Exploring the UK-EU Trade and Co-Operation Agreement

On Christmas Eve, the UK and EU reached an agreement over their future relationship after nearly a year of tough negotiations. Whilst the deal does not meet all the ambitions of ADS member companies, it does provide vital certainty and avoid major disruption that would have been the case in a No Deal situation by setting out the conditions for future trade. It also offers a framework from which to build on to enhance cooperation and collaboration with our European partners.

What is in the deal?

Several key areas of interest for ADS sectors have been agreed in this deal. Some of the highlights include:

  • No tariffs or quotas applied to qualifying goods between the UK and EU.
  • An agreement that the UK can participate in some EU funded programmes going forward subject to negotiation including Horizon Europe, Copernicus.
  • Visa-free, short-term business trips will be permitted for specific purposes, e.g. attending meetings, setting up a company.

What does it mean for ADS members?

The deal is made up of a free trade agreement between the UK and EU, a framework on law enforcement co-operation and an overarching governance arrangement, as well as several appendixes but overall, it is quite thin. As such, there will need to be ongoing discussions on future co-operation, for example through specialised committees on tariffs and chemicals. It is important too that businesses continue to stay alert for any trading and regulatory changes. Positively, the Agreement avoided a dreaded No Deal exit, which would have been significantly detrimental to our sectors and led to even greater costs of doing business.

Customs

Practically speaking, there are many positive aspects of the Agreement for members in relation to areas such as trade and customs. For example, if goods meet rules on local content, they will be exempt from any tariffs. When defining ‘local content’, UK and EU content will be treated the same in terms of cumulation. Customs declarations or other administrative processes for exports and importers will still be required but the Agreement allows for simplifications of forms. This should minimise costs and time implications for businesses eligible to use trusted trader schemes. When it comes to the implementation of these new customs formalities, the EU will apply them to GB goods moving to the EU and NI immediately. The UK, however, will be phasing in their customs processes for EU goods over a 6-month period giving importers more time to adjust.

Changes to air carrier services

For Aerospace, products will be tariff-free and covered under the plurilateral UN Agreement on Trade in Civil Aircraft. UK and EU air carriers will be able to continue providing passenger and cargo services between the UK and EU without limits on capacity or frequency. However, UK airlines will no longer be able to carry out services between two points in the EU – although EU subsidiaries may continue to do so – and in future new UK airlines will need to be majority owned and controlled by UK nationals, a far more restrictive definition than many had hoped.

Chemicals

Regarding chemicals, the deal streamlines some compliance processes but there will be no access to EU REACH data for the UK’s new chemical regulator. We therefore envisage that all UK businesses who have existing EU REACH registrations will need to transfer these to ensure continued access to the EU market, a costly process.

Movement of People between the UK and EU

As business-related visits to the EU will be limited to 90 days in any 180-day period, businesses and their employees will likely have to keep track of how long they spend in the bloc to ensure compliance. These changes, combined with the lack of mutual recognition of professional qualifications, will create new costs and complexity for businesses looking to continue providing services across Europe.

Data

Finally, no decision has been taken yet on whether the UK’s data protection regime meets EU standards. A temporary arrangement has been put in place for at least four months from January 1st to allow continued data transfers whilst the EU completes its adequacy assessments.

Aviation Safety

For a post specific to Aviation Safety, visit here and for more in-depth information, you can view the ADS briefing on the deal in our ADS members area here.

As always, you can find the latest information and guidance in our Brexit Hub.