U.K., EU reach post-Brexit Trade Agreement

U.K., EU reach post-Brexit Trade Agreement

Why in News?

Just a week before the deadline, Britain and the European Union struck a free-trade deal that should avert economic chaos on New Year’s and bring a measure of certainty for businesses after years of Brexit turmoil.
Once ratified by both sides, the agreement will ensure Britain and the 27-nation bloc can continue to trade in goods without tariffs or quotas after the U.K. breaks fully free of the EU.

What is the Brexit deal and why is it needed?

After it formally exited the European Union on January 31 this year, the United Kingdom entered a 11-month transition period during which it continued to follow EU rules.
This was when the country began negotiating a deal with the bloc to determine key aspects of their relationship — including a viable trade agreement, defence, security and immigration once the transition phase ended.
However, talks stretched on as both sides were unable to agree on major points — fishing rights, governance, and guaranteeing a ‘level playing field’ on government subsidies and regulations.
A level playing field essentially means that in order to trade with the EU’s single market, the UK will have to follow the same rules and regulations to ensure that it does not have an unfair advantage over other EU businesses.
But with or without a Brexit deal, the UK will be exiting the EU’s single market and customs union by the end of the year.
The deal is also likely to lay down rules of governance, which will dictate how any deal is enforced as well as the penalties that will be imposed if one party violates the terms of a mutually-approved agreement.
The UK will also have to agree on how it will cooperate with the bloc on issues pertaining to security and law enforcement once it officially withdraws from the European Arrest Warrant on January 1, next year.
Further, the two parties will have to finalise agreements on issues like airline safety and information sharing.

But, why is fishing such a big deal?

While fishing is a relatively small part of the economy on both sides of the English Channel (fishing was just 0.02 per cent of the overall economy both in the UK and in the EU), the issue is extremely emotive and its political consequences far outweigh the economic impact on both sides.
For the EU, access for its boats is an important precondition for a trade agreement, while in Britain, the Brexit cheerleaders peddled it as a symbol of sovereignty that needed to be regained.
Even though Britain formally left the EU on January 31, 2020, the country still has to adhere to the EU’s rules until the end of the year, including the bloc’s Common Fisheries Policy.
So, till then, the fishing fleets of every country involved have full access to each other’s waters, going well beyond the territorial water that covers the first 12 nautical miles (22km) from the coast.
But the volume of fish, depending on the species, are to be claimed by each country as per a complex national quota regime that has been formulated using historical data going back to the 1970s.
The British fishing industry has maintained that it got a raw deal in this quota distribution.
That’s why the UK government wants to increase the British quota share significantly, even as EU negotiators have been pushing Britain to continue to allow their fishing crews to have access to its waters.
The EU, meanwhile, wants to divide the amounts of fish that each country’s boats are allowed to catch in a way that will not be renegotiated every year.

Where does the deal stand now?

The two sides have agreed to a largely tariff and quota-free trade arrangement, but this does not necessarily ensure frictionless trade as businesses had hoped.
In fishing, the last issue to be resolved and the most politically sensitive, the sides agreed on a 25 percent reduction in quotas for European Union nations to be phased in over five and a half years.
Britain had been pressing for a three-year transition, the bloc for 14 years.
Even if a deal is reached and it gets support from all 27 EU leaders in the European Council, it will still have to be ratified before the transition ends.
In the UK, MPs are on standby as they may be recalled to parliament once the deal is ready to be approved.
The agreement does not cover services, such as London’s mighty finance sector, which account for about 80 percent of the British economy.
UK would no longer participate in the Erasmus exchange program, a Europe-wide program that has allowed about 200,000 students a year to travel abroad for study, work experience and apprenticeships since 1987.
Even if a deal is reached and it gets support from all 27 EU leaders in the European Council, it will still have to be ratified before the transition ends.
In the UK, MPs are on standby as they may be recalled to parliament once the deal is ready to be approved.
The agreement will then have to be ratified on the EU side, where it otherwise takes several months and sometimes even years to clear a trade deal.
To work around this, leaders may decide to apply a deal provisionally before the European Parliament holds a formal ratification vote next year. Depending on its contents, it may even have to be approved by national EU parliaments.

What is at stake?

Failure to strike a deal before the December 31 deadline would result in a no-deal Brexit, which could have far- reaching ramifications both domestically and internationally.
No deal is also likely to sever the already-tense relations between the UK and EU for some time.