After 10 months of intense negotiations, the United Kingdom and the European Union have finally reached an agreement. To the relief of those involved in cross-Channel trade, there will be no return of customs duties as a hard Brexit would have caused. Here are the main points of this 1,246-page document which will regulate the trade of goods between the 27 members of the E.U and the United Kingdom.
- No quotas, no customs duties, unless ...
If no agreement had been reached, customs duties following the rules of the World Trade Organization (WTO) would have been put in place, sometimes involving significant additional costs in several sectors. The negotiators avoided this scenario, which would have seriously weighed down trade relations and caused a 0.6% drop in French GDP, spread over several months, according to an INSEE calculation.
However, the introduction of customs duties is still possible. On the one hand, because the agreement contains an exception for products assembled in the UK but made up of part of non-EU inputs (the British will have to certify the origin of these goods).
On the other hand, because the competition rules defined by the agreement provide that in the event of non-compliance with environmental or social standards as well as fiscal transparency, the two parties may, after arbitration, impose customs duties to the other. Likewise, even if the text does not numerically limit the aid that the United Kingdom could grant to its companies to boost their competitiveness, it anticipates arbitration on a case-by-case basis, which can go as far as reimbursement of the aid. In short, in the event of dumping, retaliatory measures including the introduction of customs duties can be initiated.
- Customs formalities and health checks
The absence of tariffs does not necessarily mean the end of customs formalities for which companies have prepared themselves despite the stop and go effect of the negotiations and the onset of a global pandemic.
Concretely, there will be a European identification number, the EORI, to be held, customs declarations to be made and authorizations to be obtained for phytosanitary controls. All formalities are dematerialized (and must therefore be carefully anticipated) to avoid traffic jams at the customs post.
- The Peach
Point of crystallization of all the tensions during these negotiations : the fishing sector was a major obstacle to the conclusion of an agreement. At stake is the right to fish in British waters where two thirds of the catch is taken by foreign vessels. A British reconquest of these fishing grounds would have had serious consequences for Europeans. Under the terms of the agreement, they have a five-and-a-half-year transition period. From June 2026, they will have to pay the equivalent of 25% of the value of the products caught in British waters to the United Kingdom (which claimed 60%).
- Finance is the subject of parallel negotiations
The deal reached at the end by the negotiators only concerns goods: the financial services of which London has made a specialty are therefore not affected. The delicate issue of UK banks' access to the European market is one of the issues being addressed and negotiated alongside the trade agreement signed on December 24. In the meantime, some arrangements have already been made. The clearing houses, necessary for the proper functioning of the markets, have, for example, already benefited from an additional period of 18 months.
- Establishment of a work permit and end of the Erasmus program
Free movement ends on January 1. On this date and until September 30, 2021, it will still be possible to travel to the UK with a simple ID card. From October 1, most citizens of the European Union and Switzerland will need a passport.
Another major change for Europeans wishing to work across the Channel: from January 1, they will have to obtain a work permit, following a points-based visa system. To qualify, applicants will need to provide a job offer with an annual salary of at least 26,500 pounds (29,500 euros). However, exceptions are foreseen in some sectors such as agriculture.
Europeans already living in the United Kingdom retain their right of residence and work.
This new system excludes many young Europeans who lived in London on odd jobs, including students. Already hard hit by the crisis, they will no longer be able to benefit from the Erasmus program, considered too expensive, to study abroad for a year. British universities welcome around 30,000 European students under this exchange program which made them financially accessible. Indeed, a student in the United Kingdom paid the tuition fees charged in his country and not in his host university. Thus, the French who paid 180 euros for a year in an establishment in the United Kingdom will now have to pay the same rights as the British, around 10,000 euros.
Welcomed with relief by economic players, this agreement sets the framework for trade relations between the United Kingdom and the European Union for the coming years and leaves the threat of retaliation in the event of disagreement while providing for a system of arbitration that it still needs to be implemented. While the issue of customs duties is buried, this good news should not make us forget that customs formalities to be completed to ship goods is more relevant than ever.
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