The end of the Transition Period with the EU arrived at 11pm on 31st December 2020. A Trade and Co-Operation Agreement has been reached between the UK and the EU, which came into effect on 1st January 2021.
We have considered some of the post-Brexit changes and hurdles for dealing with transactions with the EU and other countries in previous newsletters. These can all be found here in our dedicated Brexit Resources section on the TC website. In this newsletter, look at the impact of the Trade and Co-Operation Agreement.
Before we look at the details of the Agreement, it is worth noting that the UK Government has issued a Brexit Checker to help individuals and businesses understand the steps they need to take when dealing with the EU or travelling to the EU. This is a useful resource which identifies the areas that each business will need to consider.
The main Trade and Co-Operation Agreement points of note are:
- a free trade deal—comprising a core free trade agreement providing for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin;
- a broad economic and social partnership – which includes coverage on investment, competition, State aid, tax, aviation, road transport, energy and climate change, data protection, social security coordination and fisheries;
- a security co-operation agreement—establishing a new framework for law enforcement and judicial co-operation in criminal and civil law matters (subject to a continued commitment to fundamental human rights and data protection);
- a single governance framework—overseen by a joint partnership council, with enforcement safeguards and dispute mechanisms involving independent arbitration (rather than the Court of Justice of the European Union).
There are a number of hurdles that will need to be negotiated around the zero tariffs and quotas, as these only apply to goods that originate in the EU or UK, and the Agreement gives rules for each sector. In essence, manufacturers will need to know the origin of their components and the processes they have been subject to for the finished goods to have an origin in the UK or EU. This is to protect the EU from the UK being used as a hub to import non-EU/UK goods tariff-free into the EU. Another potential hurdle is the “level playing field “ provisions that mean that the Zero tariffs will only continue if both the UK and the EU agree that the other side has not become unfairly competitive.
However, financial services equivalence was not included in the Trade and Co-Operation Agreement, and this is due to be negotiated separately. Hence the post-Brexit relationship between the UK and the EU is not entirely determined but will evolve as further agreements are made around equivalence for professional and financial services. All arrangements and local initiatives are reviewed to ensure that neither side achieves a competitive advantage.
In addition to the Agreement with the EU, the UK Government is looking to negotiate new trade deals to replace the EU’s trade deals with the rest of the world. Those deals currently being negotiated include New Zealand, Australia and the USA, and a trade deal has already been completed with Japan.
If you have any queries, please contact our Brexit Team at email@example.com or on 0330 088 7111.