The trade agreement between the UK and the European Union has welcomed relief for companies, avoiding the prospect of punitive tariffs and a chaotic split with no agreement from Britain’s biggest trading partner this week.
However, the agreement leaves the main problems unsolved or at risk of exploding again. This is where the Brexit deal can cause problems in the future:
Level playing field
An agreement on the so-called level playing field, creating the conditions for fair competition between companies, was one of the thorniest parts of the negotiations. The agreed compromise means that the UK does not need to align with EU laws, but the bloc can impose proportional tariffs, subject to arbitration, if it can show that the UK’s actions have distorted fair competition.
This means that the issue of taxes on trade between the UK and the EU is still far from being resolved and is a living issue. One of the central arguments of the campaign to leave the bloc was that Britain would “regain control” of its own laws, and Eurosceptic members of Boris Johnson’s Conservative Party asked the prime minister to take the opportunity to cut the regulations.
The agreement also contains a “review” clause that allows either party to periodically renegotiate this part of the treaty if they are not satisfied with the way it is being used. The trade agreement may therefore still collapse in the future if the United Kingdom or the EU decides it is not working.
Finance
The agreement offers little clarity for financial companies. There is no decision on so-called equivalence, which would allow companies to sell their services on the EU’s single market from the city of London. The agreement only contains standard clauses on financial services, which means that it does not include market access commitments.
Johnson told the Sunday Telegraph that the business “may not go as far as we would like” in financial services, in a rare admission that his trading strategy was insufficient.
The Treasury is expected to negotiate a memorandum of understanding with the EU as an urgent priority in 2021 and London will continue discussions with Brussels on access and equivalence for financial services, Treasury Chancellor Rishi Sunak said on Sunday.
Dice
The United Kingdom and the EU agreed to only one temporary solution to maintain the flow of data between their territories. For a provisional period of a maximum of six months, data can continue to be transferred until a separate legal agreement is reached.
EU officials said a so-called data suitability decision, which would certify that the UK’s data protection standards are comparable to the bloc’s, could be taken in early 2021.
Fish
The Brexit trade agreement contains a five and a half year transition period for fisheries, during which British fleets will see an increase equal to 25% of the catches previously caught by EU vessels in UK waters. Thereafter, access will be subject to annual negotiations.
The agreement gives the United Kingdom and the EU the right to charge fish rights to each other if they can demonstrate that any future reduction in access to water causes economic or social damage.
There was a furious response from fishermen to the agreement, with the National Federation of Fishermen’s Organizations describing it as a “betrayal”. Fishing was a totemic issue in the Brexit campaign and they will pressure the UK government to take a hard line when the next negotiations take place.
Gibraltar
The UK and the EU have not yet reached an agreement on Gibraltar, the British territory connected to mainland Spain. Without an agreement, crossing the border could be more difficult, which could cause long lines for passengers and significant economic disruptions. About 15,000 workers cross the border every day.
Any attempt by Spain to erode or even end British control of the territory has long raised the ire of conservative lawmakers, including former leader Iain Duncan Smith, and they will fight hard to prevent the UK from making any concessions.