The United Kingdom (UK) and the European Union (EU) finally came to an agreement regarding the eagerly anticipated Brexit trade deal. On December 24, 2020, both sides agreed to the EU-UK Trade and Cooperation Agreement (Agreement) after nine months of negotiation. The Agreement came into effect from 11pm (GMT) on December 31, and consists of new rules for living, working, and trading, between the UK and the EU. The outcome of this Agreement also has a direct impact on other countries trading with the UK now that it is no longer part of the EU.
The UK’s departure from the EU has been a hot topic of conversation over the last 5 years stemming from a referendum held on June 23, 2016, where the majority of those who voted in the UK, chose to leave the EU. The UK officially left the EU on January 31, 2020, which initiated an eleven-month transition period where the UK and EU formally negotiated and established a trade deal, as the UK was to leave the EU single market and customs union on December 31, 2020.
The Agreement addresses technical aspects of trade for key sectors including automotive, chemicals, pharmaceuticals, and professional services, as well as tackling dispute resolution between the UK and EU which will now be decided by an independent tribunal. The Agreement itself governs bilateral trade worth more than $870bn (£650bn) and respects major points of contention for both parties. For the EU, the “four freedoms”, free movement of goods, services, people, and capital, of its single market are preserved, and a hard border in Ireland has been avoided. For the UK, it will trade with the EU on a “zero tariff, zero quota” basis, and will no longer have the European Court of Justice settle its trade disputes. Further, the EU has agreed to give up 25 percent of its quotas of fisheries in UK waters over a five and a half year transition period, which will be revised and renegotiated annually.
Between the UK and the EU, the “zero tariff, zero quota” agreement means there will be no imposition of any tariffs or restrictive quotas. However, new customs and regulatory checks, such as local content requirements and country of origin rules, will be enforced.
The EU-UK Agreement provides more certainty for the United States (US) and the UK to enter a trade deal. Trade negotiations between the US and UK began last year with the most recent round of negotiations ending on October 30, 2020. Following this round, the British Trade Secretary, Elizabeth Truss, issued a statement that “[t]his was the most intensive round of negotiations held so far, with 38 sessions covering 19 different chapter areas [and] [a]lmost all chapter areas are now in the advanced stages of talks.” Although it is unclear at this stage how the Biden administration will prioritize the negotiations, outgoing United States Trade Representative, Robert Lighthizer, highlighted that issues remain and “tough compromises” will need to be made, particularly regarding agricultural and food standards.
If you have any questions or would like more information about Brexit or US trade with the UK. contact an attorney at Barnes, Richardson & Colburn LLP.