It’s a free trade deal!
Is this now - finally - Brexit - and a trade deal? Just to be clear, we left the EU at the beginning of 2020, but subject to a transition arrangement under the Withdrawal Agreement which expired on 31 December 2020. This agreement finally delivered our sovereignty, our ability to control our own destiny, pass our own legislation and freely trade with the world on our terms.
But we wanted to negotiate a trade deal with the EU, as much as we want to agree trade deals with the USA, Australia and other countries. The concern was that the price the EU might exact for that free trade deal would be a voluntary repatriation of control to the EU. The good news – we got a free trade deal - and did not give back our sovereignty.
The UK-EU Trade and Cooperation Agreement, hammered out over 11 months, was finally agreed on Christmas Eve 2020 by the UK and the EU subject to the necessary ratification in both the UK and the EU. Note this agreement is between the EU and the UK – not the individual member states.
The Houses of Parliament were reconvened especially, on 30 December 2020, to ratify that and pass the necessary legislation to give effect to it. The EU will ratify the deal in January 2021. So, what does it mean? Is this a good deal? What sort of a deal is it?
What was the price for the deal?
So, we have avoided the challenges, disruption and uncertainty of leaving without a trade deal – by the skin of our teeth and only just in time! Better still it has delivered a tariff-free, quota-free trade in products and services between the EU and the UK. That is a remarkable achievement by both governments and their negotiating teams. It is a historic trade deal in its economic size and the breadth of areas covered.
It is a much more detailed trade agreement, with substantially more scope for our future relationship, than would be typical for a trade agreement. Nothing in the agreement ties our regulations to EU regulations. Nothing gives the European Court of Justice any role in the agreement or otherwise. The agreement has been divided up into separate sections to enable, if needed, some parts of the agreement to be terminated by either side on notice without affecting the rest of the agreement.
The agreement provides access to some EU schemes and data sharing to prevent crime – but not all. The UK is therefore establishing its own schemes – for example the Turing Scheme for students enabling them to study worldwide to replace Erasmus.
Is it perfect? No. And to get the most from it will require strong leadership from the UK government over the coming months and years. Has everything been agreed at every level of detail? No – but for the most part, the mechanisms have been put in place to reach agreement. So what are the areas of the agreement which are not so good: The creation of a mechanism to ensure a level playing field for trade and investment purposes between the UK and the EU, the transitional arrangement on fishing for 5.5 years, and the joint role of the EU and UK in Northern Ireland.
None of these will impact our sovereignty, freedom to make our own laws, or our ability to trade on our terms with other countries. But they each have their dangers if the government of the day is not “on the case” and monitoring what is happening, ready to step in if needed. This isn’t the end of Brexit, rather the beginning of a new relationship which needs to be carefully managed.
The level playing field – and rebalancing
The EU have always been concerned that, if we left, we would become more competitive internationally to the detriment of the EU. So, we have agreed to non-regression arrangements which effectively say we will continue to maintain our current high but expensive standards as regards the environment, animal and human health, employment rights and other social protections. We would clearly not want to reduce these standards in any event even if it meant we could trade more profitably than the EU. We are however free to diverge as much as we like to improve our standards. There is however a “level playing field” constraint.
If changes are made by either party the consequence of which materially impacts trade or investment between the parties, then there is a system to adjudicate this. If the case is made, then the party wanting to introduce the change, has to choose between making the change or losing the tariff-free benefit in that area of trade. This also applies to any subsidy a party provides in its own country, seen to materially impact trade and investment. If the claim is upheld, again the party has the choice of keeping the subsidy or accepting the tariff.
Fishing – a five and a half year wait
The provisions for fishing are far from ideal. Most coastal sovereign states fish 80 percent of their waters. We have to wait 5.5 years – but we will then be entitled to 100 percent! Set against that we have from day one, 1st January 2021, total control and authority over our territorial waters and how they are fished. The fact is – we don’t currently have the capacity to fish 80% of our waters never mind 100%. Tragically much of our fishing fleet was scrapped when we joined the EU and we must rebuild it. And we must ensure that the government is held to its promises to invest in fishing and coastal communities – I will certainly be holding the government’s feet to the fire. Teignmouth and Brixham deserve no less!
Over the 5.5 year period, the EU quotas, country by country, are reduced as set out species by species, in the annexes to the treaty. For now, we will continue to use the existing quota system but in that 5.5 years we must devise and negotiate a system that works better for UK fishermen and women and which better protects the fish. The discard system must go and the supertrawlers must be banned or reformed. Fishing by EU vessels in inshore waters remains – this again must be phased or negotiated out. All of this is possible, but we need a dogged negotiator to achieve that. We will have to create a better system – and then negotiate hard!
Perhaps the most contentious area of all is how trade will take place in Northern Ireland - but the die was largely cast in the Withdrawal Agreement. The Northern Ireland Protocol in that agreement, effectively provided for joint control of trade between the EU and the UK, subject to the veto of the Northern Irish Assembly, now thankfully sitting again. Northern Ireland remains part of the United Kingdom – nothing will change that. However, for trade purposes, Northern Ireland remains part of the EU single market and the EU customs area – while at the same time remaining part of the UK customs area. What does that mean in practice?
In practice it means the people of Northern Ireland have the benefits of both which will make them attractive for inward investment and the establishment of corporate headquarters. VAT will be collected by HMRC, and British traders only charged the UK VAT rate, unless the goods are intended for the EU market. HMRC will do the heavy lifting, sorting out who pays what and organise any refunds for mistakes – and yes, I know that is not problem free! Northern Ireland will continue to benefit from EU schemes, like Erasmus for students, but will be constrained by EU state aid rules, except as regards agriculture and fishing. There will be no hard borders north/south or east/west. Yes, there will be customs checks but most will be online. The biggest issue for us nationally will be a demand from Scotland to be put in the same position! The battle for the Union just got more complicated.
In the final analysis…
Nobody gets everything they want in a negotiation – that is the nature of negotiation. There are two outcomes possible – we thrive, because a strong government fights our corner and makes the most of these opportunities – or we shrink back and become once again a nation that mimics the EU. Is this a risk worth taking? In my view yes. But it does mean ongoing vigilance and pressure from those of us like me on the back benches.
This is a historic moment, and as a proud Brexiteer, I have voted to accept the challenge, recognising the ongoing fight. The European Research Group of which I am a member has fought and will continue to fight to retain our sovereignty so hard won, and for investment by governments of all future colours, in a better future. I am also a member of the European Scrutiny Committee. This is a Select Committee with unusual special powers to bring matters of concern to the floor of the debating chamber of the House of Commons. This is a power we have – and I will continue to press for its use, for the best outcome for the British People.
We are – Great Britain.