Despite Brexit having officially occurred on January 31, 2020, there is still much uncertainty about what exactly Brexit will look like going forward. With the current trade and other agreements set to expire on Dec. 31, 2020, There is still a lot of room between the various parties trying to make a deal.
So much is left up in the air because Great Britain and the European Union have only agreed on how Britain will leave the EU, with next to nothing decided on the future of their business together. To gain a sense of how vital a deal is going forward, 45% of Britain’s imports are from the EU, while 53% of the country’s exports are to Europe.
And though GB and EU have until the end of this year to agree on trade for 2021 under the 11-month transition period, UK Prime Minister Boris Johnson has said a trade deal must be done by October 15 in order for the deal to be able to start with 2021. This puts the sides in their final month of negotiations, with so much left to decide.
So what do they want?Overall, both the EU and GB want a free trade agreement that includes no tariffs or quotas. However, even here there is a lot of disagreement. The EU wants the UK to adhere to a strict set of rules on fair and open competition aimed at preventing British companies from undercutting their rivals in the EU.
Meanwhile, in a document outlining their approach to negotiations, Britain said it will not sign anything that requires the country to align their laws with the EU’s. Great Britain would prefer a trade agreement similar to the one that the EU has with Canada, which gets rid of most tariffs but has increasing quotas. Britain also said that if that is off the table, they could settle for one similar to the Australia-EU trade-agreement, which is not actually a free trade agreement.
ServiceBoth the EU and GB are also keen on including as much of the service industry as possible in the deal. This is especially important for Britain as financial services are a crucial part of the country's economy. Britain’s financial services companies lost their passporting rights due to Brexit, which will restrict their once open access to the rest of the EU. Because of this, Great Britain is seeking enhanced equivalence, which would give their firms advanced notice to upcoming EU rule changes.
The EU does seem to have taken a step in Britain's direction, announcing on September 15 that the European Union plans to allow finance firms access to U.K. clearinghouses through the end of 2022. This comes after the European Commission proposed British regulations be seen as sufficient.
StandardsThe more similar product standards and laws are between countries, the less need there is by the importing party to check incoming goods for quality or other concerns. This in turn removes trading barriers and allows the products to make it to market at a cheaper price.
Because of this, the European Union is hoping to find consistency between the countries to keep prices on imports down. However, as mentioned above, Britain does not want any restrictions on their laws and regulations, which leads them to want to maintain the right to diverge from the EU when they see fit while assuring the EU they will not be different for the sake of being different.
The EU has also asked Britain to keep food-safety and animal health laws closely in line with those in Europe. This is believed to be a moved designed to keep chlorine-washed chicken imported from the U.S. out the EU food supply.