On Christmas Eve, just as folks were beginning their holiday celebrations (perhaps virtually due to widespread lockdowns), the United Kingdom and European Union announced that they had agreed on the terms of a deal governing the trading of goods between the EU and its former member nation. The agreement is a relief to many businesses, in the EU and the UK, who were looking at the possibility of a “hard Brexit” or no agreement on trade terms occurring at the end of the month. In what the European Commission President Ursula von der Leyen described -- “It was a long and winding road” – as negotiations have dragged after the UK voted to leave the EU over four years ago.
While the details of the agreement are still emerging and the deal has to be ratified by the UK Parliament, the European Parliament, and some EU members’ legislatures, there are a few items clients should keep in mind:
(1). Trade between the UK and the EU will change. Goods trading between the two economies will not face tariffs or quotas, but there will be customs forms and declarations across what was a previously open border.
(2). The agreement does not cover services, including financial, professional, and other activities that make up a huge portion of the UK’s economy. Some of these now cross-border services, including some banking activities, will continue generally unimpeded under the principle of equivalence. However, without a broader agreement, there will be obstacles for UK service businesses to freely access the EU market and vice-versa.
(3). Eyes on both sides of the Atlantic are now focused on trade talks between the UK and the United States. Some work has been done already, but it will be up to the Biden Administration to finish the job. For the deal to receive important Trade Promotion Authority, the plan must be submitted to the U.S. Congress by April of 2021.
So, while we can celebrate this latest agreement, the party will be short-lived as there is much work to be done by policy-makers and businesses to adjust to the new reality. We will continue to be monitoring this changing environment to assist our clients as they navigate through these issues.