Brexit Trade Deal Is Reached Between U.K., European Union

Britain and the European Union have agreed on their future relations. This sealed the British decision to leave the block in the 2016 referendum and put an end to years of economic uncertainty and tense political situations in the UK.

So we finally agreed. It’s been a long and winding road, but we’ve got a good deal. That’s good, too. It’s a balanced agreement and it’s the right and responsible thing to do for both parties, he said.

Ursula von der Leyen

said at a press conference after the agreement was announced. The European Union and the United Kingdom will unite to achieve our common goals.

prime minister

Boris Johnson

said the deal would put an end to the uncertainty that has plagued British politics for years and allow the country’s economy to recover from the pandemic in a healthier way. This agreement mainly means certainty, he said.

Germany and France welcomed the agreement, suggesting that the two largest EU economies are likely to support the agreement when leaders formally sign next week.

Chancellor

Angela Merkel

said the agreement with Britain is historic and that she trusts her government will support it after ministers have studied the details.

French president

Emmanuel Macron,

in a message on his official Twitter account that the agreement protects European citizens, businessmen and fishermen. Europe is moving forward and can look forward to a united, sovereign and strong future, he said.

The Agreement was signed by both parties on 1 January after months of intensive negotiations. January laid down the conditions for a much more far-reaching relationship between the UK and the EU than is currently the case.

It marks the end of the Brexit project and puts an end to years of uncertainty about the extent of UK membership of the EU following the vote on leaving the Union in June 2016. This agreement prevents a bitter rift between the American allies in Europe.

At the end of the year, the United Kingdom will formally leave the single European market, the single regulation and the customs union at the same time. The final agreement gives companies responsible for approximately $900 billion a year in trading just a few weeks to adapt to a complex set of new trading rules.

Under the agreement, both parties will continue to trade duty free, but important new administrative formalities will be introduced for importers and exporters. The free movement of workers between the two economies will cease and trade in services will decrease significantly. The huge financial centre of London will no longer have guaranteed access to the European markets.

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Fishing rights were a contentious issue in the negotiations on the UK-EU agreement.

Photo:

Wiki Flores/Shutterstock

This agreement gives the United Kingdom a great deal of freedom to deviate from EU rules and to conclude free trade agreements with countries such as the United States. However, as the price to be paid for a duty-free agreement, the United Kingdom agreed that it would not seriously undermine European standards in areas such as labour and the environment and that it would maintain similar restrictions on subsidies to the private sector.

If the EU abolishes its rules in the future and the UK fails to do so, the EU may impose sanctions on certain UK sectors if it can demonstrate that the divergent rules cause clear economic damage.

The agreement must be formally ratified by the European Parliament and the United Kingdom and signed by EU leaders before the end of the year. The capitals emphasized that they needed time to go through the text with a fine comb before approving it.

EU legislators also said it is now too late to meet before the end of the year, so EU governments may have to approve the agreement provisionally and wait for the European Parliament’s approval in the new year.

Mr Johnson and Mrs von der Leyen have spoken on the phone several times in the last 24 hours, with fishing rights still a major problem. The negotiations were concluded with a last-minute agreement on EU fishing allowed in UK waters for the next 5.5 years, broken down by species.

Discussions included frequent contacts between the EU team and the block’s coastal capitals, particularly Paris, to ensure that Mr Macron was comfortable with the details, officials said.

The agreement put an end to an odyssey that began with the 2016 referendum. It was won as part of a campaign to end the free movement of immigrants in the EU, criticising the EU as distant and undemocratic.

The referendum decision paralysed British politics and cost two conservative prime ministers their jobs:

David Cameron,

who resigned in 2016 after the outcome of the referendum was unfavorable for him.

Theresa May,

who resigned three years after his version of the Brexit withdrawal agreement was rejected by Parliament.

Britain legally and politically left the trading bloc on 31 January, but continued to follow EU rules until the end of the year during a transitional period that allowed time for trade negotiations.

Had the agreement not been signed before 1 January, it would have led to automatic tariffs, border delays for vital goods such as food and medicines, and serious accusations among Britain’s European allies.

The absence of an agreement could also exacerbate sectarian tensions on the island of Ireland, leading to fears that the peace process could be compromised. After the first one. From 1 January, Northern Ireland, which is part of the United Kingdom, will in practice remain within the customs territory of the EU and the internal market, which means that it does not need a customs border with EU Member Ireland in the South.

Johnson’s compromise to continue to respect far-reaching European regulatory standards may still arouse resentment among some members of his conservative party who wanted a more decisive break with the EU. However, the main opposition party, Labour, is likely to support the agreement or abstain, as it would be worse if it did not, which means British ratification by the Conservatives is unlikely to derail.

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The President of the European Commission, Ursula von der Leyen, and the Commission spokesman, Michel Barnier, were in Brussels on Thursday.

Photo:

Francisco Seco, Press Pool.

The Agreement, which covers more than 1 000 pages, including annexes, sets out how the two countries will cooperate on issues ranging from cooperation on safety to fishing rights.

The agreement will cause more friction in the trade, making it a rare experience of real-time de-globalisation.

Most economists expect the British economy to suffer significantly more from Brexit than the EU economy, although they say both sides will suffer less than if the negotiations had failed and both sides should trade according to World Trade Organisation rules. According to official statistics, 43% of UK exports will go to the EU in 2019, making it the largest export market in the country.

In 2018, the UK Government estimated that a basic free trade agreement with the EU, as just adopted, would make the UK economy 4.9% smaller after 15 years than it would have been if it had remained a Member State, compared to a deficit of 7.6% in the absence of the agreement. Since then, the government has not released an updated estimate.

Any trade agreement with more distant countries such as the United States that would allow Britain to return to the strike would be of little benefit. The models showed that they would not be able to compensate for losses in trade with Europe.

Governments and businesses on both sides of the Channel have spent billions of pounds preparing for the bureaucratic demands that exporters and importers – even with an agreement – will have to meet for the first time in almost half a century.

At the heart of the negotiations was the compromise that the UK was trying to find between maximising access to the trading bloc and limiting the amount of European regulation needed to obtain that access.

The United Kingdom’s border with Ireland has been a major obstacle since the United Kingdom began negotiating its exit from the European Union. WSJ’s Jason Douglas visited the country’s only land border to find out why this issue is so controversial. Video: George Downs. Illustration: Jaden Urby/Soarscape

EU negotiators are concerned that Britain will retain cheap access to the Union while lowering costs for exporters by lowering regulation. For its part, the UK has sought independence from EU rules and legislation and the flexibility to regulate its own affairs in the future.

British companies that import and export goods to the EU will have to complete 215 million additional customs declarations each year, according to the UK Government’s estimates. Large car parks have been constructed in the south of England and the north of France to avoid bottlenecks at the border and queues of several kilometres for trucks.

In order to relieve pressure on business, the United Kingdom has announced that it is suspending the application of certain new border procedures to UK imports from the EU until 1 January. July.

It is unclear how Mr Johnson’s government and subsequent governments will make use of this new freedom of European rules. Johnson spoke of increased government investment in the country’s post-industrial regions because he wanted to call on the employees who support Brexit. The government is also developing plans to support green business. Meanwhile, negotiators are busy pushing the dozens of trade agreements that the country currently has with non-European countries to the block.

For the EU, these negotiations mark the end of the Brexit process and the realisation that the UK will now be an economic competitor rather than a partner. It hopes that the agreement will make it clear to Member States why a stay in the club will bring significant economic benefits.

It could also facilitate relations when the new US administration takes office, making it easier for the UK and the EU to work together to strengthen the transatlantic ties tested under the trump card government.

Write to Lawrence Norman at laurence.norman@wsj.com, Jason Douglas at jason.douglas@wsj.com and Max Colchester at max.colchester@wsj.com.

Amendments and additions
EU leaders will not meet to ratify the agreement, but are expected to formally adopt it next week without a meeting. An earlier version of this article stated that the leaders would meet to ratify the agreement. (24 December)

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