The EU-UK Trade and Co-operation Agreement

The EU-UK Trade and Co-operation Agreement is the long-awaited trade treaty between the United Kingdom and the European Union, which was agreed at last on 24 December 2020, and comes into effect on 1 January 2021, as the Brexit Transition Period ends.

The Agreement does not cover Gibraltar nor the British overseas territories. Gibraltar was part of the European Union, but excluded from most of the active areas of the Union: the single market, common commercial policies and trade policies (as it is a free port) and the Common Agricultural Policy as it has no farms. Therefore the provisions of the Agreement, which deal with those very areas, are of little relevance to Gibraltar. A separate agreement has been made for Gibraltar to form part of the Schengen area.

Background

The United Kingdom and Gibraltar ceased to be a member of the European Union on 31 January 2020, and this was followed by a Transition Period to 31 December 2020, as a bridge until a trade treaty could be agreed. That treaty was agreed in the nick of time. The Agreement was negotiated with a rare political intensity.

What we have is effectively a ‘Canada+’ agreement, achieving the points most crucial to both sides, namely no customs duties to be imposed, preventing or minimising other trade barriers, and a principle of non-discrimination in such fields as regulation and procurement. The foundations on which it is built are international norms and the World Trade Organisation rules, not a residual form of EU law.

The EU’s demand for a ‘level playing field’ has been incorporated in an interesting way which appears to meet the aspiration of both sides, if not as the EU had envisaged it in their original proposed text.

There are areas for co-operation in the international field, on environmental matters for example, and co-ordination on data protection – though this is seen as a necessity for open trade and exchange of data between both sides.

The agreement goes beyond trade matters though. It includes co-operation on law enforcement: this is a major section.

(The commentary will be built up after Christmas. It was published in English only on 26 December 2020.)

The Agreement

PART ONE: Common and Institutional Provisions

This is short and standard. The main interest is in the creation of committees to co-ordinate, discuss and determine practical issues. The list of these provides an initial summary of the concerns of the Agreement.

There will be:

  • Partnership Council, and under it a series of committees:
    • Trade Partnership Committee;
    • Trade Specialised Committees:
      • Customs Cooperation and Rules of Origin
      • Sanitary and Phytosanitary Measures
      • Technical Barriers to Trade
      • Services, Investment and Digital Trade
      • Intellectual Property
      • Public Procurement
      • Regulatory Cooperation
      • Level Playing Field for Open and Fair Competition and Sustainable Development
      • Administrative Cooperation in VAT and Recovery of Taxes and Duties
    • Specialised Committees on:
      • Energy
      • Air Transport
      • Aviation Safety
      • Road Transport
      • Social Security Coordination
      • Fisheries
      • Law Enforcement and Judicial Cooperation
      • Participation in Union Programmes

It is specified from the beginning that both sides are represented on committees and for each that it “shall set its meeting schedule and its agenda by mutual consent”. Rules of procedure and for decision-making are in an Annex.

Part One Article 4 specifies that decisions (as opposed to recommendations) are binding on both parties, but specifies mutuality in decisions, that “The Partnership Council or, as the case may be, a Committee, shall adopt decisions and make recommendations by mutual consent.”

In addition to committees, there is a requirement to consult with industry bodies and bodies ‘representing’ civil society. This may be valuable but could quickly be corrupted as monopolists gain control of industry consultation groups and driven activists control civil society groups (‘The Civil Society Forum shall be open for the participation of independent civil society organisations established in the territories of the Parties’), so constant review and renewal of the system will be needed.

PART TWO: Trade, Transport, Fisheries and Other Arrangements

HEADING ONE: Trade

Title I: Trade in goods

These are the key provisions of the whole agreement.

Chapter 1:

Article 5 (page 20) states plainly:

Except as otherwise provided for in this Agreement, customs duties on all goods originating in the other Party shall be prohibited.

Likewise, neither side may impose any tax or charge on imports from the other, except those equally imposed on domestic goods.

In addition, there shall be freedom of international transhipment through the United Kingdom or through the European Union.

In Article 10:

A Party shall not adopt or maintain any prohibition or restriction on the importation of any good of the other Party or on the exportation or sale for export of any good destined for the territory of the other Party, except in accordance with Article XI of GATT 199

There are further details on repairs and remanufactured goods.

Smuggling is of common interest, and there will be a requirement for co-operation in detecting and eliminating it.

Chapter 2:

A key point concerns goods imported from the third country: imports from (say) the United States cannot pass straight through Southampton and on to Rotterdam customs-free as if they had come from the United Kingdom. Therefore ‘rules of origin’ are adopted, which appear to follow international norms.

Title II: Services and investment

It is frequently observed that Britain’s major sector is the services sector, and so free trade in services is crucial, in particular financial services. In the same way though, European businesses rely on being able to use British services, in particular financial services. On the other hand, these services are not equivalent to traded goods as they do not pass through borders and may be provided remotely. The crucial tests then are whether service-providers can feely promote themselves in the European market, whether they can be blocked from providing services, and whether they can maintain establishments.

In this Title too, a liberal approach is taken quite consistent with the practises Britain would have wanted to put in place in any case.

Article 3.1 deals with cross-border trade in services. Measures will be banned which impose quotas or monopolies, or which impose specific types of legal entity for service suppliers. Article 3.3 bans any requirement for a service provider to have a local establishment. Article 3.4 has a non-discrimination provision, that each Party shall accord to services and service suppliers of the other Party treatment no less favourable than that it accords to its own services and services suppliers.

Financial services are specifically included in these principles, as in Article 5.42:

Each Party shall permit a financial service supplier of the other Party established in its territory to supply any new financial service that it would permit its own financial service suppliers to supply in accordance with its law in like situations, provided that the introduction of the new financial service does not require the adoption of a new law or the amendment of an existing law. This does not apply to branches of the other Party established in the territory of a Party.

(In this case, once side or the other may require a particular form of legal entity: Article 5.42, para 2.)

There is little need for a ‘level playing field’ in this area as financial services are not capable of such flattening, and distortions of competition through state aid are not an issue. It is provided that ‘The Parties shall make their best endeavours to ensure that internationally agreed standards in the financial services sector for regulation and supervision‘.

The exceptions to universal establishment later on in 3.6 are small in scope. Legal services are not so open for example, as detail in Section 7, beginning down on page 114, but even there a non-discrimination provision is implied, and a lawyer qualified in one jurisdiction may practice his home law (not the host country’s law unless he is qualified in it) on either side of the Channel.

All this being said, there may be requirements for registration or for membership of a self-regulatory organisation. These are permitted, as long as they are not discriminatory.

Title III: Digital trade

Digital trade is open and cross-border flows of data and service are recognised so it is more an issue of ensuring data protection (in order to allow the preceding cross-border flow of data) and otherwise affirming that either party might have legitimate reasons for regulation. Such a rapidly changing field is hard to pin down (so it is unsurprising that the Agreement contains references to ‘modern’ technology that is already out of date and withdrawn). This must remain a dynamic area in which areas of regulation may be more aspirational than real.

Title IV: Capital movements, payments, transfers and temporary safeguard measures

Freedom to transfer capital is expected in the modern age and is enshrined here, in Title IV, which obvious exceptions, such as freezing orders or bankruptcy restrictions.

It is a short title as there is little to say. It does permit exceptions, for emergencies; though it is not clear whether illiberal action taken in such emergencies will actually make the situation worse.

Free movement of capital was not always the norm: into the 1970s governments tried to stem money flowing out of the country (often fleeing their damaging policies) and the shifty-man-trying-to-get-on-a-plane-with-a-suitcase-full-of-banknotes was a stock image in films. After Spain joined the EU in the 1980s it was several years before their government gave up trying to stop capital leaving Spain.

Title V: Intellectual property

Protection of intellectual property (copyright, trademarks, patents etc) was always a given (and flagged up on this site long before talks had even started). Intellectual property is defined and protected by worldwide international treaties already so much is repetition.

The United Kingdom’s Withdrawal Agreement Act converts Community trade marks (the pan-EU version) into British trade marks automatically, for example.

Title VI: Public procurement

This has been a major complaint from local authorities: the bureaucracy and consequent cost of complying with European Union procurement rules. There are still to be procurement rules, but not with such detail (at least not in the Agreement itself). Largely it is technology which has come to the rescue: there is no need for a complex paper form to place an notice in the Official Journal of the European Communities every time a public contract was placed, when a web app will do it all.

From Page 148, Title VI has the new agreement on procurement. It is founded on non-discrimination between British and European providers.

There must be a single point of advertisement: Article 4 ays:

With regard to covered procurement, all procurement notices including notices of intended procurement, summary notices, notices of planned procurement and contract award notices shall be directly accessible by electronic means, free of charge, through a single point of access on the internet.

It is not entirely clear whether this means every local council can have its own single point of access, but I take it that there should be a single national point of access. In any case if it is done locally it is simple enough for each local noticeboard to feed a central point of access for the whole of the United Kingdom.

There will still be councillors who demand that preference be given to local firms. The answer will still be ‘no’, if the contract is of such a size as to fall within the rules.

Therefore the Agreement ensures that there will still be burdensome bureaucracy hindering the grant of large public-sector procurement, but ultimately an open, if bureaucratic, system of tendering it should work towards getting a better deal for the taxpayer.

Interestingly the threshold is defined not in euros but in Special Drawing Rights, a basket unit devised by the International Monetary Fund. (1 XDR is currently valued at about £1.)

Title VII: Small and medium-sized enterprises

A brief title (pages 153 to 156), and an odd one but potentially helpful for smaller businesses expanding into the European market: each side must maintain a website giving essential details of the requirements for doing businesses in each market. (In the case of the European Union this may be more complicated across the member states: we will have to see how it works.)

Title VIII: Energy

Complex and longer, this title is one for specialists in the field, covering interconnection of systems, non-discriminatory access to the market, and access for new entrants to the market.

It goes on though to look at some green issues, specifically renewables, as well as energy security. Measure against climate change come later.

Title IX: Transparency

The ‘Transparency’ title is another brief one. It requires transparency in what regulatory measures are in place, and answering questions from anyone who asks.

Title X: Good regulatory practices and regulatory cooperation

A first principle stated, in Article 1 Paragraph 4 is that:

Regulatory measures shall not constitute a disguised barrier to trade.

Article 1 though starts with the approach that “Each Party shall be free to determine its approach to good regulatory practices under this Agreement in a manner consistent with its own legal framework, practice, procedures and fundamental principles underlying its regulatory system.”, though that is a start before saying how they should not go their own way if regulation is used as a barrier to trade.

The Article however lists areas where regulation may be used more freely, including such areas as health and safety, labour conditions, environment / climate change, consumer protection, social protection, cultural diversity, integrity and stability of the financial system etc. Some of these could be grasped as excuses for protectionism. In that case we would see how effective the committee system can be.

Title XI: Level playing field for open and fair competition and sustainable development

The ‘Level Playing Field’ was one of the major blocks on the road. All due credit must be given to both sides for reaching a sensible compromise that achieves mutual objectives.

The ‘level paying field’ has its main focus now on state aid: financial subsidies by any government which distort the market in favour that country’s businesses. This was to be expected and has been flagged up on this site a number of times, and it is explicitly in the Political Declaration. The provisions do not follow the original EU proposal but are balanced for both sides.

(It is a very lengthy Title. The detail can be reviewed and may be added to in this commentary later.)

Title XII: Exceptions

(Commentary to follow.)

HEADING TWO: Aviation

This heading come in two titles:

  • Title I: Air transport
  • Title II: Aviation safety

The agreement allows smooth continuation of air transport, and for co-operation on matters of security. Specifically, there is freedom to overfly and to land, but this applies only to air carriers owned by British or European Union citizens, or governments. European airspace is controlled separately from British airspace, but co-operation in airspace management is encouraged.

Just to make sure, neither side may tax the fuel and lubricants etc aboard an aircraft for its operation, nor equipment, spares etc.

Licencing of operators must be done in a non-discriminatory manner, and likewise any landing charges or user charges.

The air transport and airline safety titles, Title I and Title II, are each terminable by either party on 9 months’ notice.

HEADING THREE: Road transport

Title I: Transport of goods by road

Lorries must pass freely, but there are limits.

A driver entering Europe from Britain or vice versa must:

  • hold a Certificate of Professional Competence; an HGV licence in short. The Specialised Committee on Road Transport may be required to certify the sufficiency of different national licensing standards.
  • comply with “the rules on driving and working time, rest periods, breaks and the use of tachographs in accordance with Sections 2 to 4 of Part B of Annex ROAD-1.”

Likewise, the vehicle must be up to standard, which again is a matter for the Committee. Neither side may prohibit vehicles which comply with the agreed standard.

To ensure smooth running of the system, each side must consult with the other over proposed regulatory changes, which may be considered by the Committee. (This does not include the actual rules of the road.) Therefore Britain could not (for example) unilaterally lower the limit on the weight of lorries permitted on the road. For any failure to consult, or adoption of a regulation in defiance of the Committee, the other side may “adopt appropriate remedial measures”.

This title may also be terminated by either side on notice.

Title II: Transport of passengers by road

Co-ordination of coach and bus transport 9which is the main focus of this Title, follows the theme of the air transport agreement outlined above, with details though specific to road transport. However, it is provisional, as a wider international agreement is anticipated, and so it is stated that the provisions of the Title cease “as of the date the Protocol to the Interbus Agreement regarding the international regular and special carriage of passengers by coach and bus enters into force for the UK, or six months following the entry into force of that Protocol for the Union, whichever is the earliest”

HEADING FOUR: Social security coordination and visas for short-term visits

Title I: Social security coordination

This title is short, and simply requires co-ordination of social security systems in accordance with the Protocol on Social Security Coordination contained in the Annexes (from page 1132). This is only in relation to workers from an EU member state working in the United Kingdom, or British workers in the European Union.

In the European Union, Social Security is a matter for each member state but they are co-ordinated so that workers moving across borders are not disadvantaged. The intent is to replicate that co-ordination, or rather retain it, across the English Channel.

Title II: Visas for short-term visits

A very short title, of just 3 paragraphs. There shall be visa-free travel for Britons into Europe and for Europeans into the United Kingdom, until the United Kingdom ends that arrangement. However if the United Kingdom introduces a visa requirement, it must notify the European Union and cannot distinguish between member states, except the Irish Republic as the common travel area overrides this.

HEADING FIVE: Fisheries

One of the difficult areas right up to signature, the fisheries provision has required compromise on both sides and may yet cause political difficulties for each side. It has provisional elements which can be terminated. Nevertheless it is an achievement to have reached a settlement on the issues.

HEADING SIX: Other provisions

The ‘other provisions’ of Heading Six (from page 275) are largely definitions boilerplate provisions, invocation of the World Trade Organisation rules and such matters.

However, it then has a wide provision allowing for the terminaltion all all that has gobne befre:

Without prejudice to Article FINPROV.8 [Termination], each Party may at any moment terminate this Part, by written notification through diplomatic channels. In that event, this Part shall cease to be in force on the first day of the ninth month following the date of notification. Heading Four [Social security coordination and visas for short-term travels] and the Protocol on Social Security Coordination shall not be terminated pursuant to this Article.

PART THREE: Law enforcement and judicial cooperation in criminal matters

Title I: General provisions

Title II: Exchanges of DNA, fingerprints and vehicle registration data

Title III: Transfer and processing of passenger name record data

Title IV: Cooperation on operational information

Title V: Cooperation with Europol

Title VI: Cooperation with Eurojust

Title VII: Surrender

Title VIII: Mutual assistance

Title IX: Exchange of criminal record information

Title X: Anti-money laundering and counter terrorist financing

Title XI: Freezing and confiscation

Title XII: Other provisions

Title XIII: Dispute settlement

PART FOUR: Thematic cooperation

Title I: Health security

Title II: Cyber security

PART FIVE: Participation in Union programmes, sound financial management and financial provisions

PART SIX: Dispute settlement and horizontal provisions

Title I: Dispute settlement

Title II: Basis for cooperation

Title III: Fulfilment of obligations and safeguard measures

PART SEVEN: Final provisions

ANNEXES

If the Devil is in the detail, then the detail is in the Annexes. Much of the material is technical and clarification.

The Withdrawal Agreement: relevance

The Withdrawal Agreement is largely superseded by the Trade and Co-operation Agreement. Most of the Withdrawal Agreement was worded to apply only during the Transition Period, which expires on 31 December 2020.

However there are important elements which continue, in particular:

  • The Protocols on Gibraltar and on Akrotiri and Dhekelia
  • The Ulster Protocol

The Ulster Protocol (‘Protocol on Ireland/Northern Ireland’) was the most politically explosive element of the process of getting the Withdrawal Agreement agreed and approved in Parliament. It is best explained in this website’s existing commentary on the Withdrawal Agreement. It is a little less troublesome now that the zero-tariff agreement is in place, but will still cause ructions where bureaucracy imposes on trade with the Irish Republic and where regulations differ.

See also

Books