With the onslaught of Covid-19 we have almost forgotten we are in a transition period with the European Union and that period comes to an end on 31st December 2020 – which is just over 5 months away.

Negotiations on a few fronts have been ongoing since March 2020 but we are still unclear as to what has been agreed to date and what the likely options are going to be on areas still to be decided.

In a series of weekly articles between now and December we will be updating you on the implications of these decisions as it relates to trade between the UK and the European Union in the post transition period.

Whilst we are in the transition period, we are subject to EU Law as if we have not left the European Union. We are also still subject to the rulings of the European Courts of Justice during this period. Whether that still remains the case from January 2021 depends on which trade agreement is favoured during the negotiations.

The UK have the option to extend the transition for up to another 12 months if no agreement is made. At the moment the UK government are adamant that they will not be taking this option – but U-turns have happened before and with the chaos created right across Europe by the pandemic, 3 months lockdown and subsequent country by country recession – who would bet against that happening? If that does happen, we will remain in the status quo for up to a further 12 months.

There are four options on the negotiation table in relation to an overall trade agreement. Irrespective of which option is decided upon – the UK agreement will be with the EU block and there will be no opportunity to agree separate trade agreements with individual member states.

The four options on the negotiation table are as follows:

Membership of the European Free Trade Association (EFTA) in line with Iceland, Liechtenstein, Norway and Switzerland who are the current country members. This is a trading bloc for countries who are unwilling or unable to join the European Union. Participants have high-level access to the European Market, and they have to comply with the European Union’s high regulatory standards. EFTA was created in the 1960’s and at it’s inception the United Kingdom was one of the seven founder country members – so joining EFTA is in effect going back to our position prior to joining the European Economic Community in the 1970’s.

Membership of the European Economic Area (EEA). This is open to both European Union member states and countries from the EFTA. It permits them to be in a single market. Switzerland is not part of the EEA but is a member of EFTA.

Canada style Central Economic Free Trade Agreement. This is favoured by the UK Government and allows regulatory governance – creating our own legal trading framework and maintaining our sovereignty. This is likely to be the most difficult option on the table. It took Canada over seven years to negotiate this position with the European Union and the EU negotiators are unlikely to let the UK just ‘piggyback’ on the framework of this.

World Trade Organisation (WTO) terms. This would be like the terms Australia trades with the European Union resulting in VAT and Duty payable on the same terms as the rest of the world.

In addition to the terms of trade in these options there is the question of quota’s being set by either side. There has been much public discussion about European nations fishing in UK waters and access to European markets by UK Financial Institutions.

Our focus is on physical trade between the UK and Member States and in our blog next week we will look at the subject of ‘Importing from European Member States’.

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