Last reviewed 26 November 2018
John Davison considers the Withdrawal Agreement, relevant for all businesses who trade in goods or services with the EU, or have customers or suppliers trading with the EU.
The way the UK will trade with the EU post Brexit is still subject to considerable debate and uncertainty. The UK has, however, published a Withdrawal Agreement setting out the future relationship between the EU and the UK. With the document consisting of 585 pages, it can be difficult to determine how this will impact an individual business. It would be strongly advisable for any business to review the document to assess its affect.
Initial withdrawal stage
The issued document only concerns the withdrawal process. There will be continued negotiations regarding the actual relationship between the UK and the EU after the transition stage, which finishes at the end of 2020. During the transition stage, the UK will need to abide by EU rules, but it will no longer be a member of the EU and will not be a member of any of the EU institutions.
The EU has approved the Withdrawal Agreement at a recent EU summit and it has been said that it is the only deal possible. If this deal is not agreed to by the UK Parliament, it would appear that the UK will be left with no deal; although an extension for negotiations is also possible.
The withdrawal declaration allows for EU citizens in the UK to retain their residency and social security rights post Brexit. UK citizens in the EU will be in a similar position. Individuals taking up residence in the UK (or UK residents taking up residence in the EU) during the transition will be allowed to stay in that country. Anybody who has resided in the UK or an EU country for five years will be allowed to apply for permanent residence. This gives some certainty for those who are living and/or working outside their home country and should provide a degree of certainty for employers of EU nationals.
The Withdrawal Agreement provides for no tariffs or fees across all goods sectors. This is to be based on the current single customs territory. It will be necessary to agree a long-term trade deal by the end of 2020 that avoids a hard border between Northern Ireland and the Republic of Ireland. If this cannot be agreed, then the “back-stop”, consisting of a single customs territory between the EU and the UK, will be triggered. Northern Ireland will be more closely aligned with the rules and regulations of the EU than the rest of the UK under this arrangement. The UK cannot leave the back-stop without the concurrent agreement of the EU and the UK will be unable to agree separate trade deals with other countries if the back-stop takes effect. This, therefore, puts considerable pressure on the UK to come to an agreement with the EU regarding its future trading relationship after the end of the transitional period to avoid the back-stop.
If the Withdrawal Agreement is confirmed by the UK Parliament, this will mean that current trade rules with the EU will apply and there should be few disruptions at the border between the UK and the EU during the transition period. If the agreement is not confirmed and there is no deal, the UK will need to plan with the EU for how goods will be imported to and exported from and to the EU. This agreement will need to be come to very quickly and it is expected that the trading basis will be on Word Trade Organization (WTO) terms and there will be a need to use customs documentation for imports and exports. This should not be too difficult as the UK currently trades on WTO basis with many countries. Systems will, however, need to be adjusted to take into account this change.
The UK has agreed that it will establish similar equivalence frameworks to the EU frameworks. The EU has agreed to assess these frameworks and conclude these assessments by June 2020. This should allow the UK to provide financial services post 2020 into the EU, and EU businesses will also be able to provide these services into the UK. This would seem a pragmatic and sensible solution given that currently the UK and EU financial services regulations and standards are harmonised.
The UK and EU have agreed to establish specific arrangements in digital services. This includes e-commerce, telecommunications and emerging technologies. These arrangements will relate to both goods and services provided through electronic means (such as online retailing or web services).
While it has been stated that the UK will be taking back control of its fisheries, the Withdrawal Agreement says that the EU and the UK will seek to conclude an agreement on access to waters and fishing opportunities. Consequently, while the UK may be leaving the common fishing policy, it may agree to a similar arrangement in the future.
EU-approved geographical indications such as Stilton cheese, Welsh Lamb, or Parma Ham will remain protected.
During the period of the Withdrawal Agreement, the European Court will retain ultimate authority for hearing disputes. There is the potential that the European Court will retain an influence on UK matters after the end of the transitional period depending on the agreements that are made.
If the Withdrawal Agreement is rejected at some stage before Brexit is due to happen, (29 March 2019), it is unlikely that there will be any other deal agreed. This will lead to a rush to conclude many agreements. For example, it would be necessary to agree the terms of UK aircraft flying through EU airspace (and EU aircraft flying through UK airspace) and regulatory approval for pharmaceuticals. No doubt, many of these can be agreed on a temporary basis to ensure no or little disruption, but that is not, of course, guaranteed. It may be necessary for goods that are shipped to or from the EU and from or to the UK to use customs declarations (the C88 form). Businesses need to ensure they are familiar with these forms and how to process the relevant documentation and make declarations if goods are sent to or from the EU. In addition, it may be necessary to make provision to deal with trade disruption over this period.
The Withdrawal Agreement represents significant progress. It is not, however, the solution to the uncertainty concerning Brexit. As would be expected, it is the result of a number of compromises and many may not believe that it is the right solution. This is a significant step forward, but there is still a long way to go before businesses can understand what will be happening post Brexit and after the end of the transition period.