Celebrating Brexit - summarising the deal
- garthenv
- Dec 27, 2020
- 4 min read
Most of what we trade internationally is not subject to EU regulation (yet)
This is a deal which primarily affects goods, freedom of movement and an ability to deal separately with other countries.
The EU trade agreement is most noyably about the rules for goods crossing borders. It says far less about the trade in services.
Over the past seventy years, UK services have grown from 48% of the economy (GDP) to 80%.
In the same time, products (excluding agriculture) as a share of GDP have shrunk from 40% to 15%.
Although the economy of London relies 90% on services, the rest of the country is also service-driven. All UK regions rely on services to at least 70% of their economic output. The UK is the most heavily dependent country for services, although the US and France are close behind.
Although the EU services directive was implemented in 2009, the European Commission is now working with its members countries to further improve the single market for services to provide increased transparency and make it easier for businesses and consumers to provide or use services in the single market. The UK will be excluded from these discussions and is not guaranteed equivalent trading status.
Financial services account for 28 per cent of total UK services exports, but business services also account for 27 per cent, and transport and travel together account for 25 per cent. The UK accounts for 22.8 per cent of financial services exports in the world, 8.3 per cent of global communication services exports (9.9 per cent of telecommunications). In insurance services, the UK is not far behind the US, with 6.2 per cent of exports [1].
The deal is not yet done
Whilst the principle of tariff-free trade is enshrined in the document, some details have yet to be negotiated. Although the European Court of justice is no longer the arbiter (except for Northern Ireland), many details of our trade including potential tariff structures are subject to arbitration (mentioned over 300 times in the trade document) should the ‘level playing field’ appear to be breached. This includes instances where the EU are concerned that the UK is providing preferential circumstances (state aid or favourable business conditions) to businesses operating in the UK.
There is no ‘frictionless trade’ in the deal since goods cannot be freely exchanged any longer without checks and bureaucracy at the border. Tariffs can be targeted at a specific sector as a result of a dispute in another, and the threat that tariffs can be introduced as a result of future disputes will be a constant factor in future UK-EU relations. Northern Ireland avoids these constraints on trade through remaining in the customs union and the single market. This means that trade between Northern Ireland and Britain has to be intercepted with regulatory enforcement.
As for fishing, the share of the catch for EU fishermen is to fall by only 25% (by value) and that will take over five years to enact – almost a decade after the referendum which UK fishermen so actively supported.
What’s missing?
3rd Country conditions will apply to travel with visas being required for an extended stay, special conditions for insurance and the possibility of roaming charges being introduced.
An agreement that UK data rules are roughly the same as in the EU is still awaited. There is also no agreement on recognising each other's sanitary and safety standards for exporting food of animal origin, which means there will have to be pretty intrusive and costly checks for products going into the EU single market.
Professional qualifications won't be recognised automatically. That will make it harder for UK citizens supplying any kind of service to work in the EU. It will also jeopardise the status of EU nationals practicing here. They will often have to apply to individual countries to try to get their qualifications accepted, with no guarantee of success.
The UK will lose automatic real-time and immediate access to a variety of EU databases which the police use every day - covering things such as criminal records, fingerprints and wanted persons.
Student and other training exchange schemes will no longer apply.
There is no mention in the documentation that from January 2021, the UK will pay the EU about £25bn up to 2057. Almost £18bn of which will be paid in the first five years (2021-2016), equivalent to £69mn per week or around half the contribution we made to the EU budget in 2016. This was agreed as part of the Withdrawal Agreement.
Dodging the bullet
Previous claims that the UK government wanted to create a ‘Singapore-on-Thames’ have been refuted [2]. But the EU have proposed more transparency and control over financial transactions and capital. The UK has traditionally been lax with such measures and presumably unwilling to entertain stricter controls. Has Brexit allowed key companies and individuals to avoid future regulation?
Among the many things revealed by the Panama and Paradise Papers leaks, was the fact that British territories like the British Virgin Islands, Cayman, and the Channel Islands are amongst the most lucrative tax-havens on earth.
The UK’s non-domicile rule which undermines the tax bases of other countries also make Britain an attractive haven for high net worth individuals.
More than 40 per cent of Tory donors owe their wealth to investment firms – a combination of finance, hedge funds, private banking and private equity. Tory donors also include wealthy non-domicile individuals linked to Russia, including Alexander Temerko (pictured), who previously worked for the Kremlin defence ministry.
Between November 2018 and October 2019, the Tories received at least £489,850 from Russian donors, compared to less than £350,000 in the previous year. These and other donors have provided more than £130 million to the Conservative Party since 2010.
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