The UK-EU Trade and Cooperation Agreement: the path to the deal

The Trade and Cooperation Agreement

According to initial information provided by the Government and EU (ahead of publication of the Agreement) the UK-EU Trade and Cooperation Agreement announced on 24 December includes the following features:

• A free trade agreement ensuring no tariffs or quotas on trade in goods.
• Governance provisions involving a UK-EU Partnership Council supported by other committees. This includes binding enforcement and dispute settlement mechanisms covering the economic partnership, involving an independent arbitration tribunal.
• Both parties can engage in cross-sector retaliation in case of violations of the agreement (for example, imposition of tariffs). This cross-sector retaliation applies to all areas of the economic partnership.
• Level playing field provisions giving both parties the right to take counter-measures, but subject to arbitration, where they believe competition is being distorted. There is also a review mechanism where this occurs frequently.
• 25% of the EU’s fisheries quota in UK waters will be transferred to the UK over a period of five years. After this, there will be annual discussions on fisheries opportunities. Compensation will be granted where one side does not grant access to its waters
• A new security partnership providing for data sharing and policing and judicial co-operation but reduced compared to previous levels of co-operation. Security cooperation can be suspended in the case the UK no longer adheres to the European Convention of Human Rights or enforces it domestically.
• Continued UK participation in some EU programmes: Horizon Europe, Euratom Research and Training, and Copernicus.

Next steps

The UK and EU will still need to take steps to ensure the deal is in place before the end of the transition period on 31 December.

The EU will not be able to fully ratify the agreement by the end of the year, as the European Parliament will not be able to organise the necessary consent vote until the new year. However, it will be able to provisionally apply the deal if this is agreed by Member State governments in the Council of the EU.

On the UK side, Parliament will be recalled on 30 December to approve the legislation required to implement the agreement prior to ratification. The legislation will most likely also be used to bypass the requirements of the Constitutional Reform and Governance Act 2010. This normally requires a 21 Parliamentary sitting day period before an international agreement can be ratified.

The negotiations

The agreement is the culmination of eight months of talks which passed several shifting deadlines.

The opening rounds

The negotiations began in March, but were suspended after the first round because of the coronavirus outbreak. Talks then resumed by videoconference from April to early June. Statements following the earlier rounds referred to four principal sticking points:

1. Governance of the future relationship including treaty architecture and dispute resolution mechanisms. The EU wanted a single overarching treaty structure and governance mechanism. The UK preferred separate agreements and governance structures and rejected involvement of the Court of Justice of the EU (CJEU)
2. The “level playing field” to ensure “open and fair” competition. The EU wanted robust mechanisms to ensure common standards on state aid/subsidies and environment and labour protection. The UK rejected regulatory alignment with the EU.
3. Fisheries, where the EU wanted to maintain existing quotas in UK waters and the UK wanted reduced EU quotas agreed on an annual basis.
4. Police and judicial co-operation in criminal matters. The EU said co-operation would be conditional on data protection and human rights standards being enforced in the UK.

Differences between the two sides‘ positions were also clear from their negotiating documents published in February. Their respective positions were later reflected in the draft treaty text published by the EU in March and the ten separate treaty texts published by the UK in May.

Face-to-face negotiations resume

The UK and EU agreed to intensify talks on a face-to-face basis in June. The EU indicated it was prepared to compromise from its previous “maximalist” proposal on fisheries, and also moved away from its earlier insistence that the UK continue to align with current and future EU state aid rules. However, it wanted a mechanism to ensure “equivalence” of state aid rules and an assurance from the UK that its rules would be enforced by an independent domestic regulator.

At the end of July, the two sides indicated that there had been some movement on governance. The UK’s lead negotiator David Frost said that the EU had listened to UK concerns over the role of the CJEU, and that the UK had heard the EU’s concerns about having multiple agreements and was ready to consider simpler structures. There were also reports over the converging positions on law enforcement and judicial co-operation, although this would mean that the UK would lose access to EU law enforcement databases.

The October European Council 

The European Commission launched infringement proceedings against the UK on 1 October in relation to proposed measures in the UK Internal Market that would allow the UK to override elements of the WA Northern Ireland Protocol. The future relationship negotiations nevertheless continued. The European Council meeting of 15-16 October was previously identified by both sides as a deadline for agreeing a deal. This was viewed as giving enough time for legal revisions and translations, and for the EU to complete its internal procedures. This would involve a European Parliament consent vote by the end of the year.

The deadline was not met and the UK Government briefly broke off talks after the European Council meeting. Talks however resumed on 21 October with a new commitment to daily talks based on legal texts.

Talks moved up to leaders

There were reports in early December that a deal was close to being agreed. But there were UK complaints that the EU was bringing new elements into the negotiation. This followed interventions by some Member States who felt that the EU’s chief negotiator Michel Barnier was prepared to compromise too far with the UK. This included the French Government, which said it could veto a deal.  Disagreement focussed on an EU proposal that it be able to take retaliatory action if it increased its standards in the level playing field area and the UK did not follow suit.

On 4 December, the chief negotiators said they were pausing talks to refer back to their “principals” (the UK Prime Minister and the Commission President Ursula von der Leyen). The two leaders spoke the following day and agreed that negotiations should reconvene. They met in person on 9 December.  In a statement following the meeting on 9 December, the Prime Minister said that the situation remained very difficult, but the two sides had agreed to continue negotiations with a firm decision on the future of the talks to be taken on 13 December. The next day, the Prime Minister said that there was now a “strong possibility” that the UK would be ending the transition period on 31 December without a deal with the EU. He said the EU was seeking to keep the UK locked in its “regulatory orbit” by proposing it could retaliate whenever it brought in new laws that the UK didn’t follow.

Talks go the extra mile

Mr Johnson and Ms von der Leyen spoke again on 13 December and said that they had mandated their negotiators to “go the extra mile” and see whether an agreement could be reached.  Reports suggested that there had been some movement on the “evolution” mechanism for the level playing field. The EU had agreed that retaliatory tariffs should only be applied where there is clear evidence that divergence in regulations had significantly distorted trade. This would also need to follow independent arbitration as to whether such measures were justified.

On 16 December, Ursula von der Leyen said there was a path to an agreement but the issue of fisheries remained very difficult. Progress had however been made on the level playing field, with a mechanism of non-regression agreed and the linked issue of governance “largely resolved”. But there were still difficulties on how to “future-proof” fair competition.  Following another call with the Prime Minister on 17 December, she said big differences remained on fisheries. The Prime Minister said that “agreement would not be reached unless the EU position changed substantially”.

On 20 December, the talks passed the deadline for a deal set by the European Parliament in order to stage a consent vote by the end of the year. Talks continued and the Prime Minister and Commission President stepped up direct contact.

Further reading

Commons Library papers on the UK-EU future relationship negotiations

Commons Library papers on the end of the transition period and possible deal and no deal scenarios