As a result of the UK's withdrawal from the EU on 1 February 2020 there will be a transition period, the EU and the UK will be negotiating their future relationship in a number of areas; where a trade agreement is of very high priority.

Background

On 23 June 2016, the United Kingdom voted in favour of leaving the European Union and notified the European Council of its intention, in accordance with Article 50 of the Treaty on European Union (TEU), on 29 March 2017. Although the then Prime Minister, Theresa May, and EU leaders concluded a deal on the UK's withdrawal in November 2018, a majority could not be reached in the House of Commons.

The prolonged stalemate in the UK Parliament over the approval of the withdrawal agreement led the UK and the EU to agree on three extensions of the two-year negotiating period.

Under a new Prime Minister, Boris Johnson, the Conservative Party won the December 2019 general election by an overwhelming majority. Subsequently, on 23 January 2020, the UK Withdrawal Agreement Bill was given Royal Assent. In addition, the European Parliament gave its approval to the Withdrawal Agreement on 29 January 2020.

The UK's withdrawal from the EU entered into force on 1 February 2020. The agreement provides for a transition period from that date until the end of 2020. During this period, the EU and the UK will negotiate their future relationship in various areas; a trade agreement has been established as the highest priority.

Positions of the parties

The transition period - also called the implementation period - may be extended by one or two years, provided that both parties agree, including under the conditions necessary for an extension, in particular financial, before 1 July 2020. However, the United Kingdom's EU Withdrawal Agreement Act prohibits any extension of the transition period (section 33).

I am of the view that this contradiction would involve agreeing an extension which would in turn require a new act of the United Kingdom Parliament to repeal the existing provision.

During the transition period, the UK will no longer be a Member State or have members in any EU institution, but will remain in the Customs Union and the Single Market, giving the EU and the UK time to negotiate new arrangements to govern the future relationship.

The Political Declaration sets out the intentions of the parties with regard to their future relationship and serves as a framework for the negotiations. In this regard, the introduction to the document states that the European Union and the United Kingdom are determined to work together to safeguard the rules-based international order, the rule of law and the promotion of democracy, and high standards of free and fair trade and workers' rights, consumer and environmental protection, and to cooperate in combating internal and external threats to their values and interests. The partnership will be "comprehensive, encompassing a Free Trade Agreement (FTA) as well as broader sectoral cooperation". The partnership will be "supported by provisions ensuring a level playing field for open and fair competition".

However, the scale of the commitments will depend on the scale of the future relationship. A new agreement must necessarily take into account the economic interrelationships between the EU and the UK, as well as geographical proximity.

The EU's position has been relatively consistent over time. On 13 December 2019, the day after the United Kingdom general election, the European Council expressed its wish to establish the closest possible future relationship with the United Kingdom.

This future relationship, as advocated by the EU, will have to be based on a balance of rights and obligations and ensure a level playing field.

The EU's position is in line with the Political Declaration. The President of the Commission, Ursula von der Leyen, has defended this position. During the plenary session of the European Parliament on 29 January 2020, Ms von der Leyen expressed the European Union's desire to forge a close partnership with the United Kingdom, through an "unprecedented zero tariff, zero quota" trade agreement.

But a precondition is that EU and UK companies continue to compete on a level playing field: "we will certainly not expose our companies to unfair competition," said Mr von der Leyen.

Therefore, the greater the UK's commitment to compliance with EU labour and environmental standards, the better the access to the EU market will be, adding that it is in the common interest of the parties to have as close a partnership as possible.

Conclusion

The European Parliament, in its resolution of 29 January 2020, notes that the objectives outlined in the Political Declaration on the future relationship between the EU and the United Kingdom are in line with those set out in Parliament's resolution of 14 March 2018, which called for an association agreement. Furthermore, the European Parliament also expressed its willingness to transform the Political Declaration into a document of a more formal and legal nature, which defines the objective of establishing an association.

However, the UK position has changed over time, as its objectives and "red lines" are incompatible with EU law and principles.

In a policy paper published in July 2018 in the UK, the Theresa May government stated that the UK's objective was to participate in the Customs Union without imposing border restrictions. Here, the main concern is to avoid the creation of long queues at the border for the verification of imports.

The United Kingdom's requirement to preserve independence in trade policy and regulation, among other things, however, is incompatible with the principles of the European Union's customs union and single market.

Today, UK Prime Minister Boris Johnson has repeatedly said that the UK is seeking a Canadian-style FTA that focuses on goods and services, and that allows the UK to preserve its own trade policy and regulatory autonomy. In its written statement to Parliament on the future relationship between the UK and the EU, published on 3 February 2020, the UK Government seems to suggest that a Canadian-style agreement is indeed a "take it or leave it" proposal.

References

• Cîrlig C. and Puccio L., The future partnership between the European Union and the United Kingdom, EPRS, European Parliament, September 2018.
• Cîrlig C., The revised Brexit deal: what has changed and next steps, EPRS, European Parliament, October 2019.
• European Commission, Internal preparatory discussions on future relationship: free trade agreement, Task Force for Relations with the United Kingdom (UKTF), 13 January 2020.
• European Commission, Recommendation for a Council Decision authorising the opening of negotiations for a new partnership with the United Kingdom of Great Britain and Northern Ireland, COM(2020) 35, 3 February 2020.
• European Council, Guidelines adopted by the European Council (EUCO XT 20001/18), European Council (Art. 50), 23 March 2018.
• Future trade relations between the EU and the UK: options after Brexit. European Parliament Policy Department for External Relations, European Parliament, March 2018.
• Felbermayr G., Fuesr C., Gröschl J. and Stöhlker D., Economic Effects of Brexit on the European Economy, EconPol Policy Report (04), November 2017.