The UK exit from the European Union called the Brexit and signing a trade and cooperation deal between the parties outline the framework of future cooperation between the UK and the EU. Given the UK’s position as the second largest economy in the European Union and a permanent member of the UN security council and due to the trade and economic integration and intermingledness created between the two parties over the past thirty years , Brexit will bring with it political, economic and social consequences in the short, mid, and long term. The UK will lose its trade and financial advantages over the world and its relations with the EU will be more limited. Also, without the UK, the EU will become smaller and weaker and in case the EU officials fail to find a substitute for the UK to be member of the union, its political and economic influence in the international arena will diminish.

After a long period of tough and intense negotiations on the UK exit from the European Union called the Brexit, the UK and EU reached a deal on December 24, 2020. As per article 50 of the EU treaty, every member has the right to exit.

The EU-UK Trade and Cooperation Agreement (TCA) that outlines the framework of future cooperation between the UK and the EU was signed by Mr. Charles Michel, President of the European council, and Ms. Ursula von der Leyen representing the 27 member states of the EU and Boris Johnson, the prime minister of the UK.

To come into force, the 2000-page agreement must be approved by the 27 members of the European union as well as the UK parliament. Given that the adoption process cannot be finished before the start of the new year, the European commission agreed to the interim execution of the agreement from January 1,2021. The European parliament has time until February 28, 2021, to examine and adopt the agreement.

Reaching an agreement before the close of December this year and before the January of 2021 was predictable, but the main ambiguity and question was how to make the divorce and what the impacts and consequences would be. Would it be a hard exit? Or it would be a mutually agreed one, in other words, a soft exit.

It was important for both sides to reach an agreement that would secure the interests of both the EU and the UK. The EU did not want the exit to be so easy as it might encourage other member states to follow the UK on the path to exiting the EU, on the other side, the UK was concerned about losing its status and main interests in trade with the EU members, because more than half of the UK’s foreign trade is with the EU member states which amounts to over one trillion euros annually.

The thorniest issue between the EU and UK was the labor market. The UK had demanded that it use the EU’s customs union and free market; while the EU officials contended that if London wanted to use the union’s market it had to abide by and act on Brussel’s criteria and indexes.

In case the UK exited the EU without a deal, it would not be able to use the EU’s market, and both sides would have to negotiate in terms of the customs tariffs. The UK was trying to implement its exit from the EU in a way that it would not lose its short and long term interests in trade with the EU member states. The customs tariffs problem was solved in the agreement so that the UK’s exports and imports to and from the EU will remain without customs tariffs. In other words, the agreement facilitates trade by zero tariffs for goods.

Another subject causing difference between the parties was the issue of fishing of the member states off the UK shores and the regulations on more than 100 fishes. Both sides agreed the EU members have the right to fishing near the UK shores for five and a half years and the UK have the right to export its sea products to the EU member states. At present, the fishing value of EU’s boats in the UK waters is about 650 million euros annually. This figure will decrease by 25% during the transition period by 2026, leading to the UK fishers earning more. After the period terminates, access to these waters will be conditioned to more negotiations by the two sides.

Another point of contention was the European Court of Justice                supervising the claims by the UK and EU. Both sides came to the agreement that the UK’s claims against the EU and member states be referred to international bodies to be settled. With the agreement, the issues of the two Irelands (Northern Ireland and the Republic of Ireland) borders and transit of goods, capital and citizens were solved to some extent.

Another point to be made was the result of the US presidential elections which would influence the UK-EU negotiations.  The victory of Biden, the democratic party’s candidate, was not much of good news for Boris Johnson , the UK prime minister, because the UK conservatives do not sit well with the US democrats (during the Trump term, the UK was hoping for a free trade deal with the US, but Biden is in no rush to sign such a deal).

      Impacts and Consequences of the UK Exit from the EU

 Given the UK’s position as the second largest economy in the European Union and a permanent member of the UN security council and due to the trade and economic integration and intermingledness created between the two parties over the past thirty years, Brexit will bring with it political, economic and social consequences in the short, mid, and long term.

UK:

• Recent polls point to the fact that the UK politicians are pressing for close ties with the EU to unfold the UK’s role in the post-Brexit era , but are worried about the tough stance that France and Germany may take.
• With this agreement the UK will lose much of its trade and economic advantages over the EU and the world. On January 1, the London city will exit the European single market in terms of financial services. Legal, monetary and financial services constitute about 80% of the UK economy and the UK companies cannot easily transact with the EU like in the past and need to acquire permits from the EU or member states. Trade between the UK and the EU and member states will be performed within the framework of the agreement, and definitely the trade and economic ties between the two sides will be more limited.
• The UK GDP will decrease by 4% after the Brexit compared to the period when the UK was a member of the EU.
• The UK’s Brexit ministry will be dissolved and the future negotiations with the EU will go under the purview of a group within the prime minister’s office.
• By exiting the EU, the UK may enter into trade talks with all countries and set new regulations for imports, exports and services.
• The current UK’s Citizens’ passports will be renewed, changed and replaced with new passports. The current passports will be valid until the expiry date.
• In case the UK criminals flee to Germany, they will not be extradited to the UK. The German constitution does not authorize such an act. Germany has an extradition of criminals agreement with only the EU members.
• Subsequent to the exit agreement, the UK citizens will not be treated like the EU citizens at the borders of the member states. However, after the Brexit, the UK citizens may have short travels without a visa from the EU. Also, London is setting up a new immigration system.
• The driver’s licenses and pet passports will be valid until the expiry date.
• Since January 1, 2021, the UK citizens cannot use the EU health insurance cards inside the EU member states plus Switzerland, Norway, Iceland, and Liechtenstein). The European health insurance card allowed the UK citizens to use state sponsored treatment services in the EU member states in case of disease or accident.
• Since the date the exit agreement comes into force, the UK citizens cannot work and live in the EU member states like in the past and vice versa.
• The UK citizens working in the EU member states will continue to receive their pensions.

The EU:

• The UK exit from the EU will have negative impacts on the European political landscape and strengthen tendencies to exit the EU.
• Brexit will have tremendous geopolitical impacts on the internal, political dimensions, economic, security, defense, financial and energy developments. The negative impacts on the republic of Ireland and Northern Ireland will be considerable.
• Without the UK, the EU has now become smaller and weaker and in case the EU officials fail to find a substitute for the UK to be member of the union, its political and economic influence in the international arena will diminish.

Javad Kachoueian, Senior Expert at European Affairs 

 (The opinions expressed are those of the authors and do not purport to reflect the opinions or views of the IPIS)