Europe

Brexit trade talks: What is the difference between deal and no deal?

Boris Johnson”s threat to pull the UK out of trade talks with the EU has heightened tension still further in the already-flagging process.

Regardless of whether or not a deal is struck on future ties, acute changes are in store once the transition period expires on December 31. The UK will leave the EU’s Single Market and Customs Union and is seeking a free trade deal with maximum independence from EU rules.

However, failure to strike an accord would mean a rupture in relations. There would be a greater degree of trade friction, weaker security ties, and many other mutual arrangements would cease.

Here is a look at some of the main differences between “deal” and a “no-deal scenario” regarding the future relationship.

Trade in goods

Big changes are afoot given the UK’s departure from the Single Market and Customs Union, even in the event of a trade deal. There will be two different customs and regulatory regimes, bringing extra bureaucracy and border checks for standards and legal compliance.

If there is no deal then the EU and the UK will trade on World Trade Organization (WTO) terms.

Tariffs and quotas may apply even if there’s a trade deal, though both sides are seeking to avoid them. But a no-deal outcome is likely to be more costly for traders in terms of tariffs. The EU rate for third countries is 10% for car imports, and 90% for some lamb imports.

Customs declarations will be costly even with a deal but failure to strike an agreement could eliminate possibilities to simplify procedures, for instance via trusted trader schemes. The EU is planning full customs checks from January, while the UK plans to phase them in over six months.

Rules of origin would mean more red tape and checks under a no-deal scenario.

Full regulatory controls are in store, deal or no deal. The EU and the UK will implement two different systems for standards, involving more red tape and costs. But an agreement could reduce physical checks for agri-food imports: particularly important for Northern Ireland, a major importer from GB.

The UK chemicals industry says failure to reach a data-sharing agreement with the EU will bring an extra £1 billion (€1.11 billion) in administration costs. A mutual recognition deal would reduce costs, but the UK is seeking to diverge in regulations covering medicines, chemicals, and industrial goods.

Transport

Road: With no deal in place, UK and EU hauliers would no longer have the right to operate in each other’s territories. This could be very damaging for EU lorries, which make up vast majority of trucks arriving daily in the English port of Dover.

Instead, operators would need permits under the European system but quotas are limited: far fewer numbers are issued than the number of drivers currently operating. This has led to fears of serious trade disruption. There is also a question mark over the mutual UK-EU recognition of driving licences and professional standards.

Under no-deal planning in 2019, the EU said it would allow UK lorries temporary access for nine months.

Rail: Deal or no deal, there would be little difference for cross-border operators and drivers. They would need to comply with two different systems from 2021. But failure to secure a bilateral agreement between the UK and France for the Channel Tunnel could bring disruption if standards on each side diverge.

Air: In 2019 both sides agreed to preserve basic connections under no-deal. But UK airlines are unlikely to be able to fly routes within the EU, and vice versa. Services could be restricted as the UK would need bilateral agreements with countries inside and outside Europe. Even a deal would see restricted UK access to the EU and more complicated regulation, as the UK is opting out of the European Aviation Safety Agency (EASA).

Services

Without an agreement, the EU and UK may not recognise each other’s professional qualifications, although member states would be able to make unilateral decisions.

EU firms would have to comply with UK establishment rules to operate in Britain, while UK services companies would need to meet the EU’s stringent “third country” requirements to set up on the continent. Some large firms have already taken preventative measures.

Short-term business trips by service providers between the UK and the EU may also be subject to extra red tape and costs.

On financial services, unless a deal is agreed, UK businesses will no longer have the right to “passport” services into EU countries. UK-based advisers and insurance companies may find their ability to operate in the EU is limited.

UK companies may need to rely on individual “equivalence” decisions, where one state recognises another state’s service requirements.

Unless the EU rules the UK’s data protection system to be adequate, it may become harder to transfer data from the EU to the UK. It may also be more difficult for law enforcement bodies on both sides to share information relevant to criminal investigations.

Fisheries

A “no-deal scenario” could actually enable UK fishing boats to catch more fish in UK waters than if there is an agreement, which may impose restrictions. Both the UK and the UK would have exclusive rights in their own waters, and each would need permission to operate in the other’s territory.

However, UK exporters to the EU would be severely hit if, as is likely under no deal, tariffs and stringent regulatory checks are imposed.

International law stipulates annual negotiations regarding access, something the UK wants as part of a deal but which the EU opposes.

Security

Failure to secure agreement on policing and criminal justice would make it harder to extradite criminals between the UK and EU, in both directions. The UK would lose access to the European Arrest Warrant and to EU databases. The EU would lose the benefits of the UK’s contribution to policing across the EU.

Alternative systems are available but are less effective and out-of-date. Even with a deal, the UK’s decision not to accept European Court of Justice (ECJ) jurisdiction is likely to weaken security co-operation.

Asylum rules

Some EU law concerning asylum may remain on the UK statute book after the end of the transition period until it is expressly repealed.

However, the EU’s Dublin regulations — which allow EU states to return asylum seekers to an EU country they passed through — will no longer apply to the UK.

The issue is not part of the talks. However the UK — which has been trying to send back migrants who have crossed the English Channel in small boats — wants a new agreement, but the EU however has reportedly rejected British proposals.

This raises the prospect that there may be no legal mechanism for the UK to send asylum-seekers back to other European nations.

What won’t change

Whatever the outcome of trade talks, the divorce deal which set the terms of the UK’s departure from the EU last January remains in place and has the force of an international treaty.

The UK will have a new immigration policy from January 2021. However, the Withdrawal Agreement protects arrangements for EU citizens already living in the UK, and Britons resident on the continent.

It also covers the UK’s financial obligations to the EU, and arrangements to avoid a hard border between Northern Ireland and the Irish Republic. This will entail more red tape and costs between Great Britain and Northern Ireland, which will stick to some EU rules.

Sources for this article include the UK Institute for Government’s guide to post-Brexit scenarios.

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