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Withdrawal Agreement

Key elements of the Withdrawal Agreement:

The UK and the EU Commission have agreed a Withdrawal Agreement. They have also agreed a separate non-binding political declaration. The UK Government has confirmed that both the Withdrawal Agreement and the Political Declaration will be subject to a meaningful vote in Parliament in the week commencing 14th January 2019. 

The Transition period 

If a future partnership agreement setting out the long term, end state relationship is not ready to be implemented by 31 December 2020 (the end point of the currently agreed transition period), then the UK Government and the EU Commission have the choice of either agreeing to an extension of the standstill transition period (for a maximum of two years) or to implement the Ireland and Northern Ireland protocol (the Irish protocol) or otherwise known as ‘the backstop’. 

Under the standstill provision the following would apply for your business:

Trade with the EU

You will be able to continue to trade with the EU in the same way that you currently do now. There will be no additional customs or regulatory checks for you to deal with.

The UK will continue to apply EU trade policy. Any trade agreements signed by the UK will not be able to enter into force until the transition ends. The EU will write to third countries with which it has agreements to request the UK continues to benefit from these during the transition period.

Freedom of Movement

Freedom of Movement would continue to apply in the same way that it currently does. It was earlier proposed that the only material change that might apply would be the application of a registration process for EU 27 nationals who come to work in the UK post exit day. It is not clear if and when this registration process will be implemented.

Regulation 

The UK will continue to apply the entire body of EU law during the transition period, but it will be outside of the EU's political institutions.

Agriculture (Common Agricultural Policy)

This would de facto apply during the transition period (though it would not formally apply during the extended transition period)

Fisheries (Common Fisheries Policy)

During the implementation period the UK’s fisheries rules will be aligned with those of the EU. During the last year of the implementation period, the UK will be able to negotiate its own fishing opportunities for the following year.

Extension of the Transition Period 

Assuming that a withdrawal deal is agreed with the EU, the transition period will end on 31 December 2020. Under the Withdrawal Agreement the UK has the right to request a single extension of the transition at any point before 1 July 2020. The WA states that the maximum that the transition period can be extended for is two years i.e. up to December 2022. 
 
An extension of the transition would require the two sides to agree a new financial settlement. In the eventuality that the standstill transition period is extended, the UK will still be required to make a financial contribution, but as a third country rather than a member state for the purposes of the EU budget. Its share will be decided by the Joint Committee (comprised of UK and EU officials) rather than through the usual Multiannual Funding Framework mechanism. This means that the UK has input in calculating its financial contribution for any extension of the transition period, despite no longer having the right to participate in EU institutions.

Northern Ireland Protocol

The alternative option is that the ‘Irish Protocol’ (otherwise known as the 'backstop') will apply. It is made clear within the document that it is not the objective of the Withdrawal Agreement to establish a permanent relationship between the UK and the EU. However the protocol is also explicit that if the ‘backstop’ is implemented it will apply ‘unless or until’ the provisions within the protocol are suspended, in whole or in part by a subsequent agreement i.e. until the protocol is no longer necessary, in the view of the UK or the EU, to prevent a hard border on the island of Ireland. However neither party has a unilateral right to exit the backstop. Rather the Joint Committee will meet to consider the notification made by either party to exit the backstop within six months (and will seek an opinion from the relevant institutions created by the Good Friday agreement). It is the Joint Committee that will decide whether the backstop is no longer necessary and should therefore cease to apply either wholly or in part. 

UK wide customs implications

Throughout negotiations, the EU Commission and the UK disagreed on the scope of the backstop provision to avoid a hard border on the island of Ireland. The EU initially proposed a NI specific backstop, whereas the UK proposed a UK wide backstop covering customs arrangements, but stayed silent in relation to regulation. The outcome of the negotiation has been a ‘UK wide backstop’. This means that a single customs territory between the EU and the UK will come into force if there is no deal by December 2020 and the standstill transition period has not been extended. This would cover all goods other than fisheries and acquaculture goods. Fisheries are excluded from the customs territory, pending an agreement on fishing rights before the end of the transition period

Under the backstop, the UK has to maintain the EU’s common external tariff on third countries imports. There will be no tariffs or quotas for goods traded between the UK and EU, or rules of origin checks. This means that customs (import and export declarations) will not be necessary.

Northern Ireland specific customs implications

Northern Ireland would be part of the same customs territory as Great Britain. However Northern Ireland would be in a deeper customs arrangement with the EU. For example, unlike Great Britain, NI would have to apply EU customs law as set out in the Union’s Customs Code.

UK wide regulatory implications

In return for the proposed customs arrangements, the UK will have to ‘observe’ level playing field commitments in relation to certain types of regulations to prevent UK businesses from undercutting EU27 businesses.

These vary in the level of their strength. For example in relation to state aid and competition law, the UK will be required to remain in ‘dynamic alignment’ with the EU. This means fully replicating all EU legislation in this area (including any changes after we have left the EU and post the transition period). In relation to environmental and employment standards, there is not a commitment towards dynamic alignment, but rather a commitment to non-regression i.e. standards will not be lower than they were at the point at which we exit the EU. The Joint Committee of the overarching Withdrawal Agreement may amend the commitments to set higher standards in future, if both sides agreed.

Northern Ireland specific regulatory commitments 

Just as the Backstop’s customs arrangement is deeper for Northern Ireland than for Great Britain (England, Scotland and Wales), so is the regulatory alignment that is required between NI and the EU single market. Effectively, the ‘backstop’ will maintain full regulatory alignment between Northern Ireland and the EU. Therefore, Northern Ireland (as opposed to Great Britain) will remain aligned to EU rules in a number of areas as necessary to avoid a hard border. 

The UK has committed to ensuring no regulatory barriers for goods from Northern Ireland that move to, for example, businesses in Scotland, Wales and Northern Ireland. Therefore a product originating in NI would be presented as originating from the UK, when placed on the market in Great Britain. 

However in the event that Great Britain chooses to diverge from EU regulation, in those areas where it has the scope to do so, there could be additional regulatory barriers to goods being moved and services being traded, for example, from businesses in Great Britain to Northern Ireland. Whilst attempts will be made to minimise regulatory checks at the border (through for example checks undertaken by market surveillance authorities at manufacturing sites or checks undertaken when goods are in transit); sanitary and phytosanitary checks will need to take place at the border. 

Freedom of Movement implications 

Freedom of movement from the EU to the whole of the UK (with the exception of migration within the scope of the Common Travel Area) can cease during the backstop. The UK has committed to maintaining the Common Travel Area between Ireland, the EU and the UK. The Common Travel Area allows free movement of British and Irish citizens between the UK, Ireland, the Channel Islands and the Isle of Man and provides access to various government services in each country. This also comes with certain rights for family members. The Common Travel Area does not provide any rights to travel to the rest of the EU.

Common Agricultural policy

This will no longer apply during the backstop.

Fisheries (Common Fisheries Policy)

The UK will no longer be part of the CFP after the end of the transition period. However, Article 6 of Protocol on Ireland/Northern Ireland sets out that the free movement of fishery and aquaculture products would not be included in any backstop customs arrangements for the whole of the UK “unless an agreement on access to waters and fishing opportunities is applicable between the Union and the United Kingdom

Geographical indicators 

Geographical indications are names used to define both the origin and the quality, or reputation of products. It often applies to food and drink. The UK will have to set up its own list of geographical indications in domestic legislation that will recognise the EU’s. This applies "unless and until" superceeded by the long-term trading relationship