Brexit trade deal means ‘freedom’, but at a cost: The arguments will be far from over

Opinion piece (The Observer)
Sam Lowe
27 December 2020

The UK may have won the power to diverge from EU rules, but the new relationship will be one of constant renegotiation.

The new EU-UK trade and cooperation agreement will make trading goods and services between the two partners more difficult. While the trade agreement delivers duty- and quota-free trade (so long as exports meet stringent local content requirements), it does little to facilitate trade in services, and the UK did not manage to substantially reduce the need for more post-Brexit controls and bureaucracy.

The government explicitly prioritised regaining the ability to set its own laws over retaining the economic benefits of EU membership. Against this metric, the negotiations can be deemed a partial success. The UK successfully rebuffed EU demands to follow its subsidy rules now and for ever, to keep specific environmental and labour rules, and to have the European court of justice involved in trade disputes.

But it did not avoid signing up to strict conditionality. Great Britain now has the ability to diverge from EU rules in future – but doing so could lead to it losing the benefits of the trade agreement, and tariffs being reimposed, for example. Freedom, but not cost-free.

Where the UK did attempt to maximise trade opportunities, its efforts largely fell flat. British negotiators failed to convince the EU to reduce the frequency of border checks on food products imported from the UK (such as langoustines and lamb); failed to ensure that UK professional qualifications would be recognised across the EU; failed to include provisions allowing UK-based testing centres to continue certifying products for the EU market; and failed to win the argument in favour of allowing imported foreign parts (such as car components) from Japan and elsewhere to count towards the agreement’s rules-of-origin thresholds, which determine whether a product can be traded tariff-free or not.

This is not to say the UK did not get anything it wanted. The EU did agree to make it easier for electric vehicles and batteries to qualify for tariff-free trade, for example. But the concessions are not as generous as the UK would have liked, and are only temporary.

Neither is this trade deal the end of the story. It marks just the beginning of the UK’s new relationship with the EU, and will inevitably evolve over time. Next year, for example, the UK will need to decide whether to link its own domestic carbon-pricing scheme with the EU’s, find out whether the personal data of EU citizens can still be stored on UK servers, and re-enter discussions on the working of the sea border between Northern Ireland and Great Britain.

There is also the outstanding question of financial services equivalence – a unilateral EU decision whether to allow certain UK-based financial businesses to continue selling directly to EU-based clients. Even if such permission is granted, we should not assume it will be permanent.

The UK will also need to decide whether to use the new-found freedom to diverge from EU rules and approaches, and if so whether it is willing to accept the consequences of doing so. If it chooses to do so, years and years of disputes and reviews await.

In the longer term, it is inevitable that every successive UK government will want to renegotiate, or alter, aspects of the relationship with the EU. This could involve promises to re-enter the Erasmus scheme or commitments to deeper regulatory reintegration in order to soften the border both between Great Britain and the EU, and Great Britain and Northern Ireland. We could also see a government elected on a mandate of tearing up the deal and starting again.

But whatever the future holds, the difficult decisions will not go away – greater liberalisation of services trade, for example, would at the very least require the UK to accept freedom of movement. And negotiating with the union from the outside will remain an unpleasant experience: just ask the Swiss.

The EU-UK relationship will slip down the news agenda, but it will not disappear entirely. Our proximity to each other, and the fact that the EU remains the UK’s most important economic partner, means negotiations over something or other will continue for decades to come.

Sam Lowe is a senior research fellow at the Centre for European Reform, and a former member of the Department for International Trade’s Strategic Trade Advisory Group.