What To Make Of The EU-UK Trade Agreement

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Nick Ottens (Atlantic Sentinel) | I haven’t read the 1,246 pages of the EU-UK trade agreement, so I’m going to rely on trusted sources to make sense of the accord.

First, a couple of notes on terminology.

This treaty, the EU-UK Trade and Cooperation Agreement, governs the future cross-Channel relationship. It is due to go into effect on January 1, although it will still need to be ratified by the parliaments of the European Union and the United Kingdom as well as the European Council.

Last year’s withdrawal agreement regulated Britain’s exit from the EU. It provided for a one-year transition period, which expires on December 31, and included a protocol for Northern Ireland, which keeps the province in the European single market for goods and effectively in the EU customs union (although not legally) to avoid the need for a border with the Republic of Ireland.

Both treaties have been unhelpfully referred to as “the deal” in the English-speaking press, but only the withdrawal agreement was crucial. The trade agreement, while good to have, since Britain does most of its trade with the EU, was always optional.

What’s in the trade deal?

EUobserver has the highlights:

  • The EU and UK will maintain common standards on many environmental, social and tax regulations as well as state aid for companies and workers’ rights.
  • The UK is not forced to copy EU regulations, however, either side can impose tariffs if it believes the other diverges too much.
  • Goods moving between the EU and UK will be subject to customs, regulatory and animal-safety checks, but not tariffs.
  • British firms will have to certify the origin of their exports to qualify for tariff-free access to the EU.
  • European boats retain 75 percent of their fishing rights in British waters for the next five and a half years. After that period, quotas will be negotiated annually.
  • UK-based financial firms will lose their access to the European single market.
  • British professional qualifications will no longer be automatically recognized in the EU, nor vice versa.
  • Free movement of EU and UK nations will end, although short stays remain visa-free.
  • A Joint Partnership Council will govern the treaty.
  • Disputes are arbitrated by a separate panel, not the European Court of Justice.

The more things change…

David Allen Green of the Financial Times argues the trade agreement leaves much unchanged.

The Joint Partnership Council, alternating between Brussels and London, will be able to make binding decisions without the involvement of lawmakers. So much for UK “independence”.

Britain will no longer be subject to the European Court of Justice, a key Brexit demand. However, the new panel for dispute resolution will make its decisions behind closed doors. “At least with the Luxembourg court,” writes Green, “one could usually see cases in open court.”

Taken together with the withdrawal agreement — which provides for financial contributions, the Irish border and the rights of UK and EU citizens — the new deal means the UK has swapped the two treaties of the European Union for two new agreements that govern many of the same things.

In the same newspaper, Alan Beattie points out that while trade in goods will be tariff-free, this benefits the Europeans more than the UK. Britain’s economy is heavy on services, but those won’t retain privileged access to the European market. The absence of mutual recognition of professional qualifications will make it harder for especially small businesses and the self-employed to continue operations on both sides of the Channel.

Beattie knows this is the result not of European malevolence but Britain’s own “red lines”: to take back control of its “borders, money and laws.” (I argued the same here as recently as two weeks ago.)

This is essentially a deal written by the EU in response to the UK’s red lines of leaving the customs union and single market, and it leaves out so much of interest to the UK economy that an indefinite series of disputes and negotiations will follow.

To maintain a “level playing field”, the UK will have to largely mirror EU rules and regulations on everything from environmental protections to labor law. If either side believes the other is cutting standards or handing out illicit state aid, it can unilaterally apply “rebalancing” tariffs to correct the distortion.

There’s a good chance this will never be used. The UK is unlikely to want to undercut EU standards. As Igor Dordevic has argued in the Atlantic Sentinel, British voters aren’t interested in making life easier for corner-cutting multinationals. Nor are they likely to accept weaker environmental regulations or lower food safety standards.

If they did, the EU would still need to prove British laws had a “material impact” on investment or trade to justify tariffs. That’s a high bar.

Time to cheer then?

Dutch economist Mathijs Bouman compares British prime minister Boris Johnson to a hiker who, unable to decide between taking the dangerous route over the mountain or the easy path through the forest, threatens to jump off a cliff.

If the hiker finally decides, just before dark, to take he mountain path, would he be congratulated by his fellow travelers? Would they pat him on the back and say, “Well done, man, we almost fell off the cliff. You saved us.” Of course not. Brexit remains an idiotic detour on a dangerous mountain path.

What’s left?

The UK still needs to make a separate agreement with Spain to govern its other land border with the EU, and since Britain dragged out the trade talks with the EU until the last minute, Politico Europe reports there may not be time to avoid a “hard Brexit” in Gibraltar.

The EU’s remaining 27 member states agreed in 2017 that “no agreement between the EU and the United Kingdom may apply to the territory of Gibraltar without the agreement between the Kingdom of Spain and the United Kingdom.” I argued at the time that as soon as Britain voted to leave the EU, its friends on the continent had no incentive to push back against Spanish irredentism anymore. We’re seeing the consequences now.

Gibraltar wants to remain in the European single market, like Northern Ireland, and in addition join the Schengen passport-free travel area, of which it was never a part. Spain agrees this would be the best solution, as some 15,000 residents of La Línea de la Concepción on the Spanish side of the border — including 6,000 Britons and other Europeans — commuted into Gibraltar on a daily basis before the coronavirus pandemic.

There is precedent: Liechtenstein, which is not an EU member, is in Schengen.

But London has balked. Spain’s proposal includes posting Frontex border guards in Gibraltar’s air- and seaports, who would report to Spain. This introduces joint sovereignty by the backdoor, something Spain has long argued for and which both Britain and Gibraltar have always rejected.

Gibraltarians voted 19,322 to 823 to remain in the EU in the 2016 referendum, but they also voted 12,138 to 44 to remain British in 1967 and rejected sharing sovereignty with Spain 17,900 to 187 in a 2002 referendum.

Gibraltar has been British for 300 years and wants to stay that way. Spain’s only claim to the peninsula is that it’s right there, on its border.

By the same logic, it should cede the North African cities of Ceuta and Melilla to Morocco.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.