(S,P) Key results of the January 2021 EU-UK CSD to help businesses make sense of the EU-UK TCA.
Executive Summary
A Civil Society Dialogue (CSD) meeting on the EU – UK Trade and Cooperation Agreement (TCA) took place with DG Trade of the European Commission. Customs Manager attended and the key outcomes are summarised here. The European Commission, Directorate General of Trade held a CSD meeting on the new Trade and Cooperation Agreement signed between the European Union and the United Kingdom on 24th December.
Purpose
The purpose of the meeting was to update EU civil society organisations on the Trade part of the Agreement. It will cover the issues of Trade in Goods, Services and Investment, SMEs, Public Procurement, Intellectual Property Rights, Level Playing Field and Sustainable Development and Governance of the TCA.
Lead speakers and participants
The Director on Strategy and Overall Coordination of the UK Task Force as well as the Principal adviser to the European Commission on UK TCA affairs lead the meeting. The Director for Resources, Inter-Institutional Relations, Communications and Civil Society in DG Trade let the meeting.
Overview of the agreement
After intensive negotiations, the European Commission has reached on 24 December 2020 an agreement with the United Kingdom on the terms of its future cooperation with the European Union. The EU Commission recalled that there is already a Withdrawal Agreement, which also entered into force. The EU reminded everyone that this guarantees the rights of current EU citizens in the UK and treats Northern Ireland as part of the EU Single Market and EU Customs Union for the purposes of this agreement. The EU Commission also recalled that this agreement is very different from others for two reasons:
1. It has been done in very short time under immense timing pressure.
2. Normally it is about converging more with partners and get closer together, here it is the opposite.
As a result, there will be friction, especially for goods. All companies that do trade with the UK need to check their supply and distribution model; a lot of things have changed for goods from 1 January.
There are also some services agreed in line with basic Free Trade Agreements standards based on unilateral decisions. There is no automatic recognition of services and this needs to be carefully assessed.
An important in this agreement ensures fair competition, the so-called level playing field. Both parties have committed to ensuring a robust level playing field by maintaining high levels of protection in areas such as environmental protection, the fight against climate change and carbon pricing, social and labour rights, tax transparency and State aid, with effective, domestic enforcement, a binding dispute settlement mechanism and the possibility for both parties to take remedial measures.
Trade specific aspects of the agreement
The EU Commission than recalled that the key feature of the agreement for goods that is provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin. Without this agreement, products like:
beef, dairy, poultry, pork, lamb, cereals, sugar and several processed foodstuffs could have faced tariffs of some 50% or above under World Trade Organization rates;
processed fish products would have faced tariffs of up to 25%;
cars would have also been hit by tariffs of 10%;
textiles and footwear would be subject to tariff peaks of 12% and 17%, respectively.
The EU Commission recalled that trading under ‘FTA' (free trade agreement) terms – even one as ambitious as this one, with zero tariffs or quotas – will inevitably be very different compared to the frictionless trade enabled by the EU's Customs Union and Single Market.
In particular:
rules of origin will apply to goods in order to qualify for preferential trade terms under the agreement;
all imports will be subject to customs formalities and will need to comply with the rules of the importing party;
•and all imports into the EU must meet all EU standards and will be subject to regulatory checks and controls for safety, health and other public policy purposes.
90 minutes of trade-specific questions
There was a wide range of stakeholder questions, across multiple sectors.
Asked about the applicable ‘rules of origin' and what will traders need to do to comply with them, the EU Commission replied that these rules are necessary to ensure that the products can benefit from zero tariffs, zero quotas. The EU Commission said that products need to be are either wholly obtained from or manufactured in the EU or the UK or sufficiently worked or processed there. The EU Commission mentioned that there are specific mechanisms aimed at facilitating compliance with these rules of origin, namely:
A provision on ‘full cumulation', which allows traders to account not only for the origin of materials used, but also if their processing took place in the EU or the EU. This mechanism enables the agreement to capture to the greatest extent the value-added in the free trade area.
Exporters will also be able to self-certify the origin of the goods, thereby making it easier for traders to prove the origin of their products and reducing red tape.
Additional flexibility in collecting documentary evidence to prove origin during the first year, to allow them to benefit from the preferences despite the little time available between conclusion and application of the Agreement.
Importing of food, animals and plants
Several questions and comments related to exporting and importing of food, animals and plants.
The EU clarified that there will be no changes to EU food safety standards and the Trade and Cooperation Agreement will safeguard the EU's high levels of SPS standards. The EU made it clear that just like agri-food exporters from every other non-EU country, UK agri-food exporters will have to meet all EU SPS import requirements and be subject to official controls carried out by Member States' authorities at Border Control Posts. Where required, these controls include the verification of health certificates in line with international standards. Similarly, EU agri-food exporters will have to meet all UK SPS import requirements. The EU Commission clarified that with respect to food safety, plant or animal health or an SPS measure both the EU and the UK can request technical consultations, request audits and verifications of the other partner’s inspection and certification system.
There are simplifications:
The agreement allows for either party to unilaterally decide to reduce the frequency of certain types of border import controls, taking into account the extent to which their SPS rules converge.
It also ensures a simplified process for the approval of imports, where relevant by drawing up lists of establishments that are eligible to export to the other party, based on guarantees provided by the authorities of the exporting Party.
In case of animal or plant disease outbreaks in the territory of either Party posing a serious threat to animal or public health, the authorities of either Party may apply temporary protective measures – including suspension of imports from all or part of the country concerned or special requirements on products from that country.
Nevertheless, in order to improve the predictability of agri-food trade, the EU and the UK have agreed on procedures to speed up the recognition of disease-free regions in such cases.
Transport
Asked about the transport provision, the EU Commission said that while the UK was an EU Member State and participated in the EU Single Market and Customs Union, transport service operators could operate freely between and within the Single Market, on the basis of a single licence or authorization, and without being unduly hindered by border checks and controls. Now, the UK is no longer a part of the EU Single Market and Customs Union, or in the Union's VAT and excise duty area. It will therefore no longer benefit from the principle of free movement of goods and people. This was the UK's choice. Since the UK will no longer be part of the Single Market, all transport businesses conducting operations between the EU and the United Kingdom will have to ensure compliance with EU and UK certification requirements respectively.
For businesses, this means that transport operators will also be affected by changes in the formalities required when crossing the UK-EU border. The Agreement covers the terms and conditions according to which EU and UK air transport operators, road haulage and maritime transport operators will be able to perform services between the EU and the UK.
Distortions
Participants enquired on what the procedure is if one side unilaterally distorts the level playing field.
The EU Commission clarified that the EU and the UK agreed to effective tools and mechanisms for the enforcement of their level playing field commitments, namely:
Appropriate and effective governance and dispute settlement mechanisms for solving disputes between the EU and the UK over the application of the Agreement. Ways:
a horizontal dispute settlement mechanism
calling upon a panel of experts.
Unilateral remedial measures if there is a significant negative effect on trade between the EU and the UK.
Opportunity to apply unilateral rebalancing measures in the case of significant divergences.
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