The Brexit Trade and Cooperation Agreement
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Posted by gerryshown00
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23 Apr 2023 03:31:36 pm.
On Dec. 24, 2020, the U.K. and the EU struck a provisional free-trade agreement ensuring the free trade of goods without tariffs or quotas. However, key details of the future relationship remain uncertain, such as trade in services, which make up 80% of the U.K. economy. This prevented a no-deal Brexit, which would have been significantly damaging to the U.K. economy.
The Brexit Trade and Cooperation Agreement
A provisional agreement was approved by the U.K. parliament on Jan. 1, 2021. It was approved by the European Parliament on April 28, 2021.2 While the deal, which is known as the Trade and Cooperation Agreement (TCA), allows tariff- and quota-free trade in goods, U.K.-EU trade still faces customs checks. This means that commerce is not as smooth as when the U.K. was a member of the EU.
The Referendum
The Leave side won the June 2016 referendum with 51.9% of the ballot, or 17.4 million votes while Remain received 48.1% or 16.1 million votes. Voter turnout was 72.2%.4 The results were tallied on a U.K.-wide basis, but the overall figures conceal stark regional differences: 53.4% of English voters supported Brexit, compared to just 38% of Scottish voters.
Because England accounts for the vast majority of the U.K.'s population, support there swayed the result in Brexit's favor. If the vote was conducted only in Wales (where Leave voters also won), Scotland, and Northern Ireland, Brexit would have received less than 45% of the vote.6
The result defied expectations and roiled global markets, causing the British pound to fall to its lowest level against the dollar in 30 years. Former Prime Minister David Cameron, who called the referendum and campaigned for the U.K. to remain in the EU, announced his resignation the following day.
The Article 50 Negotiating Period
The process of leaving the EU formally began on March 29, 2017, when May triggered Article 50 of the Lisbon Treaty. The U.K. initially had two years from that date to negotiate a new relationship with the EU.8 Following a snap election on June 8, 2017, May remained the country's leader. However, the Conservatives lost their outright majority in Parliament and agreed on a deal with the Euroskeptic Democratic Unionist Party. This later caused May some difficulty getting her Withdrawal Agreement passed in Parliament.
Talks began on June 19, 2017.9 Questions swirled around the process, partly because Britain's constitution is unwritten and because no country has left the EU using Article 50 before. A similar move, though, happened when Algeria left the EU's predecessor after gaining independence from France in 1962, and Greenland, which was a self-governing territory, left Denmark through a special treaty in 1985.
On Nov. 25, 2018, Britain and the EU agreed on a 599-page Withdrawal Agreement, a Brexit deal that touched upon issues like citizen's rights, the divorce bill, and the Irish border.10 Parliament first voted on this agreement on Jan. 15, 2019. Members of Parliament voted 432 to 202 to reject the agreement, the biggest defeat for a government in the House of Commons in recent history.
May stepped down as party leader on June 7, 2019, after failing three times to get the deal she negotiated with the EU approved by the House of Commons.12 The following month, Boris Johnson, a former Mayor of London, foreign minister, and editor of The Spectator, was elected prime minister.
Conservative opponents of the amendment argued that unilateral guarantees eroded Britain's negotiating position, while those in favor of it said EU citizens should not be used as bargaining chips.
Some of the economic concerns included the fact that EU migrants are greater contributors to the economy than their U.K. counterparts. This fact suggests EU migrants are greater contributors to the economy than their U.K. counterparts. "Leave" supporters, though, read these data as pointing to foreign competition for scarce jobs in Britain.
Brexit Financial Settlement
The Brexit bill was the financial settlement the U.K. owed Brussels following its withdrawal.
The Withdrawal Agreement didn't mention a specific figure, but it was estimated to be up to £32.8 billion, according to Downing Street. The total sum included the financial contribution the U.K. would make during the transition period since it was an EU member state and its contribution toward the EU’s outstanding 2020 budget commitments.
The U.K. also received funding from EU programs during the transition period and a share of its assets at the end of it, which included the capital it paid into the European Investment Bank (EIB).
A December 2017 agreement resolved this long-standing sticking point that threatened to derail negotiations entirely. Barnier's team launched the first volley in May 2017 with the release of a document listing the 70-odd entities it would take into account when tabulating the bill. The Financial Times estimated that the gross amount requested would be €100 billion. Net of certain U.K. assets, the final bill would be "in the region of €55bn to €75bn."
Davis' team, meanwhile, refused EU demands to submit the U.K.'s preferred methodology for tallying the bill. In August, he told the BBC he would not commit to a figure by October, the deadline for assessing "sufficient progress" on issues such as the bill.20 The following month he told the House of Commons that Brexit bill negotiations could go on "for the full duration of the negotiation."
Davis presented this refusal to the House of Lords as a negotiating tactic, but domestic politics probably explain his reticence. Boris Johnson, who campaigned for Brexit, called EU estimates "extortionate" on July 11, 2017, and agreed with a Tory MP that Brussels could "go whistle" if they wanted "a penny."
In her September 2017 speech in Florence, however, May said the U.K. would "honour commitments we have made during the period of our membership."23 Michel Barnier confirmed to reporters in October 2019 that Britain would pay what was owed.
The Northern Irish Border
The new Withdrawal Agreement replaced the controversial Irish backstop provision with a protocol. According to the revised deal, the entire U.K. left the EU customs union upon Brexit, but Northern Ireland followed EU regulations and VAT laws for goods while the U.K. government collects the VAT on behalf of the EU. This means there was limited customs border in the Irish Sea with checks at major ports. The Northern Ireland assembly can vote on this arrangement four years after the end of the transition period.
The backstop emerged as the main reason for the Brexit impasse. It was a guarantee that there was no "hard border" between Northern Ireland and Ireland. It was an insurance policy that kept Britain in the EU customs union with Northern Ireland following EU single market rules. The backstop, which was meant to be temporary and was superseded by a subsequent agreement, could only be removed if both Britain and the EU gave their consent.
May was unable to garner enough support for her deal due to it. Euroskeptic MPs wanted her to add legally binding changes as they feared it would compromise the country's autonomy and could last indefinitely. EU leaders refused to remove it and also ruled out a time limit on granting Britain the power to remove it. On March 11, 2019, the two sides signed a pact in Strasbourg that did not change the Withdrawal Agreement but added "meaningful legal assurances."25 But it wasn't enough to convince hardline Brexiteers.
For decades during the second half of the 20th century, violence between Protestants and Catholics marred Northern Ireland, and the border between the U.K. countryside and the Republic of Ireland to the south was militarized. The 1998 Good Friday Agreement turned the border almost invisible, except for speed limit signs, which switch from miles per hour in the north to kilometers per hour in the south.
Negotiators in U.K. and EU worried about the consequences of reinstating border controls, as Britain had to do in order to end freedom of movement from the EU. Yet leaving the customs union without imposing customs checks at the Northern Irish border or between Northern Ireland and the rest of Britain left the door wide open for smuggling. This significant and unique challenge was one of the reasons that soft Brexit advocates cited in favor of staying in the EU's customs union and perhaps its single market. In other words, the Northern Ireland conundrum may have created a back door for a soft Brexit.
The issue was further complicated by the Tories' choice of the Northern Irish Democratic Unionist Party as a coalition partner. The party opposed the Good Friday Agreement and, unlike the Conservative leader at the time, campaigned for Brexit. Under the Good Friday Agreement, the U.K. government was required to oversee Northern Ireland with "rigorous impartiality." That proved difficult for a government that depends on the cooperation of a party with an overwhelmingly Protestant support base and historical connections to Protestant paramilitary groups.
Arguments for and Against Brexit
Leave voters based their support for Brexit on a variety of factors, including the European debt crisis, immigration, terrorism, and the perceived drag of Brussels' bureaucracy on the U.K. economy. Britain was wary of the European Union's projects, which Leavers felt threatened the U.K.'s sovereignty: the country never opted into the European Union's monetary union, meaning that it used the pound instead of the euro. It also remained outside the Schengen Area, meaning that it did not share open borders with a number of other European nations.
Opponents of Brexit also cited a number of rationales for their position:
The risk involved in pulling out of the EU's decision-making process, given that it was the largest destination for U.K. exports
The economic and societal benefits of the EU's four freedoms: The free movement of goods, services, capital, and people across borders
A common thread in both arguments was that leaving the EU would destabilize the U.K. economy in the short term and make the country poorer in the long term.
In July 2018, May's cabinet suffered another shake-up when Boris Johnson resigned as the U.K.'s Foreign Minister and David Davis resigned as Brexit Minister over May's plans to keep close ties to the EU. Johnson was replaced by Jeremy Hunt, who favored a soft Brexit.
Some state institutions backed the Remainers' economic arguments: Bank of England governor Mark Carney called Brexit "the biggest domestic risk to financial stability" in March 2016 and the following month the Treasury projected lasting damage to the economy under any of three possible post-Brexit scenarios:
European Economic Area (EEA) membership
A negotiated bilateral trade deal
World Trade Organization (WTO) membership2728
Leave supporters discounted such economic projections under the label "Project Fear." A pro-Brexit outfit associated with the U.K. Independence Party, which was founded to oppose EU membership, responded by saying that the Treasury's "worst-case scenario of £4,300 per household is a bargain-basement price for the restoration of national independence and safe, secure borders."
Although Leavers stressed issues of national pride, safety, and sovereignty, they also mustered economic arguments. For example, Boris Johnson said on the eve of the vote, "EU politicians would be banging down the door for a trade deal" the day after the vote, in light of their "commercial interests." Labor Leave, the pro-Brexit Labour group, co-authored a report with a group of economists in September 2017 that forecasted a 7% boost to annual GDP, with the largest gains going to the lowest earners.
Vote Leave, the official pro-Brexit campaign, topped the "Why Vote Leave" page on its website with the claim that the U.K. could save £350 million per week: "We can spend our money on our priorities like the NHS [National Health Service], schools, and housing."
In May 2016, the U.K. Statistics Authority, an independent public body, said the figure was gross rather than net, which was "misleading and undermines trust in official statistics." A mid-June poll by Ipsos MORI, however, found that 47% of the country believed the claim. The day after the referendum, Nigel Farage, who co-founded UKIP and led it until that November, disavowed the figure and said that he was not closely associated with Vote Leave. May also declined to confirm Vote Leave's NHS promises since taking office.
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