EU-UK Draft Agreement-2

This is the second of the series of commentaries on the Agreement that we plan to post. We do not intend to read or analyse the whole document thoroughly (1,246 pages) but we will focus on the parts that we believe may be most significant for the future of the UK.

The EU-UK Trade and Cooperation Agreement was finally signed by Commission President Ursula von der Leyen, Council President Charles Michel and Prime Minister Boris Johnson on 30th December, overwhelmingly approved by Parliament (571 for to 73 against) and provisionally accepted by the EU Parliament, just in time to come into effect on 1st January 2021.

It is unlikely that the Agreement gets Brexit done to everyone’s complete satisfaction, indeed it was only grudgingly accepted as better than no deal by Labour whose leader, Sir Kier Starmer, described it as a “thin deal”. However it can (and will) be changed, as we shall see, so it is worth examining what the Agreement means for the UK now, how it can be varied and by whom. One thing is clear, the CJEU will not decide things but this does not mean that the UK Government, Parliament or voters will have full control either. It is an international treaty governed by the Vienna Convention on Treaties, with independent arbitrators plus mutual committees empowered to adapt the Agreement to meet circumstances as they alone see fit. These ‘institutions’ are covered in our first post [1].

We can not attempt a lawyerly analysis of the Agreement (we are not qualified) but we can try to outline key points for the general reader/voter and offer our opinion where we have one.

This post covers the part of the Agreement concerning trade in goods.

PART TWO: TRADE, TRANSPORT, FISHERIES AND OTHER ARRANGEMENTS

We put our comments first, section by section, with the relevant quotations gathered together at the end. The Agreement itself can be downloaded here [2] where the quoted (and all other) Articles can be compared in full and in context.

Trade in Goods

The document appears to preserve the terms of customs quotas and tariffs on goods as they existed while the UK was a member of the EU (Article GOODS.4). Naturally there’s an escape clause, a touch of lawyerly Latin, ‘mutatis mutandis’ (meaning changes may be necessary to take account of future situations) which is ideal for ensuring continuous disputes. This sliver of Latin gives the Partnership Council (PC) plenty of scope to vary from GATT rules. (References to the PC include its committees and working groups.)

There will be no customs duties on goods (Article GOODS.5), no “consular transactions” and their associated costs on imports (Article GOODS.7) and “fair, equitable, non-discriminatory and transparent” import licencing procedures (Article GOODS. 13). That should save some paperwork. Not that everyone is convinced though as there are plenty of other clauses, such as what happens if a customs breach occurs for any product category and there is no agreement on a solution: after three months of stalemate customs preference for those products can be unilaterally suspended (Article GOODS.19). Comments from others suggest that businesses will face heavier bureaucracy than they have become used to but we should remember that export agents exist and are widely used already to assist with non-EU exports which are faster growing so cannot be that prohibitive once practices become settled.

Rules of Origin

A quick reading of this chapter (pages 27- 41) doesn’t bring up anything controversial. Locally made goods can be exported without tariffs, dependant on the proportion of ‘foreign’ components/ingredients. Accommodation has already been reached to assist UK vehicle exports, where time is needed to increase local or EU content, in particular for electric vehicles (Article ORIG.18).

The chapter concludes with Article ORIG.31, which we may expect to become familiar with. Such terms suggest an alternative interpretation of ‘Draft’ in the title of this Agreement; that it is provisional and thus may not provide the ‘certainty’ for businesses that has been claimed for it. And it may indicate what we can expect from political documents that have been produced in haste, where ‘haste’ does not mean quick, as the thing was under negotiation for years. To get it through, the many compromises may become better known as ‘fudges’, and these will keep the lawyers and politicians busy for years to come.

Sanitary and Phytosanitary Measures

The next chapter (pages 41-53), which we will skip through as it is a highly specialist, scientific area, is titled Sanitary and phytosanitary (SPS) measures. From the objectives, which open this chapter, we quote from Article SPS.1: Objectives, which includes several other nice-to-haves. We can take these with a suitable pinch of salt and wait to see how they are applied.

Article SPS.5 refers to “scientific and technical justification” but that won’t appease any who are opposed to chlorinated chickens and genetically modified foods, so politicians from both parties will have some interesting judgements to make and, no doubt, further arguments to engage in.

Do we all understand what is meant by “sustainable” in Article SPS.18?

Technical Barriers

Chapter 4: Technical barriers to trade (TBT, pages 53-61) has the unimpeachable, if unmeasurable, objective of facilitating trade in goods by preventing and eliminating unnecessary technical barriers (Article TBT.1) – technical barriers are the lifeblood of Brussels lobbyists. Article TBT.2 raises issues of conformance that we have met before [3]. EU standards are not always as strict as British equivalents (minimum wage, Mako shark fishing, live animal exports, et al) and such ‘divergences’ may trigger disputes between the parties, with consequences that have yet to be tested.

Article TBT.3 refers to the multilateral Agreement on Technical Barriers to Trade (the TBT Agreement) administered by the World Trade Organisation (WTO). The EU participates in this Agreement and the UK may need to join on its own behalf post-Brexit. We don’t know how, or whether, the EU will use “mutatis mutandis” (which is in this clause too) to vary the terms of the TBT Agreement.

Article TBT.4 allows exceptions to using international standards which sets up room for fudge and emphasises the provisional nature of the Agreement. Either party may request technical discussions on proposed rules or procedures of the other that they believe will impact on trade (Article TBT.10).

The parties must cooperate (“shall”) in the technical stuff for their mutual interest without prejudicing their own decision-making and legal processes (Article TBT.11) – we look forward to seeing that in practice. We can only hope that the details in this chapter (and others) narrow the opportunities for disputes and reduce the need for lawyers.

Customs and trade facilitation

Article CUSTMS.1 lists the objectives of this chapter, in sufficiently vague and unmeasurable terms to promote further ‘discussions’. Article CUSTMS.5 proposes simplifying existing customs procedures to help smaller businesses in particular, though “shall work towards simplification” is a little discouraging. The EU loves “appropriate” consultations with those who are affected by their proposals (Article CUSTMS.15), but who is appropriate and will the consultations be made public? This they are usually not keen to reveal, after all, lobbying should always be discreet [4]. It all suggests that a hasty compromise was reached and this will need to be clarified by lawyers, courts and precedents.

And, as usual, “The Partnership Council may amend:...” (Article CUSTMS.21: Amendments 1.)

Title II of Part I focuses on services, which are more significant in the UK economy, and – so the commentaries tell us – are less thoroughly treated in the Agreement, as by the EU generally. Services will be the subject of the next post.

Extracts from the Trade and Cooperation Agreement document

Trade in Goods

Article GOODS.4: National treatment on internal taxation and regulation

Each Party shall accord national treatment to the goods of the other Party in accordance with Article III of GATT 1994 including its Notes and Supplementary Provisions. To this end, Article III of GATT 1994 and its Notes and Supplementary Provisions are incorporated into and made part of this Agreement, mutatis mutandis.

Article GOODS.5: Prohibition of customs duties

Except as otherwise provided for in this Agreement, customs duties on all goods originating in the other Party shall be prohibited.

Article GOODS.7: Fees and formalities

4. A Party shall not require consular transactions, including related fees and charges, in connection with the importation of any good of the other Party.

Article GOODS. 13: Import licensing procedures

1. Each Party shall ensure that all import licensing procedures applicable to trade in goods between the Parties are neutral in application, and are administered in a fair, equitable, non- discriminatory and transparent manner.

Article GOODS.19: Measures in case of breaches or circumventions of customs legislation

4. If the Parties fail to agree on a mutually acceptable solution within three months after the date of notification, the Party which has made the finding may decide to suspend temporarily the relevant preferential treatment of the product or products concerned…

Rules of Origin

Article ORIG.1: Objective

The objective of this Chapter is to lay down the provisions determining the origin of goods for the purpose of application of preferential tariff treatment under this Agreement, and setting out related origin procedures.

Article ORIG.18: Claim for preferential tariff treatment

1. The importing Party, on importation, shall grant preferential tariff treatment to a product originating in the other Party within the meaning of this Chapter on the basis of a claim by the importer for preferential tariff treatment.

Article ORIG.31: Amendment to this chapter and its annexes

The Partnership Council may amend this Chapter and its Annexes.

Sanitary and Phytosanitary Measures

Article SPS.1: Objectives

The objectives of this Chapter are to:

(a) protect human, animal and plant life or health in the territories of the Parties while facilitating trade between the Parties;

(c) ensure that the Parties’ sanitary and phytosanitary (“SPS”) measures do not create unnecessary barriers to trade;

(e) enhance cooperation between the Parties…

Article SPS.5: General principles

1. The Parties shall apply SPS measures for achieving their appropriate level of protection that are based on risk assessments in accordance with relevant provisions…

4. The Parties shall not use the procedures…to delay access to their markets without scientific and technical justification.

Article SPS.18: Sustainable food systems

Each Party shall encourage its food safety, animal and plant health services to cooperate with their counterparts in the other Party with the aim of promoting sustainable food production methods and food systems.

Article SPS.19: Trade Specialised Committee on Sanitary and Phytosanitary Measures

The Trade Specialised Committee on Sanitary and Phytosanitary Measures shall supervise the implementation and operation of this Chapter…

Technical Barriers

Article TBT.1: Objective

The objective of this Chapter is to facilitate trade in goods between the Parties by preventing, identifying and eliminating unnecessary technical barriers to trade.

Article TBT.2: Scope

1. This Chapter applies to the preparation, adoption and application of all standards, technical regulations and conformity assessment procedures, which may affect trade in goods between the Parties.

Article TBT.3: Relationship with the TBT Agreement

1. Articles 2 to 9 of and Annexes 1 and 3 to the TBT Agreement are incorporated into and made part of this Agreement mutatis mutandis.

Article TBT.4: Technical regulations

3. Each Party shall use relevant international standards as a basis for its technical regulations except when it can demonstrate that such international standards would be an ineffective or inappropriate means for the fulfilment of the legitimate objectives pursued.

Article TBT.10: Technical discussions

1. If a Party considers that a draft or proposed technical regulation or conformity assessment procedure of the other Party might have a significant effect on trade between the Parties, it may request technical discussions on the matter.

Article TBT.11: Cooperation

1. The Parties shall cooperate in the field of technical regulations, standards and conformity assessment procedures, where it is in their mutual interest, and without prejudice to the autonomy of their own respective decision-making and legal orders.

Customs and trade facilitation

Article CUSTMS.5: Simplified customs procedures

1. Each Party shall work towards simplification of its requirements and formalities for customs procedures in order to reduce the time and costs thereof for traders or operators, including small and medium-sized enterprises.

Article CUSTMS.15: Relations with the business community

1. Each Party shall hold timely and regular consultations with trade representatives on legislative proposals and general procedures related to customs and trade facilitation issues. To that end, appropriate consultation between administrations and the business community shall be maintained by each Party.

[1] EU-UK Draft Agreement-1

[2] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/948119/EU-UK_Trade_and_Cooperation_Agreement_24.12.2020.pdf

[3] Regime Standards

[4] Lobbying, Corruption and EU Decision-Making


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