Boardroom Brexit - The Political Declaration on the future relationship between the EU and UK: 10 things you need to know

The Political Declaration on the future relationship between the EU and UK ̶ ten things you need to know

1. Aspirations or commitments?

The declaration is an aspirational document, setting out what both parties want from the future relationship: "an ambitious, broad, deep and flexible partnership across trade and economic cooperation, law enforcement and criminal justice, foreign policy, security and defence and wider areas of cooperation." But is not legally binding (it cannot be until the UK leaves the EU) ̶ it makes plain that the parties' ambitions "might evolve over time".

This contrasts with the Withdrawal Agreement, which will be legally binding if approved by the UK and EU Parliaments, and incorporated by legislation into UK law.

2. Why, then, is it needed now?

The declaration was a demand of the UK Government, and was initially resisted by the EU. The UK Government wanted a document to put before the UK Parliament to justify the price of leaving, and to show the light at the end of the tunnel. In the "meaningful vote" on 11 December, MPs will be asked to approve this declaration as well as the draft withdrawal agreement.

3. Sequencing

The main trade agreement contemplated by the declaration (the future UK-EU relationship is likely to comprise a number of agreements) will only come into effect after:

a) the transition period, in which the UK remains in the EU's single market and customs union (as if it were still an EU Member State), which can now be extended beyond the end of 2020; and

b) the Irish backstop, which would enter into force after the transition if no alternative solution to avoiding a hard border in Ireland can be found. Under the backstop, the UK enters into a customs union with the EU.

4. Trade in goods

Overview

The declaration provides that future UK-EU trade in goods will be “as close as possible”: there will be “deep regulatory and customs co-operation” to facilitate the movement of goods within "a free trade area". However, there would also be "checks and controls" on trade between the UK and EU, which currently do not exist. So trade in goods will not be frictionless, as had been hoped by Teresa May in the Chequers White Paper.

No tariffs

The trade agreement should ensure "no tariffs, fees, charges or quantitative restrictions across all sectors."

Close cooperation on customs

"Ambitious customs arrangements" should be in place, including mutual recognition of trusted trader schemes and administrative cooperation. These arrangements should "build and improve” on the customs union in the Irish backstop with a view to eliminating rules of origin checks.

Many Brexiteers fear that this could mean the UK stays in a permanent customs union with the EU, preventing it from doing its own trade deals on goods around the world.

The closer the regulatory alignment, the less the need for regulatory checks

The Parties will put in place provisions "to promote regulatory approaches that are transparent, efficient, promote avoidance of unnecessary barriers to trade in goods and are compatible to the extent possible". The closer the alignment, the less the need for regulatory checks:

"The Parties envisage that the extent of the United Kingdom’s commitments on customs and regulatory cooperation, including with regard to alignment of rules, would be taken into account in the application of related checks and controls, considering this as a factor in reducing risk."

The absence of regulatory checks ("the common rule book") was a key demand of the Chequers White Paper. The declaration does not go that far, but shows an important openness by the EU to flexibility on regulatory checks on goods crossing the UK-EU border.

5. Services

Services sector in general

Beyond the general good intention that the Parties "should conclude ambitious, comprehensive and balanced arrangements on trade in services and investment in services and non-services sectors", there is little substance. The level of liberalisation in trade in services should simply "build on" the EU's existing free trade agreements. Market access will be governed by the rules in the UK and each EU Member State ̶ "host State rules" ̶ with no indication of preferential access for UK services.

This section of the declaration is conspicuously opaque and non-committal, and will be disappointing for the UK services sector. The UK is the second-biggest exporter of services in the world, and its largest trading partner is the EU.

Financial services

Market access for financial services will be based on a system of "equivalence" - the UK and EU will have equivalence frameworks in place that allow them to declare a third country's regulatory and supervisory regimes equivalent for certain purposes. The UK secured a commitment for both parties to try to complete equivalence assessments by June 2020, but both parties will have to keep their respective equivalence frameworks continually under review.

There is no indication in the declaration that the UK will get better terms than any other third country seeking equivalence under EU financial services legislation. Improving the existing equivalence arrangements is likely to be a key negotiating aim for the UK.

6. Transport

Aviation

The UK and EU will negotiate a Comprehensive Air Transport Agreement covering cover market access and investment, aviation safety and security, air traffic management, among other areas.

Road transport

The UK and EU will agree rules on comparable market access for freight and passenger road transport operators.

Rail transport

The UK and EU will agree rules on cross-border rail services, including the Belfast-Dublin Enterprise Line and the Channel Tunnel.

7. Energy

The UK and EU will establish a framework to facilitate technical cooperation between electricity and gas networks operators and organisations, such as the European

Networks of Transmission System Operators for Electricity and Gas, in the planning and use of energy infrastructure connecting their systems. The framework should also include mechanisms to ensure security of supply and efficient trade over interconnectors over different timeframes.

8. Data

The declaration states that the EU will aim to reach a decision on whether to endorse UK data protection standards as "adequate" by the end of 2020, and will start its assessments "as soon as possible after the United Kingdom's withdrawal". At the same time, the declaration commits the UK to establishing its own international transfer regime for the transfer of personal data to and from the EU by the end of 2020.

9. Mobility

There is an explicit reference in the declaration to the end to freedom of movement between the UK and EU. Post-Brexit, mobility arrangements will be based on non-discrimination and full reciprocity. This means that the EU will mirror the rules adopted by the UK. These rules should include visa-free travel for short-term visits for non-business purposes. There will be additional commitments on entry and temporary stay for business travellers "in defined areas".

10. Dispute resolution

As with the Withdrawal Agreement, any dispute over the future relationship agreements which involved a question of EU law would have to be determined by the Court of the Justice of the EU in Luxembourg.