On Wednesday (Dec. 30), the EU officially approved the UK-EU trade agreement. The UK-EU Trade and Cooperation Agreement was signed in Brussels by European Council President Michel and European Commission President von der Leyen. The agreement will next be shipped to London, England, to be signed by British Prime Minister Johnson. After the signing, the agreement will be provisionally implemented from January 1, 2021.
The Brexit trade agreement is expected to be approved by both Houses of Parliament today. Johnson believes the agreement can be easily passed after a key group of Conservative hardliners earlier expressed support. The British House of Commons is expected to vote at around 2:30 p.m. local time on Wednesday (10:30 p.m. GMT), with the House of Lords voting later in the day, thus ensuring that the legislation is passed before the end of the transition period at 23:00 on Thursday (7 a.m. GMT on Friday).
The pound continued to move higher against the dollar during the day, breaking through the 1.36 barrier as of 19:00, extending its gains to 0.8%.
Everything seemed to be going smoothly, but EU officials had noted in the days after the deal was reached that things were not over yet. And, as more than one British official has noted, British businesses could be in for a “bumpy road” (especially in the financial services sector).
What’s more, as the final vote on the deal takes place, a number of issues do remain outstanding that could have an impact on the deal before or after the vote is passed.
Fair Play
First and foremost, fair competition is the thorniest issue in the negotiations.
The Brexit agreement provides for third-party arbitration of economic disputes in the area of fair competition, and the UK does not have to fully comply with the EU judicial system, but can still impose corresponding tariffs on the UK and accept arbitration if the EU can prove that the UK’s behavior distorts fair competition.
This means that the dispute resolution mechanism between the UK and the EU is far from perfect. Members of the British Conservative Party have called on the Prime Minister to seize the opportunity to free the UK from the EU judicial system as much as possible.
The agreement also contains a clause that allows either party to renegotiate this part of the treaty on a regular basis if they are not satisfied with it. Thus, there is still the possibility of a future collapse if either the UK or the EU deems the trade deal unworkable.
Finance
The U.K. did not get everything it wanted to secure on financial services, and the agreement does not yet allow U.K. financial firms to offer financial services to the EU market, meaning the deal does not include commitments on market access. Prime Minister Johnson said that the agreement may not go as far as it would like in the area of financial services.
British Chancellor of the Exchequer John Sunnucks said on Sunday that the British Treasury will make the MoU negotiations with the EU an urgent priority in 2021 and continue discussions with the EU on access and reciprocity in financial services.
Fisheries
Britain’s Brexit trade deal provides a five-and-a-half-year transition period for the fishing industry, during which British fishing vessels will receive a 25 percent share of EU fishing vessels in U.K. waters, compared to the 80 percent share the U.K. previously required.
The agreement gives both the UK and the EU the right to impose tariffs on each other’s fish if they can prove that any future reduction in access to waters would cause economic or social harm.
The UK domestic fishing industry is generally unhappy with the UK’s compromise. The fisheries issue is one of the focal points of the dispute between the U.K. and the EU, and British fishermen say they will force the U.K. government to take a tough stance during the next negotiations.
The issue of sovereignty
Finally, the UK and the EU have yet to reach an agreement on the Strait of Gibraltar.
Gibraltar is a disputed territory between Britain and Spain, and the issue of Gibraltar’s border with Spain remains after Britain leaves the EU. Approximately 15,000 workers cross through Gibraltar each day, and without a deal, crossing could become more difficult, which could lead to long lines of commuters and potentially serious economic disruption.
With a deal in place, although the risk of a hard Brexit, as previously feared by markets, has been completely lifted – David McAllister, head of the European Parliament’s UK coordination group, said in an interview that the agreement means “certainty and clarity for businesses and people “. However, when it comes to the specific terms of the issue, the two sides still need to continue to mediate in the future, the risks ahead are still a lot.
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