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Trillion-dollar trade deal: The UK's Brexit agreement explained

Jessica Yun
·6-min read
TOPSHOT - Britain's Prime Minister Boris Johnson gestures as he holds a remote press conference to update the nation on the post-Brexit trade agreement, inside 10 Downing Street in central London on December 24, 2020. - Britain said on Thursday, December 24, 2020 an agreement had been secured on the country's future relationship with the European Union, after last-gasp talks just days before a cliff-edge deadline. (Photo by Paul GROVER / POOL / AFP) (Photo by PAUL GROVER/POOL/AFP via Getty Images)
Britain's Prime Minister Boris Johnson updates the nation on the post-Brexit trade agreement. (Photo by PAUL GROVER/POOL/AFP via Getty Images)

If you’ve been staying on top of social media but not the news during Christmas, you might have seen this Tweet of a jubilant Boris Johnson.

Britain has been in a ‘transition period’ after it officially left the European Union (EU) on 31 January. Since then, both parliaments have until the end of 2020 to negotiate on the details of how the UK will conduct business with the EU.

On Christmas Eve, less than a week before the end of the transition period, the terms of the new economic partnership were finalised in a 1,246-page document. Even to the end, it was held up by details about fishing and the EU’s access to British waters.

Pending approval from UK parliamentarians, the agreement will kick in on 1 January and lays out the terms of bilateral trade that is worth over £668 billion a year, or AU $1.186 trillion.

The deal outlines new terms for trading goods across the border and encompasses everything from aviation to energy climate to security, but leaves some details still to be hashed out.

EU nations have now given unanimous approval to the trade deal, which is required for the treaty to come into effect in the new year.

All that’s left now is for the UK parliament to pass the legislation, which will be debated and voted on Wednesday.

If you’ve been out of the loop with it all, here’s a quick refresher on Brexit – and also what it means Down Under.

A lot will stay the same

The agreement means that a ‘no deal Brexit’ has been staved off, which means British businesses won’t have to cop major tariffs or quotas on goods. In the absence of a deal, car prices would have increased, and it might have become harder for British meat farmers to sell to the European market, the NY Times reported.

But it also means traders will need to face new border checks and customs declarations. Producers from the UK that want to sell to both UK and European markets will need to meet both sets of standards and regulations, increasing the red tape for goods trading.

There will be rules for a ‘level playing field’

Britain can make up its own rules in areas like environmental or labour laws, but will likely stick closely to European Union’s standards and regulations in the near future in most areas.

However, access to the European market will be restricted if Britain deviates too far from it, the Financial Times reported.

An arbitration mechanism will allow both sides to impose tariffs if a business is at an unfair disadvantage. This is a win for hard Brexiteers, who do not want the European Court of Justice involved.

People won’t be able to move as freely

In a move that will be a blow to keen travellers, UK nationals won’t have the same freedom to work, study, start a business or live in the EU.

British visitors to the EU will have to carry a valid passport, and visas will be needed for stays longer than 90 days. They’ll have to face extra border checks, too, and European pet passports will become invalid.

Michael Gove, the British cabinet minister in charge of Brexit preparations, has warned of turbulence ahead for travellers.

“I'm sure there will be bumpy moments but we are there in order to try to do everything we can to smooth the path,” he told the BBC.

Professionals will lose their credentials

The deal failed to secure recognition of mutual recognition of professional qualifications for British workers across the EU at large.

This means that professional service providers – like doctors, vets, engineers and architects – will need to have their qualifications recognised by each EU member state that they wish to work in.

The UK will be able to fish in its own waters

This detail was something that was a major sticking point for both sides on the negotiation table, right to the very end. The EU’s joint legal framework ensures equal access to waters, as well as quota-sharing arrangements.

But the deal determines the UK is an independent coastal state and is free to decide on its own access to waters and fishing grounds. In the end, the European Union agreed that it would give up 25 per cent of its fishing quota, but for this quota reduction to come into effect gradually across 5.5 years.

There are still some holes in the deal

The trade agreement mostly deals with goods crossing borders, but doesn’t cover the services sector. This includes London’s finance sector, which makes up 80 per cent of Britain’s economy.

When the transition period ends on 31 December, Britain exits European’s single market. They’ve left the door open to evaluate whether regulation on both sides are as tight as the other.

What Brexit means for Australia

Though the deal has taken 11 months of negotiations, it won’t mean too much Down Under, economists believe.

Primarily, a ‘hard Brexit’ has been avoided, which could have knocked 2-3 per cent off the UK economy in 2021, according to AMP Capital chief economist Shane Oliver.

“Given that this has been averted, it’s good to the extent that it’s positive for global growth.

“But it’s trivial for the far bigger EU economy and is of little relevance for the US, Japan and China/Asia which are all far more important for Australia,” he told Yahoo Finance.

While the Brexit deal clears the way for Australia to make its own free trade agreements with the UK, this might take years.

“While it may help a few agricultural producers, like wine makers, its overall impact on the Australian economy is likely to be marginal,” he said.

“So it’s nothing to get excited about in Australia.” The deployment of a Covid-19 vaccine, for instance, would be much more important, Oliver added.

According to UNSW academic and ‘Airport Economist’ Tim Harcourt, Australian exporters will be largely safe from the UK-EU divorce.

“Most small- to medium-sized enterprise exporters go straight to the UK, rather than Europe,” he told Yahoo Finance.

“At least the deal won’t upset the 6000 plus Aussie exporters who base themselves in the UK as a bridge to Europe. If the UK has crashed out it would have put their arrangements in jeopardy.”

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