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Brexit Law Paves Way for EU-U.K. Talks on Future Relationship

Posted on Jan. 27, 2020

U.K. and EU leaders signed the EU withdrawal agreement in the latest step of the ratification process before Britain leaves the EU on January 31.

President of the European Council Charles Michel and President of the European Commission Ursula von der Leyen signed the deal in Brussels on January 24. British Prime Minister Boris Johnson signed in London later. "This signature heralds a new chapter in our nation's history," he tweeted.

The U.K. government aims to secure trade agreements with countries accounting for 80 percent of U.K. trade within three years of leaving the EU, International Trade Secretary Elizabeth Truss told lawmakers.

“As we leave the European Union, we have a huge opportunity to be a liberalizing force for trade in the world,” Truss told the members of Parliament on January 23, as the European Union (Withdrawal Agreement) Bill completed its passage through Parliament. “As we take up our independent seat at the World Trade Organization, we will be a champion of global free trade,” Truss said during international trade questions.

But Labour MP Jonathan Reynolds noted that the Trump administration’s threat to impose tariffs on cars if the United Kingdom proceeds with its digital services tax “seems an early test of how we will fare in independent trade talks.” Asked whether the U.K. government intends to “concede to American pressure,” Truss declared that “U.K. tax policy is a matter for the U.K. chancellor — it is not a matter for the U.S.; it is not a matter for the EU; it is not a matter for anybody else.”

Ratification Is ‘Only the Start’

The withdrawal bill received royal assent and became law later on January 23. MPs voted on January 22 to reject three House of Lords amendments to the bill.

The European Parliament is expected to give its consent to the withdrawal agreement on January 29, after its Committee on Constitutional Affairs approved a positive recommendation regarding the agreement in a 23-3 vote. The European Council will conclude the process on January 30.

“Ratification of the deal is only the start of the process,” Elizabeth de Jong, director of policy at the Freight Transport Association, said in a January 23 release. “We call on the government to answer critical questions about our future trading arrangements with the EU after the Brexit transition period,” she said. “While changes in the way borders operate and in export and import formalities are to be expected, FTA is calling on the government to prioritize the smooth flow of goods and seek to minimize frictions, red tape, and costs logistics companies may face under a new agreement."

Johnson has an 87-seat working majority in the House of Commons and should not be afraid of setting out what he wants from the talks, said Tim Durrant of the Institute for Government. “Agreeing, and publishing, objectives does not guarantee a successful negotiation. But it is a strategy that worked well for the EU in the first phase of the talks — and Boris Johnson is in a position to follow suit,” he said.

Negotiations on the Future Relationship

The United Kingdom will not be an EU member state after midnight, Brussels time on January 31, and the parties will enter a transition period expected to last until at least December 31.

During the transition period, the parties will negotiate the terms of their future relationship, based on the framework set out in the political declaration agreed in October 2019. “The United Kingdom will no longer be represented in the EU institutions, agencies, bodies, and offices but EU law will still apply in the United Kingdom until the end of the transition period,” the commission confirmed in a January 24 briefing note.

The commission said it will adopt comprehensive draft negotiating directives on February 3. It noted that while the United Kingdom will not participate in EU decisions during the transition period, the Court of Justice of the European Union will continue to have jurisdiction over the United Kingdom. The United Kingdom will remain in the EU customs union and single market with “all four freedoms” of goods, capital, services, and persons, it said.

Northern Ireland

The commission’s briefing summarized the Ireland/Northern Ireland protocol, which is intended to take effect at the end of the transition period: “Northern Ireland will remain aligned to a limited set of rules related to the EU's single market in order to avoid a hard border: legislation on goods, sanitary rules for veterinary controls (‘SPS rules’), rules on agricultural production/marketing, VAT and excise in respect of goods, and state aid rules.”

While Northern Ireland will remain part of the United Kingdom’s customs territory, the EU’s customs code will apply to goods entering Northern Ireland. “This avoids any customs checks and controls on the island of Ireland. As far as customs duties are concerned, EU customs duties will apply to goods entering Northern Ireland if those goods risk entering the EU's single market,” the commission noted. “No customs duties will be payable, however, if goods entering Northern Ireland from the rest of the United Kingdom are not at risk of entering the EU's single market.”

For goods from third countries not considered to be at risk, the customs duties applicable in Northern Ireland will be the same as in the rest of the United Kingdom, the commission said. A joint committee will establish criteria to determine the risk of onward movement. EU VAT rules for goods will continue to apply in Northern Ireland, in order to avoid a hard border “while protecting the integrity of the single market.”

As lawmakers and trade experts continued to debate the impact of these arrangements on business, a government minister suggested that the terms of a free trade agreement with the EU could replace the protocol. “Movements of goods from Great Britain to the Republic of Ireland will be subject to the arrangements concluded by the U.K. and the EU as part of the future relationship. We are aiming for an ambitious agreement with the EU with zero tariffs and quotas, which could, depending on what is agreed, replace the protocol,” James Duddridge, parliamentary undersecretary at the Department for Exiting the European Union, said in a Commons written answer.

“Most importantly, the special arrangements provided for in the protocol are subject to the democratic consent of the people of Northern Ireland, ensuring that if they find the arrangements of the protocol unsatisfactory for any reason they have the choice to bring those arrangements to an end,” Duddridge added.

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