TRADE AND COOPERATION AGREEMENT BETWEEN EU AND UK

28.12.2020

Since the United Kingdom will lose all the rights and obligations it has as a Member State with the Withdrawal Agreement on 01.01.2021; the EU and UK have agreed on the draft of the Trade and Cooperation Agreement  ("the Agreement") on 24.12.2020 to determine their new positions.

The Agreement will go through the ratification processes by the UK Parliament, the European Parliament and the Council of the European Union before it formally comes into effect. The UK Parliament is expected to do so before the end of 2020, and the European Parliament will consider the draft in early 2021. 

The Agreement covers the following areas: trade in goods and services, digital trade, intellectual property, public procurement, aviation and road transport, energy, fisheries, social security coordination, law enforcement, and judicial cooperation in criminal matters, thematic cooperation, and participation in Union programmes.

1) Trade in goods is certainly an important matter because as of 1.1.2021, the UK will leave the EU Single Market and Customs Union. Therefore, the UK won’t benefit from the principle of free movement of goods. However, to preserve their mutually beneficial trading relationship, the two sides have agreed to create an ambitious free trade area with no tariffs or quotas on products, regulatory and customs cooperation mechanisms, as well as provisions ensuring a level playing field for open and fair competition, as part of a larger economic partnership.

Even with the zero tariffs or quotas, the trade between the EU Member States and the UK will inevitably be very different compared to the frictionless trade enabled by the EU's Customs Union and Single Market.

In particularly, even with the Agreement:

- rules of origin will apply to goods to qualify for preferential trade terms under the agreement,

- all imports will be subject to customs formalities and will need to comply with the rules of the importing Party,

- and all imports into the EU must meet all EU standards and will be subject to regulatory checks and controls for safety, health, and other public policy purposes.

Also in several sectors, the Parties have agreed on specific arrangements to facilitate bilateral trade, as well as regulatory cooperation. These sectors include automotive, pharmaceuticals, chemicals, wine, and organic products.

For example, in the automotive sector, regulatory convergence will be based on the use of the international technical standards set at the UNECE (United Nations Economic Commission for Europe) level. Both Parties will cooperate and, where appropriate, plan initiatives to promote greater international harmonization of technical requirements. Besides, there will be cooperation in the field of research and exchange of information linked to the development of new vehicle safety regulations or related standards, advanced emission reduction, and emerging vehicle technologies.

2) Other than the trade of goods, also services and investments will be affected on 1.1.2021. The Agreement provides for a significant level of openness for trade in services and investment, going beyond the baseline provisions of the WTO's General Agreement on Trade in Services (GATS), to which both the EU and the UK are parties, and commensurate with the commitments taken by the EU with other industrialized third countries throughout the world.

The Agreement also has substantial sectoral coverage, including professional and business services (e.g. legal, auditing, architectural services), delivery and telecommunication services, computer-related and digital services, financial services, research and development services, most transport services, and environmental services. Furthermore, the scope of the Agreement applies to investment in sectors other than services such as manufacturing, agriculture, forestry, fisheries, energy, and other primary industries.

However, naturally, given that the UK will no longer be in the Single Market, all UK service suppliers and investors must abide by the domestic rules, procedures, and authorizations applicable to their activities in the countries where they operate.

3) Level playing field principle has frequently mentioned in the Agreement. According to this principle, the EU and the UK agreed to robust commitments to ensure a level playing field for open and fair competition and to contribute to sustainable development.

More specifically, these provisions mean that:

- The current high standards applicable in the areas of labor and social standards, environment, and climate can not be lowered in a manner affecting trade or investment between the Parties.

- Robust and comprehensive rules will prevent distortions created by subsidies, anti-competitive practices, or discriminatory and abusive behavior by state-owned enterprises.

- Specific standards and rules and the joint political declaration in the area of taxation will contribute towards tax transparency and will counter tax avoidance and harmful tax regimes and practices.

- A wide-ranging set of commitments building on the EU's most ambitious precedents will ensure that trade supports sustainable development, including through cooperation at the international level.

5) About transportation; The Agreement will ensure continued air, road, and maritime connectivity, but UK service providers will lose traffic rights within the EU on air and road.

6) Also about the mobility and the visa processes; the UK refused to add a chapter about mobility in the Agreement and only accepted the temporary movement of natural persons for business purposes. However, that does not mean that visas will be necessary for all travels between the EU and the UK. The EU had already decided to allow UK nationals short-term visa-free visits of up to 90 days within any 180-day period, as of 1 January 2021. The UK has also decided to allow visa-free short-term visits for EU citizens. But the UK has to provide visa-free travel for short-term visits for all EU Member States, without discrimination between EU nationals.

On the other hand, UK nationals intending to stay in an EU Member State for periods exceeding 90 days for any purpose (e.g. work, research, study, training) will be able to do so under the conditions for entry and stay for third-country nationals set under EU law and the national laws of the Member States. Similarly, EU citizens intending to move to the UK will need to comply with the applicable immigration conditions set by the UK government.

7) Lastly, ensuring the safety and security of both the EU's and UK's citizens against common and evolving threats such as cross-border crime, cybercrime and terrorism remain a shared priority of the EU and the UK. This requires effective and swift cooperation, data sharing, and analysis. The Agreement also has details about data security, cybe rsecurity, health security and information security.

Considering the historically and culturally unbreakable connection between the UK and the EU, the Agreement is extremely important in terms of showing that the period after 01.01.2021 will pass by in cooperation and solidarity.

You can find the European Commission’s Questions & Answers about the EU-UK Trade and Cooperation Agreement here.

Should you have any queries and/or remarks, please do not hesitate to contact us. 

Kind regards,

Zumbul Attorneys-at-Law

info@zumbul.av.tr