The European Parliament has ratified the post-Brexit trade agreement, which has been provisionally applied since January. It can now fully enter into force on May 1. The attention shifts to some major loose ends.
The European Parliament has approved the EU-U.K. Trade and Cooperation Agreement (TCA), setting out a framework for the U.K. and EU’s future relationship, with an overwhelming majority.
MEPs’ consent means that the agreement, which has been provisionally applied since January, can fully enter into force on May 1. Here are five big issues that still need to be solved:
Governing the deal
The TCA foresees the creation of a complex governance structure, that only now the deal is ratified can be put in place. An EU-U.K. Joint Partnership Council will sit at the top, aimed at overseeing its implementation at the political level and creating a forum for both sides to iron out differences. The U.K.’s David Frost and European Commission Vice President Maroš Šefčovič will take the lead on each side.
There will also be a Trade Partnership Committee, which will receive input from 10 specialized trade committees looking at issues such as trade in goods, technical barriers to trade, rules of origin and intellectual property.
Working in parallel there will be eight committees, specialized in policy areas including energy, aviation safety, social security coordination, fisheries and law enforcement.
The TCA allows for the British and European parliaments to establish a Parliamentary Partnership Assembly consisting of lawmakers from the two institutions. The assembly may seek information from the Partnership Council and make recommendations on the implementation of the agreement.
Border checks
Brussels and London are continuing to hold talks to solve their dispute over Northern Ireland, following the U.K.’s unilateral decision to postpone the introduction of new checks on food, parcels and pets between the region and Britain — a move interpreted by the EU as a breach of the Northern Ireland protocol.
Both sides have been working intensively since Easter and identified up to 27 areas of divergence on which they are trying to find common ground.
Commission negotiators have offered the removal of inspections for food entering Northern Ireland from Great Britain if the U.K. aligns with EU standards. But that has been rejected by London, which continues to push for checks proportionate to the risks identified, arguing there are precedents in agreements signed between the EU and other third countries.
João Vale de Almeida, head of the EU’s delegation to the U.K., insists the Northern Ireland protocol is the solution to the problems created by Brexit, rather than the source of the tension. But some have blamed the political fight over the protocol for rising street violence in Northern Ireland, with unionist politicians in the region calling on Boris Johnson to scrap it.
Business groups are pushing for an agreement that helps alleviate trade disruption. “The U.K. and the EU must now get back around the table and continue talks so they can build upon the arrangements set out in the TCA to deliver long-term improvements to the flow of trade between them,” said Hannah Essex, co-executive director of the British Chamber of Commerce.
Diplomatic status
Among the most irritating pending issues for the Commission is the U.K.’s decision not to grant full diplomatic status to the EU’s delegation in London and its staff.
The lack of such status has so far deprived Vale de Almeida and his team of diplomatic immunity — which guarantees they cannot be arrested, detained and interrogated by the U.K. government.
The Foreign, Commonwealth and Development Office (FCDO) argues the Vienna Convention, which regulates the issue, applies to states only, and not to international organizations such as the EU. According to the department, granting diplomatic status could lead to similar demands from a host of international organizations.
But the Commission argues the EU is more than an international organization since it has the right to represent member countries in a wide range of policy areas.
Brussels also points out that the U.K. signed an agreement in 2010 granting EU diplomats diplomatic “privileges and immunities” and that 142 other countries where the EU has delegations have granted diplomatic status to the bloc’s ambassadors.
The FCDO’s refusal has meant Vale de Almeida has not yet been able to present his credentials to the queen like other heads of embassies. As a result of the U.K.’s decision, European Council President Charles Michel canceled a meeting in January with the head of the U.K. Mission to the EU, Lindsay Croisdale-Appleby.
On Monday, Almeida said he is “confident” that both sides will manage to find a solution “in line with international practise.” U.K. officials say they are also confident of a resolution.
Gibraltar treaty
If there weren’t enough open negotiations, here’s another.
As 2020 drew to a close, Spain and the U.K. struck an 11th-hour deal to avoid a hard border between Gibraltar and Spain by allowing the British Overseas Territory to become part of the Schengen passport-free area with the sponsorship of Madrid.
The deal paves the way for the demolition of the controversial 1.2-kilometer physical barrier separating both territories, by moving border checks to Gibraltar’s port and airport.
Although politicians in Gibraltar and Spain have described the agreement as historic, it is not legally binding and must be transformed into an international treaty between the EU and the U.K.
The European Commission is due to publish its negotiating mandate by early May, kicking off the formal talks with London. Brussels must also give its view on the timetable for the talks and could opt for a longer negotiating period than the six months envisaged by Spain and Gibraltar. The Rock’s Chief Minister Fabian Picardo has warned the treaty should not be taken for granted.
Financial services
The Commission and the U.K. Treasury have reached a Memorandum of Understanding on financial services, creating a forum for communication between top-level officials on future regulation.
While the agreement lacks legal weight, it is nevertheless significant for the industry, as it provides for a formal channel to debate problems and, more importantly, propose solutions to cross-border trade barriers, money laundering and financial-stability.
The MoU also lays the foundation for close collaboration and gives certainty to the industry that so-called equivalence decisions will be discussed. A fully-fledged deal on financial equivalence whereby both sides would recognize each others' rules remains highly unlikely in the near future though.
Equivalence remains a unilateral prerogative for both sides, and so far little progress has been made on the subject. This has pushed many in Britain to consider alternative options, including regulatory divergence.
Karim Haji, KPMG’s head of financial services, said Friday that failing to obtain an equivalence deal would not be the end of the world for the City of London.
“If you take a step back, the U.K. has been one of the leaders in financial services regulation and infrastructure, it’s one of the key innovators in the space as well, and one of the leaders in the world, and that’s why the U.K. has been successful in exporting financial services — that isn’t changing as a result of Brexit,” he said.
“The regulatory regime that we had before Brexit and today is by and large the same, and many of the regulations that we talk about in terms of EU regulations, the U.K. was not only an active participant, but quite a leading thinker, and the relationship between the U.K. regulators and the European regulators is still strong, so I think that there are lots of positives.”
Source: Politico
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