At the heart of the future partnership between the European Union and the United Kingdom, the free trade agreement is unlikely to be the most complex element to negotiate in the complicated talks that are beginning (see other news).
If the General Affairs Council formally adopts the EU negotiating mandate on Tuesday, 10 to 12 rounds of negotiations are already on the agenda and will be held alternately in London and Brussels, starting with Brussels on 2 March (see EUROPE 12429/20).
London and the EU have shown very distant ambitions (see EUROPE 12428/13). The proposal of the Twenty-Seven is the most ambitious. At its heart is the demand for a ‘level playing field’, which is found horizontally in all elements of the text and which the EU wants to set in stone through a legally binding commitment.
The partnership proposed by the EU should also be based on two other pillars: - effective management and supervision; - dispute resolution and provisions for the implementation of the agreement, including "appropriate remedies".
Market access. The EU calls on the UK to seek an agreement that does not raise tariffs or tariff rate quotas on their trade after the post-Brexit transition period set, at this stage, for the end of December.
It is no longer a question of "frictionless" trade: there will be many customs procedures on entry into the EU, which the negotiating directives propose to simplify as much as possible, on the basis of the World Trade Organisation (WTO) agreement on trade facilitation. Unlike the European Economic Area (EEA) Member States, which have integrated the regulatory acquis of the Single Market, the partnership will allow the use of anti-dumping, compensation and safeguard measures, in line with WTO rules.
Customs. The parties should also cooperate to combat customs fraud, and measures should be considered in cases of fraud.
Let us recall here that London has a liability with the European Anti-Fraud Office (OLAF), which had revealed that large amounts of customs duties had been evaded through false invoices between 2013 and 2016 (see EUROPE 11977/26).
Rules of origin. In theory, having ruled out the possibility of a customs union with the EU, British value added tax must be extracted from European value added tax in the production of products, a situation which will make it difficult for them to reach the threshold of export to the EU without tariffs.
To export to the EU, the UK will now have to prove the origin of its products - as a general rule, origin is granted to a producer when they have contributed an average of 45% to its value - and thus obtain a preferential tariff for their export to the EU.
To maintain existing supply chains, the British may want to rely on cumulation of origin, which would allow EU components to be included in UK content in order to reach the threshold for re-export to the EU.
Services. The European ambition here appears relatively moderate, as the draft mandate makes little reference to GATS and other EU free trade agreements. We know that, on the British side, this will be an offensive point and therefore, perhaps, an element of negotiation for the EU in the face of a British economy that relies heavily on the export of its services.
It should be possible to achieve some ambitious provisions on services, in particular on ease of establishment, recognition of qualifications and temporary movement of persons within the EU. But cross-border trade in services will face new restrictions, even though this is the most common model of provision for UK economic operators.
Sectoral agreements may be concluded in some areas, such as telecommunications, but the most regulated sectors will be the most difficult to access. For example, audiovisual services have already been excluded from trade liberalisation.
Cooperation on financial services will have to preserve the Union's regulatory and prudential autonomy, as Brexit has ended the passport system. It will thus be up to the Commission on a case-by-case basis to assess whether UK prudential regulation is equivalent to that in the EU and, if the test is positive, to offer access to an EU market segment for UK financial services.
Intellectual property. The EU calls for maintaining a high level of protection for intellectual property - copyright, trademarks... The withdrawal agreement includes protection of geographical indications (GIs), but the directives call for the creation of a mechanism to allow for the protection of future GIs.
Digital commerce. Digital commerce must be facilitated if consumer protection is ensured and if the European GDPR Regulation on the protection of personal data is respected. In general, full compliance with the relevant EU rules and their decision-making procedures will have to be guaranteed in the agreement, the EU Twenty-Seven believe.
Public procurement. The EU proposes to go beyond the commitments undertaken by the parties under the WTO plurilateral agreement (see EUROPE 12204/19) by including the public services sectors. It should be remembered that across the Channel, this market is worth 340 billion a year.
Regulatory cooperation. Provisions to avoid technical barriers to trade (TBT) will be based on principles in the field of conformity assessment, accreditation, standards... While international standards will serve as a reference, the EU recalls that testing and certification requirements should be based on a risk-based approach.
Precautionary principle. The use of the precautionary principle dear to Europeans is well understood in the agreement, but it applies only to the territory of the EU. On the other hand, this prevents any chlorinated chicken that may be imported from the United States from transiting through British territory to the single market.
In case of urgency, the parties could suspend concessions by unilaterally imposing customs duties until arbitration of the dispute. The other party would be allowed to introduce rebalancing measures.
The British Prime Minister, Boris Johnson, reiterates that he rejects any extension of the post-Brexit transition period beyond 31 December 2020. He will have to confirm this position by 30 June 2020 at the latest. If this is the case, in order to be on time, the negotiated texts will have to be finalised around October in order to allow for their legal tidying and translation into all EU languages. The agreement will then be ratified only by the European Parliament, if the EU has exclusive competence, or also by the Member States, if the competence is said to be mixed. (Original version in French by Hermine Donceel)