Britain and the European Union Make a business deal On Thursday, setting the terms for their trade relations after Britain completed its difficult separation from the European Union on December 31.
British lawmakers have been haggling for years over the divorce, known as Brexit. Britain The European Union officially left on January 31, With the book closed on nearly half a century of close relations with Europe, but it continued to follow the bloc’s rules during a transition period aimed at giving the two sides time to negotiate the trade deal struck this week.
Below are the basic conditions for that deal.
It is saving Britain from leaving the European Union
British companies have always been able to transport goods to and from the European Union without paying taxes or customs duties. Had the two sides failed to reach an agreement before the December 31 deadline, tariffs could have been imposed, which would greatly raise the price of cars and make it more difficult for British farmers. Selling meatFor example, in the European market.
It also looked likely to be a no-deal break Create a stalemate in the British ports And trucks on both sides of the border.
The new agreement means Britain is avoiding cumbersome tariffs or quotas on goods. But problems could still arise at the border, with more checks and merchants forced to complete new customs declarations.
And trade relations face more restrictions. The Office of Budget Responsibility has estimated that Britain’s GDP could be cumulatively 4 per cent lower over the next 15 years than it would have been if Britain had stayed in the European Union. Without an agreement, this drop would have been larger.
The agreement was not entirely a surprise. To some commentators, Brexit without a deal has always seemed more of a leverage beneficial for political purposes than a potential outcome of negotiations.
Both sides concede the fish, which is a major sticking point.
The number of people employed in the fishing industry in Britain has decreased in recent decades, and the British government has seen its split from the European Union as an opportunity to revive the industry by cutting off European companies’ access to British waters. Britain originally sought to reduce 80 percent of the fish quota that European Union boats would be allowed to fish in British waters.
British Prime Minister Boris Johnson has made major concessions on this point: The European Union’s share of fishing in British waters will be cut by 25 percent, according to British news reports. But Brussels also made concessions: The quota cut will take effect in five and a half years, roughly half the time the EU originally wanted.
British workers, dissatisfied with not having exclusive access to fish in British waters, may complain about the deal. But analysts said the British boats would not be able to catch everything that once went into European boats, even if they had the opportunity to do so.
The no-deal scenario would have also imposed tariffs on British fishing companies, making it more difficult to sell the catch to the European Union at competitive prices.
The pro-Brexit lawmakers won much of their cravings.
Citizens of EU member states can search for jobs elsewhere in the bloc, work there without requiring special permits and stay after they leave their jobs. But the trade agreement ends the free movement of people between Britain and the continent. It also ended Britain’s participation in the popular Erasmus student exchange program, which since 1987 has seen hundreds of thousands of people travel abroad every year for studies, work experience and vocational training.
As a single market and customs union, the European Union has also agreed to adopt the same rules and regulations so that goods, services, and capital can move freely across the borders of countries within the bloc. And it agreed to apply the same taxes to goods from outside the bloc, which means it can be shipped within the European Union without facing additional tariffs.
But Britain will now leave both the single market and the customs union and can pursue trade deals with other countries. Those points were among Britain’s most aggressive anti-European lawmakers.
But the European Union has also won reassurances.
In exchange for allowing British companies to avoid tariffs, the European Union wanted to ensure that these companies did not get unfair advantages over their European competitors. The bloc leaders were concerned that Britain would give its companies an additional advantage through additional government aid, or by lowering environmental standards or labor.
Britain did not want the European Union to be able to automatically impose sanctions if it decided to deviate from European rules. Therefore, the two sides worked to devise a mechanism through which either of them could file a complaint if he had evidence that one of them had changed the regulations in a way that would put the other party’s actions at a disadvantage.
As a last resort, if Britain and the European Union cannot find common ground in such a scenario, tariffs can be imposed to ensure that neither side enjoys too much of an advantage.
The British economy faces enormous obstacles.
The trade deal was primarily concerned with goods crossing borders. But the British economy is highly dependent on the services sector, and the deal did not immediately make it easier for British companies to sell financial and other services to their European neighbors.
Once the transition period ends on December 31, traders in London will leave the European Union’s single financial services market.
They both said that each wants to be able in the future to assess whether the other’s financial services regulations are equally strict, and whether they can continue to easily buy and sell services across borders.
But this system will not be as straightforward to banks and dealers as the current system.