Brexit and the new Trade and Cooperation Agreement

On the 24th of December 2020, just eight days before the agreed transition period was due to end, the EU and UK reached an agreement on their future trade and cooperation by way of the Trade and Cooperation Agreement (TCA).

The TCA, which has been in effect since the 1st of January 2021 is lengthy and complex. This blog provides an overview of the TCA and investigates its biggest impacts on two of the most anticipated areas of interest - the trade in goods and services and citizens’ rights.

Overview of the TCA

In addition to the rules surrounding trade and the free movement of citizens, the TCA covers a host of topics governing the relationship between the UK and the EU. These topics include:

  1. Digital trade;
  2. Movement of capital;
  3. Intellectual Property (IP);
  4. Public procurement;
  5. Energy;
  6. Taxation;
  7. Competition; and
  8. Data protection and cyber security.

Under the governance framework of the TCA, the EU and UK have agreed to create a joint Partnership Council to oversee the implementation of the TCA’s objectives. The Partnership Council will make decisions on the implementation, application, interpretation and amendment of the TCA, in which all decisions must be taken by mutual consent.

Trade in goods and services

The TCA brings with it a fundamental change in the trading relationship between the parties, with substantially reduced market access. From the 1st of January 2021, the UK no longer has single market access or participation rights in the EU Customs Union. As a result, the sale of goods and services are now governed by the TCA.

Notably, the TCA provides for zero tariffs and quotas for the trade of goods between the parties. In order for the UK to benefit from the zero tariffs, however, the goods must originate from the EU or the UK, thus satisfying the single origin requirement. In addition, all goods entering the UK or the EU must adhere to the respective parties’ regulatory standards for food and product safety. Traders will therefore have to comply with a considerable amount of red tape and ensure that their goods meet the single origin requirement to avoid any import duties and regulatory procedures.

The trade of services bears no such red tape, however, the benefits enjoyed under the single market are far from replicated. With the loss of the UK’s single market rights, each of the 27 EU member states will impose its own national regulations on the UK service provider as opposed to one single market requirement. In addition, many professional qualifications will not be automatically recognised in a particular EU member state, thus complicating cross-border service provision.

Citizens’ rights 

From the 1st of January 2021, the free movement of persons regime previously in place between the parties, no longer applies. Interestingly, besides travel for business purposes and specific social security rights, the TCA does not provide for any hard and fast rules on the mobility of UK or EU citizens. As a result, if an EU citizen wishes to reside or work in the UK, they will need to adhere to the UK’s immigration rules (and vice versa for any UK citizen looking to enter the EU).

For short stay visits, UK citizens are allowed 90 days visa free stay in the EU which is the same for any EU citizen travelling to the UK. For longer term stays, the UK has recently implemented a points-based immigration system covering both EU and non-EU citizens. Conversely, UK nationals intending to stay long term in an EU member state can do so if they meet the conditions for third-country nationals set out under EU law, as well as the national law of the relevant EU member state. 

For EU or UK citizen who have been living in one another’s territory during the transition period under the EU-UK Withdrawal Agreement, these provisions continue to apply. In summary, these citizens are able to rely on their rights of residence indefinitely, meaning that EU or UK citizens can apply for permanent residency on the basis of the EU Settlement Scheme. This right of residency will only be lost if a person is absent from the particular country for more than five consecutive years. 

Conclusion

The TCA is a welcome development in the relationship between the EU and the UK, particularly because in the absence of this agreement, the two parties would essentially be trading on ‘WTO’ terms. The TCA therefore sits in the middle of the unfavourable WTO terms and the favourable rights previously enjoyed under the EU single market and Customs Union. 

The TCA, however, is not a complete agreement and a number arrangements are still yet to be put in place. This framework is thus a work in progress, and we are yet to see how important decisions and disputes will be handled by the joint Policy Council. Rest assured Blenheim will monitor these developments closely and continue to update our network on the implementation of the TCA’s objectives.

For more information on Brexit’s impact on your business and how to mitigate the legal risks associated with these developments, please contact one of the members from Blenheim’s international Team specialising in cross-border commercial and corporate matters.

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