On December 24, 2020, the United Kingdom (“UK”) and European Union (“EU”) agreed on a Trade and Cooperation Agreement to facilitate free trade between the UK and EU following the UK’s official exit from the EU on January 2, 2020. The UK Parliament approved the agreement and Prime Minister Boris Johnson signed it into law on December 30, 2020. The EU has adopted the agreement on a provisional basis, taking effect January 1, 2021, until it is approved by the European Parliament. The full text of the trade agreement can be viewed here.
While the UK will be outside of the EU’s single market and customs union, 100% of tariffs and quotas on goods traded between the UK and EU will be eliminated. However, the provisions covering trade in services may require further negotiations. The services outlined in the agreement include telecommunications, delivery, international maritime transport, financial, and legal. The agreement also ensures continued cooperation between the UK and EU on certain trade barriers with respect to the automotive, chemical, pharmaceutical, and agricultural sectors.
The UK and EU agreed to joint management of fisheries in UK and EU waters. Specifically, the agreement recognizes the UK’s departure and permits them to “create its own laws and fisheries management practices.” Additionally, over the next five years, new quotas will be implemented as a way for the UK to increase its share of what is caught in UK waters. Under this new agreement, there will also be annual negotiations held to discuss total allowable catches for shared stock and access arrangements in order to avoid unfair distribution.
While the UK has secured more fishing rights and the free cross-border movement of goods with the EU, questions remain over the provisions covering trade in services. Regarding financial services—the UK’s single largest export—the EU stated in a Questions and Answers (“Q&A”) document that “a series of further clarifications will be needed, in particular regarding how the UK will diverge from EU frameworks after 31 December.” The EU has not yet made an equivalence decision allowing UK financial intuitions full access to the EU financial market.
The agreement between the UK and EU helps pave the way for a US-UK free trade agreement. In a recent talk, U.S. Trade Representative Ambassador Robert Lighthizer noted that while the US and UK have made some headway towards an agreement, the US needed to know the outcome of the UK’s talks with the EU before it could conclude a US-UK agreement.
Husch Blackwell continues to monitor the UK transition and will provide any updates as further developments occur. Should you have any questions or concerns regarding UK’s exit or the trade agreement between the UK and EU, please contact our International Trade and Supply Chain team.