After series of intensive talks the European Commission reached Trade and Cooperation Agreement with the UK o podmínkách jeho budoucí spolupráce s Evropskou unií. Dne 1. 1. 2021 tedy pozbyde Spojené království všech svých práv a povinností, které mělo jako členský stát EU a během přechodného období definovaného Výstupovou dohodou. UK nebude již nadále mít prospěch z hladkého přístupu na jednotný trh a do celní unie, ani z unijních politik a mezinárodních dohod (vč. dohod o volném obchodu s třetími státy).

 

The Trade and Cooperation Agreement covers a number of areas that are in the EU's interest. It goes well beyond traditional free trade agreements and provides a solid basis for preserving our longstanding friendship and cooperation. It safeguards the integrity of the Single Market and the indivisibility of the Four Freedoms (people, goods, services and capital). Nonetheless, creation of new barriers and control mechanisms in goods and services trade was inavoidable. Therefore the European Commission issued number of instructions on how to deal with these changes (available here).

 

Trade and Cooperation Agreement will cover following areas: trade in goods, services and investments, digital trade, intellectual property, public procurement and small and medium-sized enterprises (SMEs), energy, level playing field for open and fair competition and sustainable development, aviation, road transport, social security coordination and visas for short-term visits, fisheries, law enforcement and judicial cooperation in criminal matters, thematic cooperation and participation in Union programmes.

It will be governed by an institutional framework on the operation and enforcement of the Agreement, as well as binding dispute settlement and enforcement mechanisms.

 

Press release summarizes the main pillars of the drafted agreement:

  • The agreement covers not just trade in goods and services, but also a broad range of other areas in the EU's interest, such as investment, competition, State aid, tax transparency, air and road transport, energy and sustainability, fisheries, data protection, and social security coordination.
  • It provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin.
  • Both parties have committed to ensuring a robust level playing field by maintaining high levels of protection in areas such as environmental protection, the fight against climate change and carbon pricing, social and labour rights, tax transparency and State aid, with effective, domestic enforcement, a binding dispute settlement mechanism and the possibility for both parties to take remedial measures.
  • The EU and the UK agreed on a new framework for the joint management of fish stocks in EU and UK waters. The UK will be able to further develop British fishing activities, while the activities and livelihoods of European fishing communities will be safeguarded, and natural resources preserved.
  • On transport, the agreement provides for continued and sustainable air, road, rail and maritime connectivity, though market access falls below what the Single Market offers. It includes provisions to ensure that competition between EU and UK operators takes place on a level playing field, so that passenger rights, workers' rights and transport safety are not undermined.
  • On energy, the agreement provides a new model for trading and interconnectivity, with guarantees for open and fair competition, including on safety standards for offshore, and production of renewable energy.
  • On social security coordination, the agreement aims at ensuring a number of rights of EU citizens and UK nationals. This concerns EU citizens working in, travelling or moving to the UK and to UK nationals working in, travelling or moving to the EU after 1st January 2021.
  • Finally, the agreement enables the UK's continued participation in a number of flagship EU programmes for the period 2021-2027 (subject to a financial contribution by the UK to the EU budget), such as Horizon Europe.

 

  • The Trade and Cooperation Agreement establishes a new framework for law enforcement and judicial cooperation in criminal and civil law matters. It recognises the need for strong cooperation between national police and judicial authorities, in particular for fighting and prosecuting cross-border crime and terrorism. It builds new operational capabilities, taking account of the fact that the UK, as a non-EU member outside of the Schengen area, will not have the same facilities as before. The security cooperation can be suspended in case of violations by the UK of its commitment for continued adherence to the European Convention of Human Rights and its domestic enforcement.
  • To give maximum legal certainty to businesses, consumers and citizens, a dedicated chapter on governance provides clarity on how the agreement will be operated and controlled. It also establishes a Joint Partnership Council, who will make sure the Agreement is properly applied and interpreted, and in which all arising issues will be discussed.
  • Binding enforcement and dispute settlement mechanisms will ensure that rights of businesses, consumers and individuals are respected. This means that businesses in the EU and the UK compete on a level playing field and will avoid either party using its regulatory autonomy to grant unfair subsidies or distort competition.
  • Both parties can engage in cross-sector retaliation in case of violations of the agreement. This cross-sector retaliation applies to all areas of the economic partnership.

 

Foreign policy, external security and defence cooperation is not covered by the Agreement as the UK did not want to negotiate this matter. As of 1 January 2021, there will therefore be no framework in place between the UK and the EU to develop and coordinate joint responses to foreign policy challenges, for instance the imposition of sanctions on third country nationals or economies.

You can check some of the related questions and answers (for English, see European Commission webpage)

The entry into application of the Trade and Cooperation Agreement is a matter of special urgency. The United Kingdom, as a former Member State, has extensive links with the Union in a wide range of economic and other areas. If there is no applicable framework regulating the relations between the Union and the United Kingdom after 31 December 2020, those relations will be significantly disrupted, to the detriment of individuals, businesses and other stakeholders.

The negotiations could only be finalised at a very late stage before the expiry of the transition period. Such late timing should not jeopardise the European Parliament's right of democratic scrutiny, in accordance with the Treaties. In light of these exceptional circumstances, the Commission proposes to apply the Agreement on a provisional basis, for a limited period of time until 28 February 2021.

The Commission has proposed Council decisions on the signature and provisional application, and on the conclusion of the Agreement.

The Council, acting by the unanimity of all 27 Member States, is to adopt a decision authorising the signature of the Agreement and its provisional application as of 1 January 2021.

Once this process is concluded, the Trade and Cooperation Agreement between the EU and the UK can be formally signed. The European Parliament will then be asked to give its consent to the Agreement. As a last step on the EU side, the Council must adopt the decision on the conclusion of the Agreement.

Throughout the negotiations, the European Commission has held regular meetings with national parliaments of all 27 Member States to keep them fully informed. The Commission is of the view that the Agreement with the UK can be concluded as an EU-only agreement since it covers only areas under Union competence, be it exclusive or shared with the Member States. The Commission has chosen Article 217 TFEU as the legal basis for the conclusion of the Agreement. This requires the unanimous agreement of the Member States in the Council and the consent of the European Parliament.

The United Kingdom left the European Union on the basis of the here), which was agreed and ratified by both sides, and entered into force on 1 February 2020.

The Withdrawal Agreement contains, amongst others, provisions on citizens' rights, the financial settlement and a legally operative solution to avoid a hard border on the island of Ireland, protecting the all-island economy and the Good Friday (Belfast) Agreement in all its dimensions while safeguarding the integrity of the EU's Single Market.

The rigorous, timely and full implementation of the Withdrawal Agreement is and will always remain a key priority for the EU.

On 9 September 2020, the UK government published the Internal Market Bill, which would have enabled the United Kingdom to unilaterally suspend parts of the Withdrawal Agreement, and notably of the Protocol on Ireland and Northern Ireland. This bill was in clear breach of the Withdrawal Agreement – and therefore international law. As a result, on 1 October 2020, the Commission sent the United Kingdom a letter of formal notice for breaching its obligations under the Withdrawal Agreement. This marked the beginning of a formal infringement process. The European Parliament also signalled that it would not give its consent to any agreement on a future partnership if the UK went forward with this proposal.

On 17 December 2020, the EU-UK Joint Committee met to endorse all formal decisions and other practical solutions related to the implementation of the Withdrawal Agreement. As part of these mutually agreed solutions, the UK has agreed to withdraw the contentious clauses of the UK Internal Market Bill, and will not introduce any similar provisions in the Taxation Bill.

Thanks to intensive discussions between the EU and the UK in the Joint Committee and the various Specialised Committees, the Withdrawal Agreement – and the Protocol on Ireland and Northern Ireland, in particular – will be implemented on 1 January 2021.

Trade in Goods

As of 1 January 2021, the UK leaves the EU Single Market and Customs Union. As a result, it will no longer benefit from the principle of free movement of goods. To preserve their mutually beneficial trading relationship, the two sides have agreed to create an ambitious free trade area with no tariffs or quotas on products, regulatory and customs cooperation mechanisms, as well as provisions ensuring a level playing field for open and fair competition, as part of a larger economic partnership.

In particular:

  • rules of origin will apply to goods in order to qualify for preferential trade terms under the agreement;
  • all imports will be subject to customs formalities and will need to comply with the rules of the importing party;
  • and all imports into the EU must meet all EU standards and will be subject to regulatory checks and controls for safety, health and other public policy purposes.

The provisions in the agreement do not govern trade in goods between the EU and Northern Ireland,where the Protocol on Ireland and Northern Ireland included in the Withdrawal Agreement will apply.

 

 

As of 1 January 2021, the UK will no longer be part of the EU Customs Union. Therefore, all customs controls and formalities required under EU law (and in particular the Union Customs Code), including entry and exit summary declarations, will apply to all goods entering the customs territory of the EU from the UK, or leaving that customs territory to the UK. This does not concern trade in goods between the EU and Northern Ireland, where the Protocol on Ireland and Northern Ireland included in the Withdrawal Agreement will apply.

The two sides have, however, agreed to recognise each other's "Authorised Economic Operators" programmesenabling trusted traders that benefit from this status to enjoy certain simplifications and/or facilitations relating to security and safety in their customs operations with the customs authorities of the other Party. However, there is no waiver on such security and safety declarations, as this requires alignment between the Parties on security standards. 

The Agreement sets the ground for further developing customs cooperation in the future, including for instance with regard to innovative solutions, in full respect of both Parties' domestic rules, concerning the handling of customs procedures for roll-on/roll-off (“ro-ro”) traffic, i.e. ships carrying loaded trucks, or exchange of customs-related information.

Rules of origin determine the ‘economic nationality' of products when these have been produced using components or materials made in more than one country.

Such rules are necessary to ensure that the products benefiting from the terms of the free trade agreement (in this case, zero tarifs, zero quotas) are either wholly obtained from or manufactured in the free trade area itself (in this case, the EU and the UK), or sufficiently worked or processed there (e.g. by setting a limit on the value of non-originating materials that can be used in order to benefit from the agreement.

Under the Trade and Cooperation Agreement, EU and UK traders would have to meet rules of origin comparable to those which the EU and the UK have with other trading partners.

The Agreement also includes specific mechanisms aimed at facilitating compliance with these rules of origin, namely a provision on ‘full cumulation', which allows traders to account not only for the origin of materials used, but also if their processing took place in the territory of one of the Parties. This mechanism enables the agreement to capture to the greatest extent the value added in the free trade area.

Exporters will also be able to self-certify the origin of the goods, thereby making it easier for traders to prove the origin of their products and reducing red tape. In addition, the operators will benefit from additional flexibility in collecting documentary evidence to prove origin during the first year, to allow them to benefit from the preferences despite the little time available between conclusion and application of the Agreement.

 

As of 1 January 2021, the Union and the United Kingdom will be two separate regulatory and legal spaces. This means that all products exported from the EU to the UK will have to comply with UK technical regulations and will be subject to any applicable regulatory compliance checks and controls. Similarly, all products imported from the UK to the EU will need to comply with EU technical regulations and will be subject to all applicable regulatory compliance obligations, checks and controls for safety, health and other public policy purposes.

Nonetheless, the Trade and Cooperation Agreement contains a number of provisions aimed at preventing and addressing unnecessary technical barriers and requirements, including through bilateral cooperation, and simplifying procedures used to demonstrate compliance with them (conformity assessment procedures).

In particular, the two sides agreed a definition of international standards that identifies the relevant international standard-setting bodies. This will ensure that both sides' domestic product standards and technical regulations are based on the same international references and are therefore compatible to the extent possible. This will make compliance of products with the other Party's rules easier and less costly, all the while safeguarding each side's ‘right to regulate'.

In the field of conformity assessment, the Parties agreed to maintain simplified access to each other's markets through, in particular, the continued use of self-certification of conformityby themanufacturer where this is currently applied in both the EU and the UK.

 

 

Services & investment

As of 1 January, the UK will no longer benefit from the principles of free movement of persons, free provision of services and freedom of establishment. As a result, UK service suppliers will lose their automatic right to offer services across the EU. They may need to establish themselves in the EU to continue operating. In any event, they must comply with the – often varying – host-country rules of each Member State, as they will no longer benefit from the ‘country-of-origin' approach or ‘passporting' concept, according to which authorisations issued by one Member State under EU rules enable access throughout the entire EU Single Market.

As required by the WTO's General Agreement on Trade in Services (GATS), the Agreement has substantial sectoral coverage, including professional and business services (e.g. legal, auditing, architectural services), delivery and telecommunication services, computer-related and digital services, financial services, research and development services, most transport services and environmental services. Furthermore, the scope of the Agreement applies to investment in sectors other than services such as manufacturing, agriculture, forestry, fisheries, energy and other primary industries.

As in any free trade agreement negotiated by the EU, there are number of exceptions to the scope of liberalisation:, namely, public services and services of general interest; some transport services; as well as audiovisual services.

The draft EU-UK Trade and Cooperation Agreement covers financial services in the same way as they are generally covered in the EU's other FTAs with third countries. In particular, the Agreement commits both parties to maintain their markets open for operators from the other Party seeking to supply services through establishment. The parties also commit to ensuring that internationally agreed standards in the financial services sector are implemented and applied in their territories.

Both parties preserve their right to adopt or maintain measures for prudential reasons (‘prudential carve-out'), including in order to preserve financial stability and the integrity of financial markets.

The parties will also aim to agree by March 2021 a Memorandum of Understanding establishing a framework for regulatory cooperation on financial services.

 

As of 1 January, as a general rule, UK nationals, irrespective of where they acquired their qualifications, and EU citizens with qualifications acquired in the United Kingdom will need to have their qualifications recognised in the relevant Member State on the basis of each country's existing individual rules applicable to the qualifications of third-country nationals as of the end of the transition period.

The Trade and Cooperation Agreement nevertheless foresees a mechanism whereby the EU and the UK may later agree, on a case-by-case basis and for specific professions, on additional arrangements for the mutual recognition of certain professional qualifications.

The non-discrimination obligations of the Agreement ensure that service suppliers or investors from the EU will be treated no less favourably than UK operators in the UK, and vice-versa. This entitles them to receive more favourable treatment than that granted to service suppliers or investors of third countries without similar provisions in place.

Naturally, given that the UK will no longer be in the Single Market, all UK service suppliers and investors must abide by the domestic rules, procedures and authorisations applicable to their activities in the countries where they operate. For UK service suppliers, this means complying with – often varying – host-country rules of each Member State, as they will no longer benefit from the ‘country-of-origin' principle, mutual recognition or ‘passporting'.

The actual level of market access will depend on the way the service is supplied: whether it is supplied on a cross-border basis from the home country of the supplier, e.g. over the internet (‘mode 1'); supplied to the consumer in the country of the supplier, for example a tourist travelling abroad and purchasing services (‘mode 2'); supplied via a locally-established enterprise owned by the foreign service supplier ('mode 3'), or through the temporary presence in the territory of another country by a service supplier who is a natural person (‘mode 4').

In practice, the actual ability to supply a particular service or invest in a certain sector will also depend on specific reservations set out in the agreement, which may be imposed on UK service suppliers when supplying services in the EU in some sectors, and vice-versa.

The EU-UK Agreement also includes a forward-looking “most-favoured nation” clause that would allow the EU and the UK to claim any more favourable treatment granted by the UK or the EU respectively in their future agreements on trade in services and investment with other third countries – except in the area of financial services.

It also includes a review clause encouraging the parties to consider whether there are possibilities to improve trade in services and investment relations between the EU and the UK in the future – except in the area of financial services.

The UK has chosen to no longer allow the free movement of EU citizens to the UK. It also refused to include a chapter on mobility in the Agreement. These choices inevitably mean that business travel between the EU and the UK will no longer be as easy as it currently is. Nonetheless, regarding the temporary movement of natural persons for business purposes (often refered to as ‘mode 4'), the EU and the UK have agreed on a broad range of reciprocal commitments facilitating the ability of companies located in a Party to transfer certain employees, as intra-corporate transferees, to work in an associated company located in the other Party. As intracorporate transferees constitute temporary migration, the maximum duration of such transfers is capped at three years. With respect to UK nationals transferred to the EU, this duration includes periods of mobility between Member States. This is in line with current EU practice with other third countries.

The EU-UK Agreement also facilitates the movement of “contractual service suppliers” or “independent professionals” to supply services under certain conditions. Business visitors not providing services will also be allowed short-term entry in order to carry out certain activities.

The Comparison of the terms agreed by the Trade and Cooperation
Agreement

Free movement of people

EU-UK
Agreement

EU single

market

Removal of border checks

Pet passports

Visa-free travel (90 days in a 180-day period)

Visa-free travel (beyond 90 days)

Right to work, study, live in another EU country

Removal of roaming charges

Trade in goods

Frictionless trade

Zero tariffs or quotas

Zero customs formalities

Zero SPS checks

Zero rules of origin procedures

Fisheries agreement

Benefit from the EU’s international agreements

Trade in services

Financial services passport

Easy recognition of professional qualifications

Air transport

Single aviation area, full freedoms

Bilateral 5th freedoms for extra-EU air cargo

Road transport

Single internal transport market for hauliers

Cross-trade operations

Energy

Single internal energy market

Energy trading platforms

EU programmes

ERASMUS

NextGenerationEU, SURE

Galileo encrypted military signal

Horizon Europe

specific terms agreed by the Trade and Cooperation Agreement, source: EC

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