Brexit deal details explained: what was agreed and what it means for the UK

Running to around 1200 pages, the deal agreed between Britain and the EU will form the bedrock of our future relationship for many years to come.

But what exactly has been agreed across trade, fishing, security and other areas of cooperation? Who has given ground and in which areas? And what will the deal mean for millions of people whose lives and livelihoods are interconnected with that of our largest neighbours and trading partner? 

Level playing field
One of the unique aspects of the agreement, reflecting Britain’s former EU membership, its economic size and close geographical proximity is the so-called level playing field mechanism.

It commits both the UK and EU to maintain equivalent and common standards on social, labour and environment regulation. However, the deal does not force the UK to match every new EU regulation like-for-like and standards are not defined in reference to EU law, which was a key demand of the British. Instead, the deal contains something called a “rebalancing clause” that is designed to resolve disputes between the two sides. This novel element has two parts and has not been used in free trade treaties before.

The first is that if one side believes that the actions of the other have distorted fair competition then they can apply to a neutral arbitration committee to impose limited tariffs to redress the balance of unfair competition and “level the playing field”.

The second element allows either side to trigger a review of the entire trade agreement, which could again allow tariffs to be imposed if either the UK or the EU has diverged in such a systemic way that the overall agreement is unbalanced.

From the UK side this allows Boris Johnson to insist that the UK has retained full sovereign rights over UK law and cannot be bound into the EU.

For Brussels it provides a guarantee that the UK cannot continue to have full market access to the EU unless it keeps up with future European rules and regulations. The treaty will be reviewed in 2024.

“State aid” or subsidy control
The UK has agreed, in a concession, to abide by common principles on how subsidy control or state aid should work.

The EU has also dropped its original demand for the “application of Union law” on “state aid” meaning there is no role for the European Court of Justice (ECJ) to arbitrate disputes. The UK accepted the principle of an independent competition agency that will oversee and interpret these common principles. But the government has won the right to have, if it chooses, a subsidy control regime based on tests that need evidence that state aid has caused an actual competitive distortion.

The EU operates a test based on a subsidy’s likely effect and a political process of prior notification and negotiation. European companies will be able to seek redress in British courts.

If either side believes subsidies are causing “significant” trade distortion and leading to job losses, then interim or unilateral measures such as tariffs are possible without going through the dispute mechanism.

If arbitration then found that a party had taken remedial interim measures wrongly then compensation or remedies would be available to compensate the other side.

Non-regression “clause” 
Britain has agreed to non-regression to standards that exist on December 31, 2020.

The government can move away from EU law as of January 1 as long as overall common standards are not undercut. This is important for the government as it avoids retaining EU law on the statute book. For a regression dispute to be triggered, regulatory divergence must be shown to have an impact on trade. A special “panel of experts” will assess disputes over divergence and if there is an impact on trade, the rebalancing mechanism can introduce remedies including tariffs. If there is a clear significant distortion in trade, either party can take interim measures pending arbitration.

Governance/enforcement
The government initially refused to accept binding independent arbitration and dispute settlement but conceded when the EU dropped demands for the ECJ or “Union law” to play a role in policing the agreement.

A partnership council will oversee the implementation of the agreement. It will be composed of representatives from both the EU and the UK and will be the first port of call for any disputes. Under the new rules, if the council cannot resolve the issue disputes will be settled by binding arbitration whose decision can empower either side to impose limited tariffs if the other violates the terms of the agreement in a way that distorts trade. The arbitration committee is likely to be made up of three people appointed by each side with those six individuals collectively choosing an  independent chairperson. Importantly such “enforcement” can result in “cross suspension” which could lead to trade tariffs on British exports being imposed after a dispute over fishing rights or energy connections. This represents another concession by the government. The arbitration panels, and particularly the chairman or woman in charge, could become as well known or as notorious as European commissioners as the new face of bureaucrats and jurists who make rulings that touch on sovereignty and its consequences in terms of trade tariffs.

Mutual recognition of product safety standards
This is an arrangement that lowers the costs of product safety testing by allowing each side to accept each other’s standards (and testing).

This is particularly important for regulated products such as medicines, electrical equipment or chemicals. The UK had asked for broad recognition of conformity assessments that would allow UK-based notified bodies to certify products to EU standards.

However, the EU rejected this and it is not in the final agreement. This will push up the costs for UK exporters who will have to get the products checked twice — once in the UK and once in the EU — if they want to sell their products in both markets.

Mutual recognition of qualifications
At the moment if you are qualified as a doctor, lawyer or accountant in the UK you can work in any of the other 27 member states as your UK qualifications are automatically recognised.

However, despite a British wish for this to continue the EU rejected it meaning it will be much harder for UK citizens to work in the EU.

Checks on food and agricultural products
This is an issue of significant concern to farmers and the food industry who wanted to reduce the number of safety checks (known as SPS checks) on UK food exports to the EU.

The UK side was looking for a regime in which the EU recognised UK standards as being equivalent to theirs. However, this has not been agreed. This is likely to impose higher costs for the transfer of animal products from the UK to the EU and vice versa.

Fishing: Part One
The fisheries agreement comes in two parts, a transition and then future arrangements.

There are two elements to the fisheries agreement where the government made major last-minute concessions. The UK will allow the EU to keep 75 per cent of the value of the fish caught in British waters, with just a quarter returned to British fishermen over a five-and-a-half year period. The transition will cushion the cuts for European fishermen to reductions of 4.5 per cent a year, translating into tiny annual losses of less than 1.5 per cent for French fishermen. The stock returned to the UK will be worth an extra €163 million to the British fishing industry by the end of a transition period. After the transition in the summer of 2026, a new regime begins.

Fishing: Part Two
After the transition, the UK becomes sovereign over access to its waters with annual fishing negotiations that could cut EU fish catches further. After June 2026, the UK can cut quotas or exclude boats to maintain control of territorial waters in the six to 12 nautical mile zone.

A compensation or “rebalancing” mechanism built into the disputes procedure would allow French or other fishermen to be repaid for the loss of their fish via tariffs on fishing products or other goods or by locking British boats out of EU waters. The sum would be proportional to the size of the catch that was lost. Given that the value of all French fish caught in British waters is €171 million (£154 million), the cost to UK exports worth €294 billion a year would be tiny.

This allows both the British and the French to declare victory. The government can say that it has sovereignty from 2025. France can say that fishing rights are linked to trade access.

Road Transport
British lorries and haulage firms will continue to be able to operate freely in the EU delivering goods across the Continent. However, the UK has agreed to follow detailed EU rules on things like the amount of hours that drivers are allowed to work in order to secure this access.

Trade in Goods
Both sides met their declared objective of zero tariffs, fees, charge or quotas for manufactured and agricultural goods.

The deal includes regulatory co-operation and removing technical barriers to trade that go beyond existing WTO agreements on labelling, standardisation, suppliers declarations.

The are five sectoral annexes on chemicals, motor vehicles, medicines, wine and organic aimed at cutting technical barriers to trade. Remedies within the free-trade agreement rather than overarching level playing field are WTO consistent and do not include the EU’s “green box” agricultural subsidies.

Rules of Origin and “Cumulation”
Rules of origin will be largely based on the EU’s free trade agreements with Canada and Japan which set strict limits on the percentage of a product that can be made outside UK and still be called “British” in order to be exported tariff-free to the EU.

However, there will be separate rules for batteries and electric vehicles, aluminium and chocolate. This was a last-minute EU concession to the UK, which was particularly worried about the effects of rules of origin on the British car manufacturing industry. As most electric batteries are not made in the UK, without this exception the future of plants such as Nissan in Sunderland would have been put into doubt.

Such rules on origin will not affect parts made in other EU countries under an agreement known as “cumulation” of materials and processing. This will allow EU inputs and processing to be counted as UK input in UK products exported to the EU, and vice versa.

Customs Simplification
There will be mutual recognition of trusted traders schemes in place from January 1, so eligible businesses, mainly large companies with complex European supply chains, face fewer controls at the border.

 Scientific Cooperation
The agreement paves the way for the UK to continue to participate in the Horizon programme of scientific co-operation — but also to contribute funds to secure this access. The UK will also continue to take part and benefit from the Copernicus satellite earth observation programme.

Education cooperation
The UK will no longer take part in the EU-wide Erasmus university exchange programme. While the two sides did discuss participation the UK decided to opt out, claiming the costs were disproportionately high on the taxpayer. Instead it will create a new “Turing” scheme allowing UK students to apply to study at universities worldwide. 

Healthcare
The deal will allow a scheme similar to the European Health Insurance Card (EHIC) programme. This means a UK national who is in an EU member state for a holiday will have their necessary healthcare needs met for the period of their stay.

Financial Services
There is little in the treaty covering financial services — despite a desire from the UK side for it to be included.

Instead ,the EU is expected to make a series of “equivalence” rulings before the end of the year to allow the City of London some access to EU markets. However, this access will be greatly reduced compared to single-market membership. Indeed the agreement does not include the level of regulatory co-operation that exists in the EU’s free-trade agreement with Japan.

Extradition 
There will be a new extradition treaty along the lines of an existing one with Norway with judicial safeguards based on proportionality and guarantees that suspects will not face long periods of pretrial detention. There will be co-operation on asset freezing and confiscation.

Databases
The UK will be able to exchange information from the EU’s criminal records database, ECRIS, without oversight of the ECJ.

There will also be exchanges of DNA, fingerprint and vehicle registration data. The UK will have to follow EU rules on the exchange of air passenger name records. Both the EU and UK will share real-time alerts on missing or wanted people.

The UK will take part in Europol and Eurojust based on their- country precedent but with extra access and ability to second officers.

 Governance and European Convention of Human Rights 
The enforcement structure is linked into the overarching arbitration structure with no automatic suspension of termination from one side unless serious concerns on data prediction or human rights. The ECJ is not involved.

Co-operation is not contingent, as the EU first demanded, on Britain’s commitment to the European Convention on Human Rights.

This article first appeared in the Times – Thursday 24th December 2020