EU-UK Brexit deal and its impacts on EU and UK FTA talks with Australia

January 7, 2021: The European Union and the British government finally came to an agreement about trade in goods on Christmas Eve 2020, which came into effect on January 1, 2021. The United Kingdom has now separated from the European Union, Common Market and Customs Union.

Brexit was largely driven by conservative forces in the UK which wanted to keep zero tariff arrangements (but not free movement of people), and wanted to discard the modest gains in human rights, labour and environmental regulation which EU social movements, including in the UK, had won over many years. There were also progressive critics of the pro-corporate austerity policies adopted by the European Commission, especially during the Global Financial Crisis, but these featured less in the public debate.

The final agreement enables tariff-free and quota-free trade in goods between the two parties, but will still have a significant negative impact on trade in goods because of extra customs processes to implement rules of origin. Since there are no common rules for services, which make up 80 per cent of the UK economic output and 82 per cent of employment, there is also a predicted negative impact on services, especially financial services based in the City of London.

The Brexit deal will have some impacts on Australia’s current negotiations for an Australia-UK FTA and the Australia-EU free trade agreement.

The Australia – EU FTA talks are more advanced, and the EU has published its pro-corporate demands for longer medicine monopolies, and further deregulation of essential services, e-commerce, and government procurement. The UK-Australia FTA talkstalks began last year, and the UK shares many of the EU demands, although like the Australian government, it refuses to publish its detailed proposals.

Australia is seeking more market access for its agricultural and services exports into both the EU and the UK, and the danger is that longer medicine monopolies or other negative deregulatory concessions may be traded off to gain these. Both the EU and the UK also want to protect exclusive use of product names like prosecco and stilton cheese, which is a major obstacle to final agreement.

The UK-EU agreement commits the UK to no lesser product regulatory standards than the EU, which could simplify product regulations for Australian exporters. But the lack of common UK-EU services rules could pose problems for Australian services exports  like financial services..

Both the UK and the EU want to include in their FTAs commitments on labour and environmental standards, including United Nations environmental agreements on carbon emissions and climate change. But it is possible that the UK Conservative government may want lower commitments on labour rights than the EU, and less protection of consumer privacy rights for e-commerce, where the EU is developing higher standards.

Free movement of people between the UK and EU ended on December 31, 2020. The UK’s points-based skilled immigration system aims to treat EU and non-EU citizens equally. There will be no special provision for Australians to be able to migrate to the UK. But the FTA may be accompanied by a separate agreement for an expansion of existing temporary working holiday visas for young people from both countries.

Australia already had low tariffs for specific quantities of some agricultural products into the European market. There has been a negotiated “split” of these quotas between the UK and the EU-27, but this appears to be “in principle” and the Australian government has not yet published the precise “split,” or how it will impact on the FTA negotiations with the EU and the UK for expanded market access for agricultural products.