The 'Brexit' deal: digestible for the UK and acceptable for Europe
Four and a half years after the referendum was held in the United Kingdom in which the British people decided to leave the European Union by a narrow margin, and at the last minute of the transitional period after the application of Article 50 of the Union Treaty, the terms of the future relationship between both economic areas have just been defined in their entirety in terms of movements of goods, services, people, capital, international security, and defence commitments and investments, among others.
While waiting to know the full text of this Agreement, in principle of a new Trade and Cooperation Pact, it is possible to make a first assessment of the essential components in it. This is an objectively good deal for both sides, not only because it executes the mandate for an orderly exit reached last year, but also because it lays the groundwork for a major 'Canadian-style' free trade agreement with huge economic benefits for the future.
It is also accompanied by a 'dynamic adaptation framework' that will resolve, over the next few years, the most difficult points on which a definitive and acceptable solution for both blocks was not possible right now, such as: convergence of financial and insurance regulations, health and environmental regulations, data exchange and protection standards.
While the European Commission strives to emphasize that the deal between the EU and the UK will never be the same as when the UK was a Member State, there are numerous elements that indicate that, in the coming years, the UK will be able to obtain a Status in practice similar to that of other countries such as Switzerland or Norway with Europe.
It will then approach a Brexit model halfway between the 'soft' Brexit scenario, i.e. an exit with a free trade agreement and pact between the parties, and the 'Best Deal', the UK enjoys a status similar to that of Member State without the obligations that this implies.
The breakdown of a single economic and commercial area is always a complicated matter, which meant that an optimal or quick solution could not be draughted in time.
In this sense, the analysis of this ‘amicable divorce’ should not start from maximum budgets but from the verification of an evident reality: neither can the UK go against the global trend towards economic integration (beyond the fact that it presents serious cracks in full reconfiguration global geopolitical balance), nor can the EU think that without the British Isles it will be possible to achieve greater cohesion of the Member States.
For this reason, the agreement has been costly and it will not be easy to fully implement in the short term, given that friction, noise and tough negotiations will appear on positions with which London and Brussels will seek to strengthen their negotiating position.
Beyond the fact that these problems can materialize, although it’s nothing different from what happens in the new dynamic of free trade agreements such as the one signed by the EU with Canada or Japan, what is truly essential is the starting budget: the freedom to trade goods without tariffs or quotas, under a system of self-certification of the rules of origin.
This fact is essential for the fluidity of the physical borders of the British Isles and their customs with Europe, something that to date did not exist in any trade treaty under the rules of the World Trade Organization (WTO).
Thanks to this, the expected escalation of bureaucracy and barriers at borders will not occur, which in practice would have been prohibitively expensive for the trade of certain goods. Therefore, a fluid access is guaranteed with documentation and traceability similar to that which the goods already had before 'Brexit'.
The second relevant milestone regarding trade in services is the activation of the 'national treatment' clause both for European companies that want to offer services in the UK, and for English companies that want to do so in the EU, outside of being an essential service. Because a short-term free provision of services was not possible, access is guaranteed under equal rules and conditions with an ambitious competition regulation that is more favourable than the rules currently being negotiated in the EU in matters, for example, of State aid.
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A third element of interest, especially in terms of the movement of people, is that British nationals will still only be allowed to stay in EU territory for 90 days out of every 180 days, buy no visas will be required for entry to Europe.
There is also an agreement on Social Security (mutual recognition as currently of pensions and contributions), health care (with a health card for Europeans in the UK and for British people in the EU), or the conventions on labour standards and health and safety at work.
Finally, in fourth place, the integration of vital markets for both parties is preserved, such as energy, air (the loss of the flight rights of British airlines in European territory have little impact at the level of airline groups since for the most part they have consolidated groups of European shareholders), logistics or transport, among others.
Based on these four points of support: freedom to trade in goods, free access under equal conditions in services together with a single supervisory framework of competition, social security rights and the integration of relevant markets such as energy or logistics, a 'dynamic adaptation framework' is established that in the coming years will bring together the points that are still in dispute today and others that will lead trade in services to convergence.
This is the case of the automatic recognition of certifications and standards which fundamental in the academic and lines of work, and fishing, which during the transitional period thorny agreements in this matter with third parties will expire, which could significantly change the situation.
Also in the definitive framework of security and defence (today the UK was one of the few members of the EU that met the objective of 2% of NATO military spending) and financial and insurance regulation (a large part of the Fintech ecosystem in Europe is in the UK, as well as the headquarters of the world's most important investors, agents and financial advisers), among others.
In summary, with a prudent period of time, the relationship between the two sides will gradually become more polished while the costs of this rupture are internalized into the two economies. Too much time has been wasted in discussing whether this orderly exit was going to take place like this, or they were heading for total breakdown and chaos.
Now is the time to rebuild the relationship and consider the new scenario where convergence will be the guide to the future, and take advantage of the opportunities that open up with the status of Ireland, or what Spain could achieve if it had enough skill with Gibraltar.