Britain faces new obstacles from Brexit trade deal

Country will see biggest overnight change in modern commercial relations, say analysts

Trinity College in the University of Cambridge. EU students will have to pay steeper tuition fees at UK's prestigious universities. PHOTO: AGENCE FRANCE-PRESSE Cars ready for export in Bristol. With the deal, there will be no tariffs or quotas on goo
Cars ready for export in Bristol. With the deal, there will be no tariffs or quotas on goods made in Britain and EU moving between the two sides. PHOTO: NYTIMES
Trinity College in the University of Cambridge. EU students will have to pay steeper tuition fees at UK's prestigious universities. PHOTO: AGENCE FRANCE-PRESSE Cars ready for export in Bristol. With the deal, there will be no tariffs or quotas on goo
A Belgian fishing trawler in the Channel. The deal will see EU relinquish 25 per cent of its current fishing quotas in a 5½-year transition period. PHOTO: EPA–EFE
A Belgian fishing trawler in the Channel. The deal will see EU relinquish 25 per cent of its current fishing quotas in a 5½-year transition period. PHOTO: EPA-EFE
Trinity College in the University of Cambridge. EU students will have to pay steeper tuition fees at UK’s prestigious universities. PHOTO: AGENCE FRANCE-PRESSE

LONDON • For weary Brexit negotiators on both sides of the English Channel, a Christmas Eve trade deal sealed 11 months of deliberations over Britain's departure from the European Union, encompassing details as arcane as what species of fish can be caught by each side's boats in British waters.

But for many others - among them bankers, traders, truckers, architects and millions of migrants - Christmas was only Day 1 of a high-stakes, unpredictable experiment in how to unstitch a tight web of commercial ties across Europe.

The deal, far from closing the book on Britain's tumultuous partnership with Europe, has opened a new one, beginning on its first pages with what analysts say will be the biggest overnight change in modern commercial relations.

In the four years since Britons voted to cast off a half-century of ties to Europe, many migrants have stopped moving to Britain for work and British firms have sent staff to Paris and Frankfurt to set up toeholds on the continent.

But for all those preparations, less than a week is now all that stands between businesses and an avalanche of new trading obstacles on Jan 1.

"We are going to have to learn how to do this as we go," said Mr Shane Brennan, chief executive of the Cold Chain Federation, a British group representing logistics firms. "It will be slow, complex and expensive."

British distributors are scrambling to prepare the first of hundreds of thousands of new export certifications to allow their meat, fish and dairy to be sold to the bloc. British food, once exempt from such burdensome checks, now faces the same inspections as European imports from countries like Chile and Australia.

Britain's services sector - encompassing not only London's financial industry but also lawyers, architects, consultants and others - was largely left out of the 1,246-page deal, despite the sector accounting for 80 per cent of economic activity.

The deal also did little to assuage European migrants, some of whom left Britain during the coronavirus pandemic and are now struggling to determine if they need to rush back to establish a right to settle in Britain before the split is finalised on Thursday.

"As of Jan 1... the safety blanket of the transition period is gone," said Ms Maike Bohn, a co-founder of the3million, which supports European citizens in Britain, laying out her fears that Europeans will be unfairly refused jobs and rental apartments amid the confusion.

Analysts and ordinary citizens have been left uncertain about details of the trade deal as negotiators did not formally publish the text until yesterday afternoon. It will take time to work through the voluminous trade document.

But it had long been clear that the pact would offer the City of London, a hub for international banks, insurance firms and hedge funds, few assurances about future trade across the English Channel.

The new trade deal does smooth the flow of goods across British borders. But it leaves financial firms without the biggest benefit of EU membership: the ability to easily offer services to clients across the region from a single base.

  • What's known about the trade pact

  • TARIFFS

    The deal means there will be no tariffs or quotas on goods produced in Britain and the European Union moving between the two sides.

    British exports still have to comply with EU health and safety standards and there are strict rules governing products made with parts from outside the EU or Britain.

    FISHING

    Britain wanted to take back full control of its rich waters, while EU coastal states sought to guarantee that their fishermen could keep fishing there.

    The two sides reached a hard-fought compromise that will see EU gradually relinquish 25 per cent of their current quotas in a 5 1/2-year transition period. After that, there will be annual negotiations on the amount of fish EU vessels can take from British waters.

    LEVEL PLAYING FIELD

    The EU had insisted on "level playing field" rules to prevent British firms having an advantage if London lowers standards or subsidises its industries.

    Britain had fought hard to avoid having a system that could see Brussels able to force it to follow EU's rules on such issues as environmental or labour regulations.

    But London admitted the deal allowed for either side to impose "countermeasures if they believe they are being damaged", subject to arbitration.

    CUSTOMS

    Britain will leave the EU's Customs union along with the single market at the end of the year, meaning that firms face new red tape for imports and exports across the Channel.

    SECURITY

    The deal will see both sides continue to share DNA, fingerprint and passenger details and cooperate through EU's Europol.

    MOVEMENT OF PEOPLE

    Britons will be treated by the EU as "third country" nationals, no longer enjoying freedom of movement to work, study or retire across the EU.

    Britain in turn will process EU nationals at its borders as it does non-UK passport holders.

    STUDENTS & UNIVERSITIES

    From Jan 1, EU students going to Britain will need a visa for courses longer than six months, and will have to pay steeper tuition fees - four times as much for degrees such as medicine or MBAs at prestigious universities.

    British students wanting to go to EU universities will encounter higher fees in some countries, as well as visa requirements that in many cases will curb their right to work in those countries.

    AGENCE FRANCE-PRESSE, REUTERS

The result of the deal is that the EU "retains all of its current advantages in trading, particularly with goods, and the UK loses all of its current advantages in the trade for services", said Mr Tom Kibasi, former director of the Institute for Public Policy Research.

"The outcome of this trade negotiation is precisely what happens with most trade deals: the larger party gets what it wants and the smaller party rolls over."

Agreeing to let goods cross the border without onerous tariffs ensured that the most vital supplies - food and medicine - were accessible across Europe. A deal on goods was also easier to strike; given intricate country-by-country financial regulations, like how much money banks must hold, most trade agreements skirt the service industries.

But Brexit is not most trade agreements: It is erecting barriers, not taking them down.

After Jan 1, the sale of services, once assured, will hang on patchwork decisions by European regulators about whether Britain's new financial rules are close enough to their own to be trusted.

As for British retailers, when Prime Minister Boris Johnson promised that there would be "no non-tariff barriers" to selling goods after Brexit, he had ignored the tens of millions of Customs declarations, health assessments and other checks that businesses will now be responsible for.

Britain is short of the Customs agents needed to deal with those documents, industry experts said.

"It's a massive problem that is going to cost industry millions of pounds and euros," said Mr Alex Altmann, a partner in charge of Brexit-related issues at Blick Rothenberg, an accounting and tax practice. "That's going to be passed on to consumers."

Still, the deal looks certain to be passed when Parliament is recalled on Wednesday, after Britain's main opposition Labour Party said it would vote in favour despite misgivings.

"When this deal comes before Parliament Labour will accept it, and vote for it," party leader Keir Starmer said, adding that it was a "tough but necessary decision".

The votes will take place less than 48 hours before the pact is due to come into effect.

On the EU side, member states are expected to give provisional approval before the European Parliament can weigh in next month.

"Today is a day of relief. But tainted by some sadness, as we compare what came before with what lies ahead," EU Brexit negotiator Michel Barnier said on Thursday after the deal was clinched.

"We have got a good deal to show for it," European Commission president Ursula von der Leyen said, while French President Emmanuel Macron lauded "the unity and strength of Europe" for helping to secure a satisfactory deal.

British business leaders were not as satisfied with the outcome.

"Let's not forget that many businesses are already on their knees from the impact of the coronavirus crisis, and most will have fewer resources available to implement the necessary changes with furloughed staff and Christmas holidays," said British Chambers of Commerce director-general Adam Marshall.

Mr Ian Wright, chief executive of Britain's Food and Drink Federation, said: "The Prime Minister promised UK businesses over a year of transition in which to adapt to a new set of rules. He has delivered us four working days."

NYTIMES, REUTERS, AGENCE FRANCE-PRESSE

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A version of this article appeared in the print edition of The Sunday Times on December 27, 2020, with the headline Britain faces new obstacles from Brexit trade deal. Subscribe