Post-Brexit Trade Deal
- 28 Dec 2020
- 4 min read
Why in News
Recently, the UK and the European Union (EU) have published the full text of the post-Brexit trade agreement aimed at governing their relationship when the UK definitively leaves the bloc's single market on 31st December 2020.
- The document lays out detail on trade, law enforcement, and dispute settlement among other arrangements. Despite the complexity of the document, which includes explanatory notes and side agreements on nuclear cooperation and the exchange of classified information, both sides have indicated they will rush through the adoption.
- The deal ensures the two sides can continue to trade in goods without tariffs or quotas but despite the breakthrough, key aspects of the future relationship between the 27-nation bloc and its former member remain uncertain.
- The two sides held extensive negotiations on three key issues:
- Level Playing Field: It essentially means that in order to trade with the EU’s single market, the UK will have to follow the same rules and regulations to ensure that it does not have an unfair advantage over other EU businesses.
- Rules of Governance: These will dictate how any deal is enforced as well as the penalties that will be imposed if one party violates the terms of a mutually-approved agreement.
- Fishing Rights: The agreement gives free access to EU fleets to fish in UK waters, including up to six miles off the shoreline for a five-year transition period. At the end of the transition, everything will return to normal arrangements and the UK will have full control over its waters.
- However, the UK's fishing industry has expressed disappointment on the agreement on fishing rights.
- Despite the deal, there are still unanswered questions about huge areas, including security cooperation and access to the EU market for Britain’s huge financial services sector.
- The European Commission (EC) has proposed the agreement be applied on a provisional basis until 28th February 2021.
- EC is the executive branch of the EU, which brings together the executives of all 27 member states.
- The European Parliament will be asked for its consent to the deal in 2021 and for the process to be concluded, the EC must adopt the decision.
Opportunities for India
- India should aggressively pursue free trade agreements (FTAs) separately with both the EU and the UK.
- Although it is premature to assess the gains for India from the agreement, India can explore opportunities in service sectors like IT, architecture, research and development and engineering in both the markets as the EU-UK pact does not cover the services sector.
- Indian competitors like Vietnam have greater duty advantage in sectors like apparel and marine goods.
- India had a lot of contentious issues while negotiating FTA with the EU. However, after Brexit, the UK could have a different stand on those issues and so India should continue pursuing FTA talks.
- The Apparel Export Promotion Council (AEPC) held that India-UK FTA would help in removing the customs duty disadvantages faced by domestic players in Britain.
- However, Federation of Indian Export Organisations (FIEO) highlighted that there are no specific customs duty benefits for domestic goods from this agreement.
- The bilateral trade between India and the UK dipped to USD 15.5 billion in 2019-20 from USD 16.9 billion in 2018-19.