LAST UPDATE: January 13th, 2020
As the United Kingdom has now withdrawn from the EU following Brexit, the British government has signed a number of agreements with other countries. From the UK’s financial settlement with Switzerland to numerous free trade agreements, these new deals ensure the future of British trade with other parts of the world.
Now that the Brexit transition period has come to an end, the UK government has finalized a number of international agreements that will help establish Britain as a key financial centre now that it has left the European Union.
The commitment signed between the UK and Switzerland is one example, paving the way for an ambitious agreement on financial services.
There have also been agreements with a number of other sovereign states and further UK free trade agreements (FTAs) are still under discussion.
This article explains the key features of these deals and what they hope to achieve, as well as taking a look at how long the free trade agreements take to negotiate.
As well as securing agreements with non-European nations, the UK has also finally reached a post-Brexit trade deal with the EU following extensive trade talks that continued right up to the 31st, 2020 end of the Brexit transition period.
Why has the UK negotiated bilateral services agreements?
The impact of Brexit on UK citizens will be felt in different ways, one of the most important considerations is economic. To ensure the UK economy can prosper outside of the European Union, the UK has created new international agreements.
The importance of financial services agreements was made clear by Rishi Sunak, the Chancellor of the Exchequer of the UK, who stated:
“The UK’s financial sector is integral to the success of the British economy, creating jobs, driving regional growth, and contributing taxes that pay for essential public services.”
The Chancellor added that, following Brexit, the nation was now able to move forward in its own way, based on UK values as a financial centre.
Countries that the UK has made deals with
Following the EU-UK withdrawal agreement, the United Kingdom of Great Britain and Northern Ireland needed to secure trade deals and financial agreements with other countries to secure trading partners for the future.
So far, fully ratified trade agreements of the United Kingdom have been made with the following countries and took effect from January 1st, 2021:
- Costa Rica
- El Salvador
- Côte d’Ivoire
- Eastern and Southern Africa trade bloc
- Faroe Islands
- Palestinian Authority
- South Korea
- Southern Africa Customs Union and Mozambique trade bloc
UK trade agreements with a large number of other countries including Singapore, Turkey, and Vietnam have also been made but have not yet been ratified. In these cases, provisional application or bridging mechanisms, an alternative means of ensuring continuity of trade until a deal can be fully ratified, have been put in place to ensure continuity of trade.
Additionally, the UK has also signed some trade agreements with other countries which have not fully taken effect, including Canada, Jordan, and Mexico. These are expected to come into effect in early 2021.
UK-EU trade deal after Brexit
In the lead-up to December 31st, 2020 there was great uncertainty about whether the EU and UK could reach a deal regarding the rules for their future trading relationship, after several months of negotiations and numerous missed deadlines.
However, UK Prime Minister Boris Johnson and European Commission president Ursula von der Leyen committed to continuing the negotiations and a deal was finally struck just hours before the Brexit transition period ended.
The UK-EU trade deal allows the country to continue business with its largest and closest trading partner without the introduction of any additional tariffs and quotas, allowing the value of goods exchanged to remain more or less the same.
Nevertheless, the Brexit separation has created new logistical, regulatory and administrative challenges, including an increase in paperwork and customs checks that businesses in the UK and the EU will need to adapt to in order to continue trade.
Additionally, because the United Kingdom will cease to follow EU product standard regulations, some goods, including a rage of animal products, will no longer be able to be exported to the European Union.
Finally, although additional tariffs do not apply under the current UK-EU trade deal, they may well be implemented in the future if the UK chooses to diverge too much from the EU’s standards in areas like worker’s rights and environmental protection, or vice versa.
The UK and the US have signed a customs agreement
The financial secretary to the UK Treasury, Jesse Norman and US Ambassador Robert Wood Johnson signed a Customs Assistance Agreement (CAA) between the 2 countries to ensure ongoing smooth trade after Brexit separation from the EU.
The bilateral customs agreement will also allow the 2 counties to continue cooperation in tackling customs fraud by sharing data among UK and US customs authorities, and “provides the legal underpinning for schemes to ease trade flows for importers and exporters”, according to Norman.
Wood Johnson added that the agreement allows the UK and the US to continue working together “to stop criminals trafficking illegal goods across the Atlantic - from guns, to drugs, to illegal wildlife products and even counterfeit medicine” and “keep countries in both our countries safe”.
Additionally, the agreement also provides the legal basis for the Authorised Economic Operator Mutual Recognition Arrangement, an internationally recognised quality mark which allows businesses customs benefits and confirms that they meet international customs standards.
The UK and Vietnam’s free-trade deal
In the final weeks leading up to the Brexit deadline, the UK secured a free-trade deal with Vietnam.
The free-trade agreement between the 2 countries will see Vietnam save £114 million ($151 million) in tariffs on exports by the time the deal is fully implemented. The United Kingdom is set to save in the region of £36 million on exports.
Negotiations had been ongoing since August 2018. The new agreement came into effect on January 1st 2021, once Vietnam’s deal with the EU no longer applies to the United Kingdom.
Vietnam and the UK are important trading partners and, therefore, reaching a post-Brexit free-trade agreement was mutually beneficial. Vietnam sent out more than 4.5 billions pounds worth of goods to the UK in 2019, making it the Southeast Asian nation’s third-largest trading partner in Europe. The UK, on the other hand, sent over 600 million pounds worth of goods to Vietnam.
UK Secretary of State for International Trade, Liz Truss, stated that the deal with Vietnam would also:
“Pave the way for new digital partnerships and joining the Trans-Pacific Partnership... this will play to the U.K.’s strengths, as we become a hub for tech and digital trade with influence far beyond our shores, defining our role in the world for decades to come. ”
The UK-Switzerland bilateral financial agreement
On 30th June 2020, a commitment was signed by British Chancellor of the Exchequer Rishi Sunak and his Swiss counterpart to develop an international agreement on financial services. The agreement facilitates the provision of cross-border financial services.
The aim of the UK’s bilateral financial services agreement with Switzerland is to boost cooperation and trust by making it easier for cross-border access for the UK finance industry to the Swiss market, and vice versa.
This outcomes-based mutual recognition agreement increases cooperation between the UK and Switzerland by reducing costs and obstacles for cross-border access for UK finance.
There will be a particular focus on the following financial services:
- Asset management
- Capital markets
The bilateral financial services agreement has also been created in light of the recent COVID-19 pandemic. Such commitments are seen as particularly important given the economic challenges that lie ahead now that the coronavirus travel restrictions are being eased in Europe.
Additionally, on 4th December 2020, the UK and Switzerland also signed a Services Mobility Agreement which will build on the previously agreed trade deal.
This will allow UK professionals and service workers continued freedom of movement to Switzerland to work for up to 90 days, without having to face economic interest tests or work permits, and support trade worth over £37 billion in industries such as legal services, creative industries, and the tech sector.
UK-Kenya Economic Partnership Agreement finalised
An Economic Partnership Agreement (EPA) has been signed between the United Kingdom and the Republic of Kenya that aims to promote increased trade and investment between the 2 countries.
The deal means that the UK has committed to providing immediate duty-free, quota-free access to goods exported from Kenya, while Kenya has committed to a gradual tariff liberalisation of goods.
The EPA also dictates that some domestically sensitive products in Kenya are excluded from tariff liberalisation for the UK.
The UK and Turkey agree on free trade deal
The UK’s trading relationship with Turkey was previously dictated by the EU-Turkey Customs Union as well as agreements on agriculture, coal and steel trade, which has now changed following the signing of a traditional free trade agreement between the United Kingdom and Turkey.
The UK-Turkey agreement includes trade on manufactured goods, agriculture and services, and involves provisions on customs and trade facilitation, intellectual property, and technical barriers to trade.
UK trade agreements with Turkey are significant given that the UK is Turkey’s second most important trading partner. According to Turkish Foreign Minister Mevlut Cavusoglu, a post-Brexit bilateral trade target of $20 billion has already been set.
The UK and Canada agree on provisional trade deal
The United Kingdom has reached an agreement with Canada described as a “rollover” trade deal. This will maintain trade between the 2 countries now that the UK has completely withdrawn from the EU.
Dubbed the “Canada-UK Trade Continuity Agreement”, the Canadian and British governments have said that this will be a provisional arrangement to limit the negative impact of Brexit on the economies of both countries until a full trade deal can be worked out.
According to the UK government, the rollover deal “locks in certainty for UK businesses trading goods and services with Canada”, which are worth around $35bn (£20bn). Canada’s Prime Minister Justin Trudeau and UK Prime Minister Boris Johnson both praised the move as being beneficial for both nations.
As the TCA will not enter into effect until early 2021, the two governments have signed a Memorandum of Understanding (MoU) to ensure continuity of trading conditions in key areas in the meantime.
The Japan-UK Comprehensive Economic Partnership Agreement (CEPA)
The UK and Japan have agreed to a deal which broke down trade barriers between the countries’ large economies.
Although some have pointed out that the Japan-UK comprehensive economic partnership agreement (EPA) is more beneficial to Tokyo than to London, it marked a significant step in post-Brexit relations for the UK.
The deal will offer some assurances to Japanese business interests in the UK after the uncertainties of Brexit left many contemplating a move to the EU.
Economic and commercial attaché at the Luxembourg Embassy in London
The Ministry of Foreign and European Affairs and the Luxembourg Chamber of Commerce agreed to create a position for an economic and commercial attaché at the Luxembourg Embassy located in London.
The attaché role has been filled by Christophe Brighi who is now responsible for promoting trade relations between the 2 nations.
The UK is one of Luxembourg’s most important trading partners for services and goods, hence the attaché position has been created to help strengthen trade ties following Brexit. Tasks attributed to the attachél include providing assistance to Luxembourg companies wanting to establish or expand business activities in the United Kingdom.
There are also plans to create a Business Club in the UK offering a space for business communities to meet and develop exchanges between Britain and Luxembourg.
UK trade deals signed with Mexico
UK trade agreements have been signed with Mexico, although, similar to the situation with Canada, the deal did not come into effect on 1st January 2021.
Although how long the free trade agreements will take to negotiate with Mexico has not yet been confirmed, the TCA is expected to come into force in early 2021.
In the meantime, the UK has committed to allow preferential tariff rates to be applied to goods imported into the UK from Mexico until the Trade Continuity Agreement enters into force.
Likewise, Mexico has confirmed it will implement a tariff rebate scheme to allow any businesses to claim a refund on the excess tariffs they may have to pay until the TCA comes into effect.
Financial services agreement signed between Brazil and the UK
A UK-Brazil financial services agreement was signed following the fourth Economic and Financial Dialogue (EFD) between the 2 countries on December 10th, 2020, attended by both UK Chancellor, Rishi Sunak and Brazilian Economy Minister Paulo Guedes, as well as a number of central bank governors and the heads of financial sector regulators.
Agreements on financial services, taxation, sustainable growth,and investment opportunities for UK companies have already been finalised, which will allow the strong economic relationship with Brazil to continue into the future.
The representatives for both countries also committed to continue to cooperate to improve market access and boost green finance and clean growth initiatives in order to tackle environmental issues and climate change.