The negotiations for the Future Trade relationship with the UK will need to begin (and conclude) before the end of the year (2020) for there to be a trade deal in place for the EU and UK and so that business can avoid a cliff-edge scenario which would revert to WTO rules. Negotiations are expected to begin in March. The EU’s draft negotiating mandate is available on their website, along with useful Q&As on what happens next in their “Guide to the Negotiations”. Trade deals typically take several years to negotiate and conclude (on average between 3 and 7, depending on the degree of complexity.) The UK have said they will not seek an extension to the transition. If they were to change their mind, this would have to happen before end of June, after that point, the EU will not be able to facilitate an extension.
If an extension is not requested, the EU and UK have between March and October to agree a new deal. After that, the deal will need to be ratified so that it can be in place for Jan 2021.
As you will appreciate, negotiating such a trade deal will be very challenging, therefore, we are advising Chamber members to continue with their planning and preparation for No-Deal/WTO Rules. This includes reviewing your supply chain, logistics, whether you need to use the UK Land-Bridge (which will involve a significant degree of admin), certification, tariffs, Rules of Origin, Data Protection etc. The Chambers Ireland website also contains a range of Brexit preparedness resources available for you to access.
Updated: February 2020
North-South Protocol and the Withdrawal Agreement
As part of the Withdrawal Agreement, a Northern Ireland/Ireland Protocol was agreed to ensure that no hard border would be on the island. Within this, it makes provisions for Citizen’s Rights, the Single Electricity Market and ensures that NI businesses continue to have full access to the EU’s Single Market, with the only checks on goods between EU and UK being at ports/airports, rather than at the border with the six counties.
A Joint Committee, made up of EU and UK officials is currently being put together to review how to implement the protocol so that it is operational following the end of the transition period.
Within the Protocol, while Northern Ireland remains within the EU’s Single Market, it stays inside the UK’s customs territory, which will pose some difficulty for NI companies, and Irish companies with all-island supply chains, who currently benefit from preferential treatment under EU FTAs. Depending on the trade deal, they may no longer be able to benefit from preferential treatment under existing FTAs. We would urge members who have an all island supply chain to review markets they currently engage with and assess how any preferential access might be impacted. We’re currently seeking greater clarification on this and a number of other matters, and we’ll keep you briefed. We encourage members to review how the Protocol might impact their business.
Updated: February 2020
How did we end up in this situation?
The UK voted to leave the EU on June 23rd 2016 by a majority of 51.9% to 48.1%. The vote means that the UK are on course to leave the EU, with all details of its exit still to be confirmed.
The timetable was set on 29th March 2017, when the formal step, required under EU law to start the exit process, of triggering Article 50 of the Lisbon Treaty was enacted. Under the two-year process the UK will leave the EU on March 29th, 2019. An extension to the exit period is possible if all 28 EU members agree. However negotiations have been taking place on the assumption that the UK leaves in March 2019.
The talks between the UK and EU started in June 2017 and so far have focused on the details of the UK’s withdrawal, which must be set down in a formal, legal agreement. Outline agreement has been reached on what the UK will pay the EU after departure – the so-called exit bill or divorce bill – and on the mutual recognition of the rights of UK citizens in the EU and EU citizens in the UK. However on the other crucial issue related to the withdrawal agreement, a backstop for the Irish Border, an agreement is still being sought. The backstop is a legally operable text which would provide a guarantee that there be no hard Border on the island of Ireland no matter what future trade arrangements are agreed between the EU and UK.
Before the UK leaves, the two sides must also agree a political declaration outlining the principles for future negotiations. Under the withdrawal agreement, a so-called transition period, a kind of standstill in current arrangements, would apply from March 2019 until December 2020. This is to allow future trade arrangements and the wider ongoing relationship between the EU and UK to be negotiated.
Brexit talks between the UK and the EU are taking place in a sequenced order, which has led to little confusion in the debate. What has to be decided upon now are the terms on which the UK leaves. These will be contained in the withdrawal agreement. A political declaration on what the future relationship might look like also has to be agreed before the UK leaves. However, details of the future relationship between the EU and UK will be decided in talks after the UK actually leaves, assuming the two sides are still talking.
In the short term the conclusion of the withdrawal agreement would mean that once the UK leaves next March a transition period, a kind of standstill, would commence and last until the end of 2020. If this happens, not much will change next March, except for the UK’s formal departure.
What might No Deal look like?
If there is no withdrawal agreement, then the UK would leave the EU in a so-called “no-deal” Brexit in March 2019, which could be chaotic as barriers to trade would go up overnight and there would be uncertainties in areas ranging from aviation to pharmaceuticals to co-operation in nuclear regulation. There is speculation that the EU and UK would work together to try to avoid the worst of the chaos – though they could only do so much ‑ or even that there might be late moves to delay the UK’s exit date.
If a withdrawal agreement is finalised, then talks move on to how the two sides will relate in future in areas such as foreign policy, defence and security and, crucially for Ireland, trade.
What is the BackStop?
The UK’s departure from the EU means Northern Ireland is leaving the bloc too so checks would be required along the 499-kilometre Irish Border as different trade rules would apply north and south after Brexit. The Border in Ireland will become the only land border between the UK and the EU after Brexit.
The 1998 Belfast Agreement laid the foundation for Northern Ireland’s peace process with many all-island rules and institutions. Neither side wants the return of border checks because of the risk to peace whereby a physical border infrastructure would be considered a potential target for paramilitaries.
The Backstop is an insurance policy that the EU and UK have agreed to include in the withdrawal agreement to avoid this happening. Both sides see it as a last resort to be triggered in the event of no better solution being found to avoid a hard border in a EU-UK trade deal. But there is a sequencing problem: a withdrawal treaty must be agreed before a trade deal, hence the need for the backstop first.
Carlow Chamber of Commerce
Gateway Business Centre,
Ph: 059 91 32337