How future EU-UK trade will look

Britain and the European Union  released a draft agreement on the country's future relationship with the bloc once it leaves the EU on March 29.

The 26-page political declaration is a supplement to last week's much-criticized withdrawal agreement that covers the rules of the divorce and the transition period — currently slated to last until December 2020.

The text on the post-Brexit relationship is not legally-binding but does promise "an ambitious, broad, deep and flexible partnership" that includes trade and economic cooperation, law enforcement and criminal justice, foreign policy, security, and defense.

It requires the endorsement of the 27 remaining EU members at a Brexit summit in Brussels this weekend. The details will only be worked out in further EU-UK negotiations, that can only begin after next March.

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New economic partnership 

The two sides have agreed to develop a free trade area that respects the integrity of the European Union's Single Market and Customs Union as well as Britain's internal market. The partnership will combine "deep regulatory and customs cooperation," and will ensure "a level playing field for open and fair competition."

The UK "will consider aligning with Union rules" where relevant to ensure a friction-free trade. The agreement also recognizes Britain's right to pursue an independent trade policy with the rest of the world.

The two sides expect "no tariffs, fees, charges or quantitative restrictions across all sectors." New customs arrangements, including the use of new technologies, should "obviate the need for checks on rules of origin." The mutual recognition of trusted traders and assistance in the recovery of taxes and duties is also covered.

The text contains a specific reference to the end of the EU's free movement of people, money, goods, and services, in the UK. Visa-free travel for short-term visits by both EU and UK nationals is mentioned, and both sides plan to consider "entry and stay" conditions for research, study, training and youth exchanges.”

Controversially for many supporters of Brexit, the European Court of Justice will maintain the role of interpreting EU law even after the transition period.

The Irish border issue, a major sticking point in negotiations over the divorce agreement, will be resolved by a permanent solution "that establishes alternative arrangements for ensuring the absence of a hard border on the island of Ireland." 

The transition period, allowing an orderly withdrawal from the UK, could be extended once "for up to one or two years," so long as Britain continues to contribute to the EU's budget during that period.

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Trade in services including financial operations

The two sides plan “ambitious, comprehensive and balanced arrangements on trade in services and investment in services and non-services sectors," and aim to go beyond World Trade Organization commitments, and build on recent EU free trade agreements with Canada, Japan and others.

The new relationship should cover "professional and business services, telecommunications services, courier and postal services, distribution services, environmental services, financial services, transport services," and more.

The ties that will bind the City of London — a global financial capital — to Europe after Brexit are well advanced, with Britain accepting a diminished role. The political declaration commits the two sides to explore the possibility of equivalence in regulatory regimes in order to facilitate cross-border financial services. 

These arms-length relationships allow non-EU financial services to do business in the EU as long as their home countries are judged by the EU to hold up to similar standards of oversight. This signals that Britain will pursue similar arrangements that Wall Street and Japan hold with the bloc. They should aim to conclude their assessments by the end of June 2020.

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Foreign policy

The declaration envisages close cooperation while respecting the right of both sides to pursue their own foreign policy agendas according to security and strategic interests. 

The two sides will likely cooperate closely in international forums, particularly the United Nations, and support each other when it comes to economic sanctions.

The declaration opens the way for Britain, still one of the world's leading military powers, to take part in European defense projects, including those funded by the beefed-up European Defense Fund.

There is also an agreement that Britain should be able to take part in projects under the EU's so-called PESCO defense pact when invited to do so.

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Other cooperation

The text is a reminder that Britain's future relationship with the EU will be more than just about trade.

The two sides will try to maintain law-enforcement cooperation at the same level as now, "as far as is technically and legally possible." "Exchanges of intelligence and sensitive information" will continue to be shared between the UK and EU.

The text describes how mechanisms will be set up to share DNA information, fingerprints and vehicle registration details, and to "consider further arrangements" to exchange information on wanted suspects and missing persons.

A commitment was made to "explore the possibility of cooperation" of the UK with several EU agencies such as the European Medicines Agency (EMA), the European Chemicals Agency (ECHA), and the European Aviation Safety Agency (EASA).

The sides want to ensure "passenger and cargo air connectivity” and ensure provisions to mutually protect intellectual property rights.

One of the most vexing issues during the Brexit vote campaign was over access to UK and EU territorial waters for fishing rights. The declaration says the two sides should "establish a new fisheries agreement," ideally by July 1, 2020.