Brexit: Habemus Pactum

Brexit became an attention-grabbing phenomenon ever since the 2016 referendum on UK’s departure from the EU. Since then, the UK organised two snap elections and changed three Prime Ministers. In the meantime, after an extension to the negotiations, the Withdrawal Agreement was reached in 2019. Yet, that was only a part of the story, as the two negotiating sides, the UK and the EU, were left to agree on the future relationship. In March 2020, they have committed to sit at the same table in order to find an agreement that would, on the one hand, satisfy the Brexiteers, and on the other, preserve the integrity of the EU’s single market, all while ensuring that a no-deal scenario is avoided. To make the things worse, COVID-19 pandemic struck at the same time the negotiations were launched. Despite initially agreeing to have a deal by October, unsurprisingly in the context of Brexit, the deadline was once again postponed, which further contributed to the rising stress levels in Europe. Nevertheless, after some ups and many downs, the Trade and Cooperation Agreement was reached and announced on Christmas Eve, December 24th. Therefore, considering the timing, people have already managed to coin the term “Merry Brexmas”. As the Agreement is over 1000 pages long, the aim of this blog is to analyse the key elements and the consequences for the future EU-UK relationship.

1. Regulatory and Customs Independence – Although the UK considered some level of regulatory alignment and membership in the EU Customs Union during the premiership of Theresa May, the UK’s course out of regulatory and customs alignment was decided on once Boris Johnson became a Prime Minister in 2019. In 2020, he made sure that he fulfilled this commitment by pulling the UK out of the EU’s Single Market and Customs Union. Such decision will allow the UK to have its own trade policy and to set the rules on its own separate market, while the UK, as a 3rd country, will have no obligation to contribute to the EU budget. As a result of this decision, the UK will face the following restrictions:

            a. The end of free movement of goods – The UK will not be able trade freely with the EU, considering that it will have to comply with the rules of origin requirements, customs formalities, border customs checks, and regulatory checks and controls for safety, health and other essential areas. This will inevitably increase the cost of trading, while simultaneously slowing it down. In other words, trade will not be free and frictionless. Therefore, even though PM Johnson claimed that the UK’s exporters will be able “to do even more business” with the EU after reaching the Trade Deal, all indicators are not pointing in that direction. Hence, it can be concluded that this was nothing more than a political statement that has no basis in reality.
           b. The end of free movement of services – As the UK is a service-based powerhouse, by leaving the Single Market, it will lose its automatic right to offer services to all EU member states, while in return it will have to comply with the varying rules of each member state. Additionally, there will not be an automatic recognition of professional qualifications for UK service providers, such as doctors, engineers, or architects. Considering that this deal is not focused on services it remains to be seen, not whether the UK’s service sector will suffer, but how much will it suffer.
          c. The end of free movement of people – This freedom was one of the key reasons why Brexit took place, considering the issue of immigration was one of the key drivers of debate at that time. As the UK has had the intention of developing its own asylum system and work visas, exiting the single market meant that the freedom of movement would no longer be guaranteed to the Brits. The Brits will need visas to travel to the EU and stay there over 90 days in a 180-day period, while also losing their ability to work, study, research, train, or live in the EU as before. In that regard, students will particularly suffer, since the UK has decided to drop out from Erasmus, considering it “extremely expensive”.

2. Northern Ireland as an exception – As the Withdrawal Agreement stipulates, Northern Ireland (NI) will remain part of the EU’s regulatory area, by aligning with the rules on goods of its single market and by applying its customs rules. This is why it would be more appropriate to argue that most of the listed restrictions in point above will apply to Great Britain (GB) and not to NI. For the same reason, the provisions of the Trade Agreement do not govern trade in goods between the EU and NI. This will result in the following practices:

a. A customs and regulatory border will be put between NI and GB, which is why goods entering from one place to another will constitute ‘imports’ that will be subject to checks (unless proven by simplified procedures that goods are not ‘at risk’ of onward movement to the EU). Although Theresa May originally argued that “no Prime Minister could agree” to place a regulatory border in the Irish sea, PM Johnson was ready to do so, in order to “Get Brexit done”.
b. The application of the agreements will effectively prevent borders from appearing on the island of Ireland. It was as early as April 2017, that the European Council indicated that “flexible and imaginative solutions” will be required in view of the unique circumstances of NI. What made this part of the UK such a sensitive issue was the fact that it had gone through a three-decade-long conflict called “the Troubles”, during which around 3500 people have been killed. Therefore, without any borders, the 1998 Good Friday (Belfast) Agreement enabling peace will continue to stay in place, while people will continue enjoying the freedom of movement. As a special regime will apply to Northern Ireland, the Republic of Ireland stepped in and offered to cover the Erasmus programme to it.
c. Unlike Northern Ireland, Scotland, which is a part of the UK that is strongly pro-EU, will not enjoy the same unique position and will be fully out of the EU’s system as will the rest of Great Britain. For Scotland, this caused further frustration and increased calls for independence. In that regard, the fact that Brexiteers and PM Johnson claimed that Brexit will make the UK “more united” turned out to be misleading.

3. Level-playing Field – Although the UK will no longer be a part of the EU’s market, both legally and regulatory, in order to keep its tariff and quota free access to the EU, the deal includes commitment of non-regression with regards to the level-playing field commitments. This obliges the UK to uphold common high labour and social standards, environmental protection, the fight against climate change (including carbon pricing and taxes), and principles on state aid. In that regard, the UK committed not to weaken or reduce the current levels of protection of these standards in a manner affecting trade or investment with the EU. In other words, although leaving the EU, the UK will nevertheless, and at least partially, remain bound to it. As a safeguard, the EU could decide to introduce tariffs if the UK decides to lower the standards that would cause unfair competitive advantage to certain business or to grant unfair, trade-distorting subsidies. On top of that, the UK has committed to implementing the 2015 Paris Climate Agreement, as the fight against climate change was defined as an “essential element” of the Deal. In that regard, it was agreed that if the UK fails to fulfil its obligations with regards to essential elements, the Deal may be suspended in part or in whole. Although the UK is not expected to regress its standards or to scrap the Paris Agreement like the US President Donald Trump did, these requirements nevertheless will put some checks on the UK’s ability to make “sovereign” decisions.

4. Fisheries – From the very start, it was clear that the issue of fisheries was a matter of political symbolism rather than an actual economic question of crucial importance. This becomes clear considering that fisheries account for 0.1% the UK’s economy. Yet, for Brexiteers, being an “independent costal state” meant that they could regain their sovereignty and renew their fishing industry. Now that the deal is settled and with the UK out of the EU, one would think that the UK will be able to fish all it wants in its own seas. Yet, it was agreed that the EU would, in fact, keep access to the UK seas (and vice versa), while it would gradually decrease its access from 33% to 25% in a period of a 5,5 years. Even once this period is over, the EU will still retain the access to UK’s waters, as the two sides have agreed, from then on, to organise annual consultations on the quotas. In theory, the UK will retain the right to tell the EU’s vessels to completely stay out of its waters after the agreed transition period passed, however, as a consequence, its fishing industry risks facing significant tariffs and quotas – the ones the UK tried to avoid. Such scenario would not be in the UK’s favour at all, particularly considering that it would still need to sell the fish to the EU, which is by far its largest fish export destination.

5. No International Courts – As a big victory, PM Johnson highlighted that the Court of Justice of the EU will not have a role to play with regards to the implementation of the Trade Deal. That is true, and this represented a concession which the EU was willing to make in order to ensure the two sides reached a compromise. As a result of the negotiations, it was agreed that if disagreements persisted, the complaining party is able to request a creation of an independent arbitration tribunal, whose members would be chosen jointly by the UK and the EU. For the UK, it was paramount to ensure that it will not be bound by an international court that would infringe upon its sovereignty. Yet, it would be misleading to argue that the international courts would be completely out of the picture, both when it comes to the CJEU and the European Court of Human Rights:

         a. Court of Justice of the EU – Although the CJEU will not play a role with regard to the implementation of the Trade Deal, it will nevertheless be able to say with regards the following three aspects:
                       A1. As agreed in the 2019 Withdrawal Agreement, the CJEU will continue to have jurisdiction in any proceedings brought by or against the UK before the end of the transition period (31 Dec 2020).
                      A2. In relation to the part on protection of citizens’ rights of the Withdrawal Agreement, UK courts will continue to be able to refer cases to the CJEU for eight years following the end of transition.
                      A3. As Northern Ireland will remain part of the EU’s regulatory area (as indicated in Point 2), by aligning with the rules of its Single Market and Customs Union, the CJEU will therefore have jurisdiction over this part of the UK. It would be more correct to argue that such level of jurisdiction will not exist with regards to Great Britain instead.
          b. European Court of Human Rights – It should be noted that this court is not a court of the EU, but of the Council of Europe, an entirely different international organisation. It is expected that this court will have a say in the UK affairs with regard to fundamental rights and freedoms of individuals, as the agreed Trade Deal stipulates that the UK will continue to abide by the European Convention on Human Rights (ECHR). Although the UK’s chief negotiator, David Frost, argued that it would be an infringement of the country’s “sovereign independence” to write in such a commitment to a deal, the UK nevertheless agreed to it. For this reason, it is clear that the UK will not be completely independent from the oversight of international courts. On top of that, the EU will retain the right to suspend cooperation on law enforcement and judicial matters or even terminate the Deal if there are serious concerns about the protection of fundamental rights and the rule of law which are defined as an “essential element” of the Deal.

6. Continued Security Cooperation – Negotiations in this area were unique, as the EU had to decide what kind of access would it allow to a third party such as the UK (and vice versa) with regards to the security-relation information. Considering the long existing closeness of cooperation between the UK and the EU in this area, but also the practical necessity to ensure the cooperation continues to unfold, the focus on security aspect illustrates that this Trade Deal is not just about trade. Without an Agreement, cooperation between the EU and the UK would have relied on international cooperation mechanisms only (such as Interpol and the relevant Council of Europe Conventions). In order to maximise cooperation in this area, the two sides agreed to reciprocal exchanges of air passenger data, criminal record information, as well as DNA, fingerprint and vehicle registration data. In addition, the Deal will enable cooperation between the UK and the Europol and Eurojust. It was also agreed to enable strong cooperation of police and judicial authorities between the EU and the UK, for example supporting the swift surrender of criminals, while avoiding lengthy extradition procedures. As the EU itself rightfully notes, such level of cooperation will be unprecedented for a non-Schengen third country. Yet, the UK will no longer have direct, real-time access to sensitive EU databases that support the EU’s area of freedom, security, and justice. Furthermore, the security cooperation can be suspended in case of violations by the UK of its commitment for continued adherence to the European Convention of Human Rights and its domestic enforcement. Therefore, the cooperation in this area will be more restricted than it was the case while the UK was an EU member state.

7. Foreign Policy Independence – The Deal recognises the importance of global cooperation to address issues of shared economic, environmental and social interest, while adding that parties shall endeavour to maintain a constant and effective dialogue and to coordinate their positions in multilateral organisations and forums in which the Parties participate. Yet, this falls short, at the UK’s request, from covering cooperation on foreign policy, external security and defence. This represented a step backwards from the UK’s original position, as cooperation in these areas was initially foreseen in the Political Declaration signed in 2019, a document which called for “ambitious, close and lasting” cooperation on external action. Even though PM Johnson hailed the Trade Deal as a Canada-style deal (a free trade deal), he omitted the fact that Canada, like Japan, has also an accompanying legally binding agreement with the EU on foreign policy cooperation (Strategic Partnership Agreement). The lack of such agreement in this case illustrates that the UK is adamant in showcasing that it is fully sovereign in foreign policy arena. Furthermore, this could mean that the UK will prefer, in a post-Brexit era, to work bilaterally with major EU member states, who will then bring the rest of the member-states and the EU institutions into line. This is not to say that the UK or the EU will not cooperate in this area in the future, but rather to point out that more effort will be needed in order for the EU and the UK to sustain their partnership and a productive working relationship.

Overall, the analysed points showcase that the Trade Deal was never about economics as the negotiations have taken the trading partners further apart and not closer together. Had it been simply about economic aspects, Brexit would not have happened in the first place. In that regard, politics and the power of symbolism have crucially shaped the negotiations and thus the content of the final Trade Deal between the UK and the EU. Despite the fact that this Trade Deal is regulating the level of divergence instead of convergence, both the EU and the UK have celebrated its conclusion as a much better option than a no-deal scenario which was long looming, as it does install some level of predictability for business and regular citizens, all while complementing the Withdrawal Agreement. Now, the formal negotiations may be over, but the subsequent ad hoc UK–EU talks will be of utmost importance to make sure the Trade Deal works for both sides, but also to determine the political relationship between them.

Brexit is now officially over. Enter, post-Brexit Europe.

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