the sudden emits of the recent pandemic among the nations.

In continuation of the above tone, it is interesting to know that the EU and the UK have agreed to establish a new framework for law enforcement and judicial cooperation in criminal matters, allowing for strong cooperation between national police and judicial authorities and the swift exchange of vital data. Criminal elements would have taken umbrage of recent movement of the U.K. from the EU to perpetuate their illegal activities but for the above provision.

Why not some interesting questions and suitable convincing answers?

Will traders have to comply with two different sets of regulations and compliance procedures if they want to serve both the EU and UK markets?

As of 1 January 2021, the Union and the United Kingdom will be two separate regulatory and legal spaces. This means that all 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 imported 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.

What was agreed to facilitate trade in automotive?

  • Regulatory convergence will be based on the use of the international technical standards set at the UNECE (United Nations Economic Commission for Europe) level. Both Parties will cooperate and, where appropriate, plan initiatives to promote greater international harmonization of technical requirements.
  • Both Parties will accept, in their respective markets, products that are covered by a valid UN type-approval certificate.

The next interesting question is related to wines, produced in abundance both in the EU and U.K.

What was agreed to facilitate trade in wine?

Both Parties mutually accept the importation of wines produced according to each other’s definitions and oenological practices, as long as in line with oenological practices recommended by the International Organization of the Vine and Wine (“OIV”). It is needless to add that the prevailing standards already follow the international standards of Vine and Wine only.

Will sanitary and phytosanitary requirements (SPS) for imported food, animals, and plants change?

Let me state firmly that the high standards established by EU and U K will equally be met by the countries concerned in this area also.

What is covered by the Trade and Cooperation Agreement?

The Agreement 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 industrialized third countries throughout the world.

Which sectors are covered by the Trade and Cooperation Agreement?

As required by the WTO’s General Agreement on Trade in Services (GATS), the Agreement has substantial sectoral coverage, including professional and business services (e.g., legal, auditing, architectural services), delivery and telecommunication services, computer-related and digital services, financial services, research and development services, most transport services and environmental services.

Will EU firms be allowed to bid for UK public sector contracts?

EU companies will be able to participate on an equal footing with UK companies in bids for procurement tenders covered by the agreement, and vice versa. This means the status quo in respect of the current bidding system.

Conclusion

The agreement between the EU and UK covered a period of 3 years for the conclusion and would continue to engage both of them till all matters would be sorted out.

The above agreement would affect India/Indians who used to find the UK a willing companion to do business and offer its shores to deal with the EU directly. This arrangement no longer exists and one would have to go to any of the EU members to deal with the EU as a whole while the UK continues to do business for its affairs. The positive aspect of this agreement is that UK will have a separate Free Trade Agreement with countries like India at its own will and have the advantage to deal with it directly since the UK has an enviable record of cooperation with its Commonwealth nations and would offer/get advantageous positions in its trade and cultural relationship.

This arrangement will help India immensely to move towards its goal of coming within the top five positions as the best economies of the world.

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