What’s in the Brexit deal that the UK and EU signed?

Jan 7, 2021

Starting from this month, citizens of the EU and the UK will have to endure a few complicated months until the Brexit deal’s nitty-gritty is clarified. 

UK nationals voted for the UK to leave the EU during the Brexit referendum in 2016. The UK legally left the EU eleven months ago, and the parties struck a deal just one week before the deadline of 31st December 2020.  

The leaders of both the European Union and the United Kingdom announced that they had reached an accord on 24th December 2020. The deal is called the Trade and Cooperation Agreement (TCA), and it has been provisionally implemented as of 1st January 2021. The agreement is pending ratification of the European Parliament before it fully comes into effect. 

What’s in this deal? Where does it leave the UK? And the EU? What topics does it cover? Who made concessions and where?  

Let’s take a closer look and the ramifications of this deal.  

Trade  

The deal stipulates that trade between the UK and EU will not be subject to quotas or tariffs. However, now that they’ve left the EU customs union and single market, products from the UK will be subjected to stringent requirements and regulatory checks. There may be no taxes to pay at the border. However, there will be more paperwork, which is going to cause delays.  

Northern Ireland will remain quasi under the EU because of its border with the Republic of Ireland. Consequentially, checks will be introduced in the Irish Sea between Ireland and the rest of the UK.  Northern Ireland will naturally deviate further from the UK and draw closer to Ireland now.  For instance, Ireland already promised to subsidize the Erasmus Exchange program for Northern Ireland students following Brexit. This may pave the way for the reunification of Nothern Ireland and the Republic of Ireland.  

UK’s departure from the EU has potentially cleared UK’s path to make new free trade agreements with other countries.  Many speculate about a UK-USA trade agreement. However, the Biden administration announced that new trade deals would not be a priority. Nonetheless, there are plenty of other countries for the UK to talk shop with, including Australia (which is having trade issues with China).   

Work and Travel  

Regarding travel and free movement of workers, UK nationals will now need a visa if they wish to stay in the EU for over 90 days in a 180-day- period. Similarly, employment immigration rules will apply to citizens of both the UK and the EU. Although, some transition period will be given for UK individuals living in the EU and vice versa, to sort out their documents.  

UK passport holders will no longer be able to use the EU entry lines at airports and borders.  

British citizens will not need an International Driver’s Permit to operate a vehicle in the European Union (except for those who have a license from Gibraltar, Guernsey, Isle of Man, or Jersey).  

Level Playing Field   

In an attempt to ensure fair and open competition, the EU pressed for common standards for goods and services. They claimed that it would prevent businesses from undercutting each other and ensure a level playing field. The parties agreed that they needn’t adopt the same rules, and the UK needn’t comply with EU law; however, its standards must protect fair competition. They settled on similar rules regarding state aid and government subsidies for businesses.  

The UK and EU didn’t agree on recognizing each other’s standards for goods, which could result in manufacturers having to get two certificates – on import and export. In such a case, businesses would incur additional costs and see even further border delays.  

Fishing Rights   

Despite accounting for only 1% of the UK’s GDP, fishing was a critical topic for both the UK and the EU, politically speaking. The parties agreed to reduce EU fishing rights in UK waters by 25%. Both parties will implement the reduction over a 5-year transition period with wiggle room for annual negotiations afterward.  

Professional and Financial Services  

Considering that the services industry makes up roughly 80% of the UK’s economy, this was a crucial issue that the parties failed to address in the TCA. There will no longer be automatic recognition of professional qualifications and licenses between the EU and the UK.   

The UK has provided assurances that they will permit EU organizations to extend their UK operations for a temporary period. However, the EU hasn’t done the same. The parties expressed that they are working on a memorandum of understanding (MOU) concerning financial regulation, which will be ready by March 2021.  

The issue is whether the UK financial services organizations are operating under the same standards and regulations as the EU. If the EU deems that they do not, such organizations would have to qualify and establish corporate entities in individual countries in the EU. Due to this uncertainty, many banks and investment firms have already registered companies in major EU cities. Some of them even partially moved operations to Ireland, which is still a member state of the EU.  

Dispute Resolution  

The European Court of Justice (ECJ) will have no role in dispute resolutions between the EU and the UK, save for Northern Ireland. The parties can only refer to the ECJ for arbitration alone.

The TCA stipulates that representatives from both sides will resolve any disputes between the parties. Moreover, in case the arbitration panel finds that one party violated the agreement, that party will have to compensate the other. If the wrongdoing party fails to provide compensation, the complaining party can take unilateral measures such as imposing tariffs.   

Brexit Deal Conclusion

In conclusion, the Brexit deal called for extensive publicity but yielded disappointing results.  Brussels believes that it has made an example of the UK, deterring other Eurosceptics from splitting from the Union. The UK believes it has regained sovereignty and reclaimed control.  

The Northern Ireland leaders were pleased to remain in the EU’s orbit, as they had voted against Brexit.  Nicola Sturgeon, Scotland’s First Minister, expressed that Brexit happened against Scotland’s will and strengthened the desire for Scottish independence. 

Most importantly, and perhaps, unfortunately, this is not the last we’ll hear of Brexit. We foresee a long future of amendments, memorandums, and exceptions yet.