The Prime Minister of the United Kingdom Boris Johnson is holding an external press conference to update the nation on the post-Brexit trade agreement at 10 Downing Street in central London on 24 December 2020.
Paul Grover | AFP | Getty Images
LONDON – Britain and the European Union agreed on Thursday on new Brexit trade arrangements more than four years after the United Kingdom voted to leave the bloc, narrowly avoiding a potentially catastrophic no-deal scenario.
The two sides reached a “zero tariff-zero quota agreement”, which will help smooth trade in goods across the channel. It would facilitate relief for exporters on both sides who would have had higher tariffs and costs if an agreement had not been reached.
Trade agreement still to be ratified by the UK and EU parliaments in the coming days with a vote in Westminster on Wednesday.
The Prime Minister of the United Kingdom Boris Johnson and the President of the European Commission Ursula von der Leyen praised the agreement.
“The arguments with our European partners were tough at times, but I think this is a good deal for the whole of Europe,” Johnson told a news conference.
While von der Leyen said: “It is fair, it is a balanced agreement and it is the right and responsible thing to do for both sides. She added that Europe would continue to cooperate in all areas with Britain, which she described as a “trusted partner.”
Sterling trimmed some gains after the news was announced, but still rose 0.5% for the session at around $ 1.3557. Earlier this month, the currency hit a 2020 high of $ 1.3624, a level it has not hit since May 2018.
About 47 years after the accession of the European Union, Britain officially left the bloc on 31 January 2020. It thus became the first nation ever to leave the EU. However, it agreed to continue to follow European rules until the end of 2020, so that it could negotiate more friendly trade relations with the other 27 nations.
The two sides had been involved in intense negotiations since March to determine how trade will work from January onwards. There were significant clashes over fishing, competition rules – known as “equal terms” – and the management of their new conditions.
Under the agreement, the EU has achieved “equal terms”, which means that neither party can undercut the other with subsidies or the like. But Johnson stressed that the United Kingdom and the European Union would act as “sovereign equals” and that customs duties could be imposed if both parties subordinated the other.
In fisheries – which seems to have been the problem that stopped trade in the last stages – there will be a transition period of five and a half years, during which EU fishing vessels will continue to have access to British waters. Negotiations on fishing quotas will take place on an annual basis thereafter.
The period is longer than Johnson had originally pushed for, but shorter than the EU’s proposed 10 years.
During this period, Britain’s share of fish caught in British waters will increase from around half at present to two-thirds, Johnson said.
Thursday’s news is a welcome development for companies in the UK and Europe, putting an end to more than four years of what has at times seen infinite economic uncertainty.
Von der Leyen said she quietly felt satisfied “and frankly relieved” to have reached an agreement.
“I know this is a difficult day for some and to our friends in the UK I would say that parting is such a sweet sadness,” she added.
EU chief negotiator Michel Barnier agreed it was a day of relief, but “colored with some sadness.”
Analysts at Citi said the deal would help mitigate economic disruption and provide a starting point for constructive future economic and political relations. But they added that it would be a “massive step down from the existing connections”, and the “urgent character at the last minute could trigger more inconveniences.”
Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, predicted that a deal with the EU would create a recovery for an economy that has experienced severe contractions by 2020.
“This increase in confidence and investment will help the UK overcome the 1% hit to GDP that the Bank of England predicts will come as the price of leaving the EU, even with an agreement next year,” she said in a flash. research note under the agreement.
“If the recovery is sustained without further pandemic setbacks and aided by a rebound in global growth, it could herald a new Roaring Twenties era, reflecting the decade-long recovery due to the economic pain of WWI.”