Post-Brexit Trade Agreement

Why in news?

Britain and the European Union have struck a provisional free-trade agreement as part of the Brexit deal.

What is the Brexit deal and why is it needed?

• The UK formally exited the European Union on 31 January 2020.
• After this, it entered an 11-month transition period.
• The UK’s post-Brexit transition period officially ends on 31 December 2020.
• The two sides thus attempted to strike a deal to define key aspects of their relationship ahead of this deadline.
• These included areas such as a viable trade agreement, defence, security and immigration.
• The deal is also likely to lay down rules of governance.
• This will dictate how any deal is enforced and the penalties if one party violates the terms of a mutually-approved agreement.
• Further, the two parties will have to finalise agreements on issues like airline safety and information sharing.

Why is the delay?

• Talks stretched on as both sides were unable to agree on major points.
• These particularly included fishing rights, governance, and guaranteeing a ‘level playing field’ on government subsidies and regulations.
• A level playing field essentially means that in order to trade with the EU’s single market, the UK will have to follow the same rules and regulations.
• This is to ensure that it does not have an unfair advantage over other EU businesses.

Why is fishing such a big deal?

• Fishing is a relatively small part of the economy on both sides of the English Channel.
  • It was just 0.02% of the overall economy both in the UK and in the EU.
• However, the issue is extremely emotive and its political consequences far outweigh the economic impact on both sides.
• For the EU, access for its boats is an important precondition for a trade agreement.
• On the other hand, Britain sees it as a symbol of sovereignty that needed to be regained.
• Policy - Even though Britain formally left the EU on January 31, 2020, it still has to adhere to the EU’s rules until the year end, including the bloc’s Common Fisheries Policy.
• So, till then, the fishing fleets of every country involved have full access to each other’s waters.
• This goes well beyond the territorial water that covers the first 12 nautical miles (22km) from the coast.
• But the volume of fish, depending on the species, are to be claimed by each country as per a complex national quota regime.
  • This has been formulated using historical data going back to the 1970s.
• The UK government wants to significantly increase the British quota share in this.
• But EU negotiators have been pushing Britain to continue to allow their fishing crews to have access to its waters.
• The EU, meanwhile, wants to divide the amounts of fish that each country’s boats are allowed to catch in a way that will not be renegotiated every year.
• With the present deal, there is now a five-and-a-half-year transition period that guarantees continued access for the affected EU states.
• Nevertheless, the reduced terms for the latter are expected to help British fisheries.

What is the significance of the present deal?

• The agreement comes four and a half years after Britain decided to leave the EU in 2016.
• The agreement averts a catastrophic ‘no deal’ scenario.
  • Failure to strike a deal before the December 31 deadline would result in a ‘no-deal Brexit’.
• This could have far- reaching ramifications both domestically and internationally.
• The country now faces a potential 4% loss of GDP over 15 years, compared to remaining in the EU.
• Leaving without any agreement would have led to a potential loss of an estimate 6% of GDP.
• Moreover, the U.K. relies on the EU for about 75% of food product imports.
• So, a zero duty trade is of great significance to consumers and the retail economy.
• By striking a zero-tariff and zero-quota deal, the UK and the EU will be able to safeguard the trade of goods between them, which amounts to around $1 trillion annually.
• The tariff-free trade accord in goods should mitigate somewhat the consequences of Britain’s decision to leave the EU.
• A no deal would have also strained the already-tense relations between the UK and EU for some time, which is now prevented.

Source: The Hindu, The Indian Express