Brexit: the ‘moment of reckoning’ in trade negotiations

The eighth round of Brexit negotiations commenced on Tuesday 8 September and has been described as the ‘moment of reckoning’.

21 September 2020

The Brexit transition period commenced on 30 January 2020 and runs until 31 December 2020. It was established under the terms of the revised ‘divorce’ agreement and gives the UK an 11-month period to secure a trade deal with the EU. From 1 January 2021, the UK will no longer be part of the EU's Single Market or Customs Union.

The negotiations cover trade in goods including services, fishing and farming, aviation, security cooperation, data policy, education and science. The EU wants a single comprehensive agreement; the UK is seeking a simpler free trade deal with separate accompanying agreements, similar to the arrangement between the EU and Canada. The EU has been clear that this cannot apply due to the UK’s geographical proximity and the degree of economic integration with Europe. The UK desires independence and continuing access to European markets, which cannot be without obligations. 

Both sides expressed frustration at the lack of progress after the seventh round of talks in August. The eighth round of negotiations began on Tuesday 8 September and has been described as the ‘moment of reckoning’ due to concerns that it may be too late to implement a deal by the end of the transition period if it is not agreed before the European Council meets on 15 October. This week, the Prime Minister reiterated this point, stating both sides should ‘move on’ if a trade deal is not reached by 15 October. 

The UK Government said a ‘no-deal’ means having a “trading arrangement with the EU like Australia’s”, using trade protocols set by the World Trade Organisation. This would mean taxes on exports and customs checks. 

What about the rest of the world? In 2018, 51% of UK trade was beyond the EU. Post-Brexit, the UK is free to enter into new deals for buying and selling goods and services around the world. As it stands, 19 of the existing 40 EU trade agreements the UK was party to as an EU member have been rolled over. This covers 50 out of 70 countries or territories and represents around 8% of total UK trade. The UK has said it is negotiating with a further 18 countries that have existing EU trade deals, including Canada and Mexico. The UK is also holding trade talks with the US, Australia and New Zealand.

Businesses will face new and more complex challenges from 1 January 2021, whether a trade deal with the EU is reached or not. The divorce agreement permitted a two-year extension of the transition period. Despite the coronavirus pandemic, both sides have agreed there will not be an extension, suggesting we will see an eventful few months ahead. 

Our trade and commerce team has a broad range of experience in advising UK and multi-national businesses operating across all sectors, assisting clients with ongoing business and trading requirements. The team will be releasing a series of short bulletins in the lead-up to 31 December, offering high-level overviews of trade developments, including EU negotiations and agreements with other key trading partners around the world. 

If you would like further advice on this or another related matter, please get in touch with Alison Rochester or Roddy Forgie, of our trade and commerce team, or your usual Shepherd and Wedderburn contact.