As of 1 January 2021, the UK is regarded as a ‘third country’ outside of the EU. The EU and the UK have formed 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 did not previously exist – in both directions.
The long awaited EU-UK Free Trade Agreement (FTA), known as the ‘EU-UK Trade and Cooperation Agreement’, was finalised on 24 December 2020, coming as a significant relief to the many businesses who will continue to trade with the UK. While this is good for relations and reduces some costs involved, this FTA is fundamentally different to the freedoms enjoyed when the UK was a member of the EU and the Single Market.
However, the EU-UK FTA goes well beyond traditional EU FTAs (such as with Canada or Japan) by providing for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin. This ensures that the trade preferences granted under the Agreement benefit UK and EU businesses rather than third countries, preventing circumvention.
It includes commitments from both sides to maintain high levels of protection in areas such as climate change, social and labour rights, tax transparency and the use of State aid to provide unfair market advantage.
There is also a new framework for the joint management of fish stocks in EU and UK waters and the agreement allows for continued and sustainable air, road, rail and maritime connectivity.
The agreement includes a new arrangements for law enforcement and judicial cooperation in criminal and civil law matters. This security partnership recognises the need for strong cooperation between national police and judicial authorities, in particular for fighting and prosecuting cross-border crime and terrorism.
The treaty has a dedicated chapter on governance that provides clarity on how the Trade and Cooperation Agreement will be operated and controlled. A Joint Partnership Council has been established to make sure the Agreement is properly applied and interpreted, and in which all arising issues will be discussed.
A useful overview of the 4 pillars of the Agreement can be accessed here.
Read the statement from our Chief Executive on the necessity of the EU and UK continuing to work together to ensure that this deal is SME-friendly and that emerging trade barriers are reduced.
Brexit Section last updated: Friday 19 February 2021