Brexit News, Chapter News

EU-UK Trade and Cooperation Agreement: A new relationship, with big changes – Overview of consequences and benefits

On 1 January 2021, the United Kingdom will leave the EU Single Market and Customs Union, and all EU policies. This was its choice.

As a result, it will lose all the rights and benefits it had as an EU Member State, and will no longer be covered by the EU’s international agreements. This will bring far-reaching changes, affecting citizens, businesses, public administrations and stakeholders in both the EU and the UK. To limit the disruption insofar as possible, the EU and the United Kingdom have spent the past year negotiating the terms of a new “Trade and Cooperation Agreement” to govern their future relations now that the UK is a third country.

On 24 December 2020, an agreement in principle was reached at negotiators’ level. Both parties will now advance with the signature and ratification of the Agreement, in line with their respective rules and procedures, with a view to its provisional application from 1 January 2021.

The new EU-UK Trade and Cooperation Agreement: What has been agreed?

On 24 December 2020, EU and UK negotiators reached an “agreement in principle” on the text of a new “Trade and Cooperation Agreement” to govern their relations now that the UK has left the EU. Both parties must now advance with the signature and ratification of this Agreement in line with their respective rules and procedures, with a view to its provisional application as from 1 January 2021.

While the new EU-UK Trade and Cooperation Agreement will by no means match the level of cooperation that existed while the UK was an EU member, it goes well beyond traditional free trade agreements and provides a solid basis for preserving our longstanding friendship and cooperation going forward.

It consists of:
1. an unprecedented free trade agreement,
2. ambitious cooperation on economic, social, environmental and fisheries issues,
3. a close partnership for citizens’ security,
4. an overarching governance framework.
The Agreement reflects the fact that the UK is leaving the EU’s ecosystem of common rules, supervision and enforcement mechanisms, and can thus no longer enjoy the benefits of membership or the Single Market.

It confers rights and obligations on each party, while fully respecting their regulatory and decision-making autonomy. At the UK’s request, the Agreement does not cover cooperation on foreign policy, external security and defence, even though this was initially foreseen in the Political Declaration. In addition, the Agreement does not cover any decisions relating to equivalences for financial services. Nor does it cover possible decisions pertaining to the adequacy of the UK’s data protection regime, or the assessment of its sanitary and phytosanitary regime for the purpose of listing it as a third country allowed to export food products to the EU. These are and will remain unilateral decisions of the EU and are not subject to negotiation.

Examples of inevitable change on 1 January 2021:

  •  The free movement of persons will end: UK citizens will no longer have the freedom to work, study, start a business or live in the EU. They will need visas for long-term stays in the EU. Border checks will apply, passports will need to be stamped, and EU pet passports will no longer be valid for UK residents.
  •  The free movement of goods will end: Customs checks and controls will apply to all UK exports entering the EU. UK agri-food consignments will have to have health certificates and undergo sanitary and phytosanitary controls at Member States’ border inspection posts. This will cost UK businesses time and money.
  •  The free movement of services will end: UK service providers will no longer benefit from the country-of-origin principle. They will have to comply with the – varying – rules of each Member State, or relocate to the EU if they want to continue operating as they do today. There will be no more mutual recognition of professional qualifications. UK financial services firms will lose their financial services passports.

Below are links to a selection of key documents that explain what is next:

Compliments of the European Commission

IN THIS CONTEXT: Be sure to follow the EACCNY’s announcements on upcoming webinars and thought-leadership articles to learn what Brexit will mean to your company. Members interested in joining the Brexit Working group should reach out to the EACCNY’s Executive Director. We also encourage you to check our our Brexit news section as well as the Brexit Musings podcast series.