Brexit deal ensures tariff-free trade between EU and UK

The EU and UK have today reached a post-Brexit deal on trade and future cooperation, ending months of disagreements and intensive negotiations about issues ranging from fishing rights to future business rules. The agreement has been reached a week before the end of the Brexit transition period on 31 December. The UK voted in a referendum in June 2016 to leave the EU, and it exited the EU in January 2020.

The deal is based on a free-trade agreement in goods and services, which provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin. But it also covers a range of other areas such as investment, competition, state aid, transport, energy, security, and sustainability.

The EU and UK have committed to maintain high levels of environmental protection, including carbon pricing and the fight against climate change. The agreement also enables the UK's continued participation in a number of flagship EU programs for the period 2021–27, such as the Horizon Europe research and innovation project.

Meanwhile, binding enforcement and dispute-settlement mechanisms will ensure that the rights of businesses, consumers, and individuals are respected, the European Commission says. “This means that businesses in the EU and the UK compete on a level playing field and will avoid either party using its regulatory autonomy to grant unfair subsidies or distort competition,” the Commission says.

But, because the UK will leave the EU single market and customs union, as well as all EU policies and international agreements, the free movement of people, goods, services, and capital between the UK and EU will end from 1 January.

“It was worth fighting for this deal because we now have a fair and balanced agreement with the UK, which will protect our European interests, ensure fair competition, and provide much needed predictability for our fishing communities,” says European Commission president Ursula von der Leyen.

UK prime minister Boris Johnson calls the deal “the first free trade agreement based on zero tariffs and zero quotas that has ever been achieved with the EU.” He says it is also the biggest bilateral trade deal signed by either side, covering total trade worth £668 billion ($898 billion) in 2019.

The agreement is subject to approval by the European Council and European Parliament, as well as the UK parliament.

Cefic and the Chemical Industries Association (CIA) are not available for comment on the agreement at press time. However, CIA said earlier that “a deal with the EU is in the best interests of the [chemical] sector, our suppliers, and our customers. Our sector needs tariff-free trade, minimal border delays, regulatory consistency, and continued access to skilled people,” it said.

CIA estimates that 60% of UK chemical exports go to the EU and that the UK sources 75% of its raw materials from the EU. Cefic and the CIA estimate that total chemical trade between the EU and UK is worth about €44 billion/year ($54 billion). As a result, the two associations have consistently highlighted the need to minimize supply-chain disruption.

However, the UK’s exit from the single market and customs union means there will be non-tariff barriers to trade such as increased bureaucracy, including customs declarations and other documents, and higher regulatory-compliance costs to business. Cefic and the CIA estimate immediate costs from post-Brexit regulation for UK chemical companies totaling about £1 billion.

“The EU and the UK will form two separate markets; two distinct regulatory and legal spaces,” the Commission says. “This will create barriers to trade in goods and services and to cross-border mobility and exchanges that do not exist today—in both directions."

Source: Chemical Week