Towards a Free Trade Agreement – the EU’s initial negotiating stance
04 February 2020
A two-part analysis of the EU and UK negotiating mandates from our Vice President, Arne Mielken.
First, we look at the EU vision and you can read the UK vision here.
On 31 January 2020, the United Kingdom withdrew from the European Union. On 3 February 2020, the European Commission has issued a recommendation to the Council to open negotiations on a new partnership with the United Kingdom.
On the same day, the UK government has made a formal statement to the House of Parliament on the future of UK/EU relations and a future, independent "Global Britain". The Foreign Secretary gave a speech in Parliament, and the PM made a speech in Greenwich as regards the new UK trade policy.
Part 1: The EU Vision
Proposal for and EU negotiating directive
- The recommendations include a comprehensive proposal for negotiating directives.
- They define the scope & terms of the future partnership that the European Union envisages with the United Kingdom.
- They cover all areas of interest for the negotiations, including trade and economic cooperation, law enforcement and judicial cooperation in criminal matters, foreign policy, security and defence, participation in Union programmes, and other thematic areas of cooperation.
- A dedicated chapter on governance provides an outline for an overall governance framework covering all areas of economic and security cooperation.
What does the Political Declaration require the EU to do?
The political declaration that accompanied the Withdrawal Agreement sets out the framework for the future relationship between the European Union and the United Kingdom.
What is required is ‘an ambitious, broad, deep and flexible partnership across trade and economic cooperation with a comprehensive and balanced Free Trade Agreement at its core, law enforcement and criminal justice, foreign policy, security and defence and wider areas of cooperation.’
Aims of the future partnership
- The goal is to create an ambitious, wide-ranging and balanced economic partnership.
- This partnership should be comprehensive, encompassing a free trade agreement as well as wider sectoral cooperation.
- It should be consistent with the applicable World Trade Organization (WTO) rules, notably Articles XXIV of the General Agreement on Tariffs and Trade (GATT) and Article V of the General Agreement on Trade in Services (GATS).
A partnership based on three elements
The envisaged partnership is a single package that comprises three main components:
- general arrangements (including provisions on basic values and principles an on governance);
- economic arrangements (including provisions on trade and level playing field guarantees); and
- security arrangements (including provisions on law enforcement and judicial cooperation in criminal matters, as well as on foreign policy, security and defence).
8 Must-Have Requirements on the EU side
- Ensure a balance of rights and obligations
- Create a level playing field
- Ensure the autonomy of the Union’s decision-making
- Respect the EU's legal order
- Allow for the integrity of its single market and the Customs Union
- Guarantee the indivisibility of the four freedoms
- Protect the Union’s financial interests
- Reflect the United Kingdom’s status as a non-Schengen third country that cannot have the same rights and enjoy the same benefits as a member
What should be covered in the area of goods
The envisaged partnership should contain a free trade area, with customs and regulatory cooperation underpinned by:
- Robust commitments ensuring a level playing field for open and fair competition
- Effective management and supervision
- Dispute settlement
- Enforcement arrangements, including appropriate remedies
Free Trade Area
- There would be no tariffs, fees, charges or quantitative restrictions across all sectors provided that a level playing field is ensured through robust commitments.
- All customs duties or taxes on exports or any measures should be prohibited, and no new ones should be introduced.
- No ban or restriction on trade between the EU and the UK, including quantitative restrictions or authorisation requirements, which are not justified.
- There should be enhanced disciplines on import and export licensing, import and export monopolies, repaired goods, transhipment, remanufactured goods and origin marking.
Rules of Origin
The envisaged partnership should include appropriate rules of origin based on the standard preferential rules of origin of the EU.
ADD & CVD
The agreement will include provisions on antidumping, countervailing and safeguard measures providing that either Party may take appropriate measures in accordance with the:
- WTO Agreements on Implementation of Article VI of GATT 1994
- the WTO Agreement on Subsidies and Countervailing Measures
- the obligations under Article XIX of GATT 1994
- the WTO Agreement on Safeguards
- and with Article 5 of the Agreement on Agriculture, as appropriate
The EU-UK deal should go beyond the WTO Trade Facilitation Agreement. It should include a comprehensive set of customs-related provisions covering transparency, efficiency, and non-discriminatory nature of customs procedures and practices.
AEO Mutual Recognition
There would be arrangements on the facilitation of inspections and formalities in respect of the carriage of goods and on customs security measures, including through the mutual recognition of Authorised Economic Operators (AEO) programmes.
Technical Barriers to Trade (TBT)
- The agreement would promote regulatory approaches that are transparent, efficient, promote avoidance of unnecessary barriers to trade in goods.
- Disciplines on technical barriers to trade (TBT) and sanitary and phytosanitary measures (SPS) should build on and go beyond the respective WTO agreements.
- The TBT disciplines should set out principles in the fields of standardisation, technical regulations, conformity assessment, accreditation, market surveillance, metrology and labelling.
The TBT provisions should include a definition of international standards.
Relevant international standards should be used as a basis for technical regulations
Testing and Certification
Testing and certification requirements should be streamlined (for example, the application of a risk-based approach to conformity assessment, including the use of self-certification in sectors where this is possible and appropriate).
TBT concern accelerator
There would be a mechanism to address expeditiously any specific trade concern related to TBT measures and include provisions aiming to ensure the timely dissemination of information about applicable TBT measures to importers and exporters
In the area of SPS, the envisaged partnership should build on and go beyond the WTO Agreement on SPS measures, with the objective of facilitating access to each Party’s market while protecting human and animal health, as well as plant health.
The SPS provisions should consider the respective international standards, guidelines and recommendations of the:
- International Plant Protection Convention (IPPC)
- The World Organisation for Animal Health (OIE)
- Codex Alimentarius
The SPS provisions should cover:
- Transparency and non-discrimination
- Avoidance of undue delays
- The recognition of the Parties’ health and pest status
- Inspections and approval procedures
- Audits, certification
- Import checks
- Emergency measures
- Approval of establishments without prior inspections
- Regulatory cooperation
- Cooperation on antimicrobial resistance
- Cooperation in multilateral fora relevant for SPS issues
- Cooperation on sustainable food systems
- The creation of a mechanism to address expeditiously specific trade concerns related to SPS measures or any relevant issues
The envisaged partnership should promote continued cooperation and exchanges on animal welfare.
Mobility & transport
- The envisaged partnership should aim at setting out conditions for entry and stay for purposes such as research, study, training and youth exchanges.
- The agreement should encompass on a reciprocal basis certain traffic rights to ensure continued connectivity.
- The EU and the UK should establish open market access for bilateral road freight transport, including unladen journeys, made in conjunction with these operations by Union road haulage operators from the territory of the Union to the territory of the United Kingdom, and vice versa;
- The agreement should provide for appropriate transit arrangements.
- Specific provisions should ensure that the common level of protection in relation to operators and drivers (including social rules) in the area of road transport is not reduced below the level provided by the common standards applicable in the Union and the United Kingdom at the end of the transition period.
- The envisaged partnership should address, if necessary, the specific situation of the Channel Tunnel.
The envisaged partnership should include a specific chapter on small and medium-sized enterprises (SMEs) which should assist SMEs to take full advantage of the envisaged partnership, through increasing the level of awareness among SMEs and enhancing their access to useful information on rules, regulations and procedures related to doing business, including public procurement.
Level Playing Field
Given the Union and the United Kingdom’s geographic proximity and economic interdependence, the envisaged partnership must ensure open and fair competition, encompassing robust commitments to ensure a level playing field.
These commitments should prevent distortions of trade and unfair competitive advantages. To that end, the envisaged agreement should uphold the common high standards in the areas of:
- State aid
- State-owned enterprises
- Social and employment standards
- Environmental standards
- Climate change
- Relevant tax matters
"To enable the alignment of the United Kingdom with the Union sanction policy, when and where foreign policy objectives are shared, the envisaged partnership should facilitate dialogue and mutual exchange of information between the Union and the United Kingdom at appropriate stages of the policy cycle of their respective sanction regimes".
The EU Council will have to adopt the draft negotiating directives.
This will formally authorise the Commission to open the negotiations as Union negotiator.
What's the UK vision?
You can read about the UK's negotiating stances here.
Press Release: https://ec.europa.eu/commission/presscorner/detail/en/IP_20_176
Proposal for Directives: https://ec.europa.eu/info/sites/info/files/communication-annex-negotiating-directives.pdf