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Brexit trade deal explained: the key parts of the landmark agreement

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After nine months of tortuous and at-times fractious negotiations, the UK and the EU have reached agreement on an economic partnership agreement that will govern large swaths of bilateral trade worth more than £650bn.

The deal covers technical aspects of trade for key sectors, including autos, chemicals, pharmaceutical and professional services as well as a governance mechanism to resolve disputes that may arise between the two sides.

Here, the Financial Times looks at key aspects of the deal and assesses how they will affect trade from January 1, when Britain becomes a so-called “third country” outside the EU’s single market and customs union.

Level playing field: standards 

The UK and Brussels painstakingly negotiated a system that will leave the UK free to set its own standards in areas such as environmental standards and labour law but with the risk of having access to the European market restricted if it strays too far. 

A “rebalancing mechanism”, governed by arbitration, will allow either side to impose tariffs should it be determined that their businesses were at an unfair disadvantage. 

Crucially for the UK, the system does not rely on EU law or the European Court of Justice. Jim Brunsden

Level playing field: state aid 

Companies in the EU will be able to challenge state aid awarded to UK rivals in Britain’s national courts if they feel it violates common principles set out in the trade deal. British companies will enjoy equivalent rights in the EU.

Britain also agreed to set up an independent state-aid authority, although the deal does not require the UK to have an “ex ante” regime that will vet subsidies before they are granted. 

Either side would also be able to unilaterally impose tariffs to counter the effect of trade-distorting subsidies, although the other party could then call for accelerated arbitration.

For the UK, it was important to secure a system far removed from the EU’s original request that it simply continue to follow EU state aid rules — a demand it saw as an affront to sovereignty. Jim Brunsden

Fishing rights

EU fishing fleets will have a five and a half-year transition period with guaranteed access to UK waters. After that, access will depend on annual negotiations. 

During the transition, EU fishing rights in UK waters — currently worth about €650m per year — will be reduced by one quarter, with British quotas increased by a corresponding amount. The shift will boost UK boats’ current share of fishing rights in British waters from about a half to two-thirds. 

After the transition, access to waters will depend on annual negotiations, such as those the EU already has with Norway. But the EU will have some leverage: should the UK revoke access, it will be able to take compensatory measures, including hitting UK fish exports with tariffs, and even shutting the UK out of its energy market. Jim Brunsden

Data flows 

The trade agreement does not contain a section covering the vast flow of personal data between the UK and EU which will be concluded in a separate “adequacy” decision due in early 2021. But the trade deal does cover data flows in specific areas of law enforcement and police co-operation between the two sides.

A senior EU official said the broader data adequacy decision — which is unilaterally granted by Brussels — could be concluded in the “coming weeks”. If granted, it would mean that the EU in effect recognises UK data protection standards as equivalent to its own to allow for the free flow of personal information of EU and UK citizens that underpins the digital economy. Mehreen Khan

Logistics and road haulage 

For British hauliers the deal contained mixed blessings. The two sides recognised the validity of each others’ licences and permits and included full transit rights, allowing drivers to cross multiple countries in order to drop a load. This will enable Irish lorries to use the UK as a “landbridge” to deliver goods into the EU.

However, the agreement limits British truckers to a single drop-off and a single pick-up when in Europe, a significant downgrade from EU membership, under which drivers could do three pick-ups inside an EU country before returning home.

Richard Burnett, the head of the Road Haulage Association, said the deal risked decimating the concert haulage industry, which relied on the ability to make multiple trips inside an EU country. “At the moment we have three drop-offs, and this allows one,” he said. Peter Foster

Aviation and travel

The deal allows flying rights between the EU and UK to continue, but UK carriers will not be able to fly between two points within the EU. This was expected, and airlines on both sides have set up foreign subsidiaries to continue current routes, allowing easyJet, for example, to fly between France and Italy.

The UK will still have access to Horizon Europe, the EU’s €100bn research and development programme, while the space industry will be relieved it can access Copernicus, the earth observation programme.

For travellers, visas will be required for visits of more than 90 days, and there may be additional passport checks. Healthcare provisions will still be available for UK visitors into Europe on a basis similar to the current European Health Insurance Card. Philip Georgiadis

Food and drink

An overview published by the European Commission suggested the EU would immediately implement tough new checks on agri-food products, with no grace period. Still, food and farming businesses welcomed the deal but warned that leaving the customs union and single market in a week’s time would still disrupt the food supply chain.

Ian Wright, chief executive of the Food and Drink Federation, said: “This week’s chaos at Dover and the last gasp nature of this deal means that there will be significant disruption to supply and some prices will rise.” 

Minette Batters, president of the National Farmers’ Union, said more UK-EU talks were needed to prevent perishable food becoming caught in border queues.

Shane Brennan, chief executive of the Cold Chain Federation, said the arrangements would mean that the UK’s “food chain will be slower, more complex and more expensive for months if not years.” Judith Evans

Retail

The British Retail Consortium, which had estimated that tariffs in the event of a no-deal Brexit would add £3bn a year to the cost of food for UK consumers, said it welcomed the deal. “Given that four-fifths of UK food imports come from the EU, today’s announcement should afford households around the UK a collective sigh of relief,” said chief executive Helen Dickinson.

However, she added that the zero-tariff agreement should be implemented as soon as possible and new ways needed to be found “to reduce the checks and red tape that we’ll see from the January 1”.
Jonathan Eley

Chemicals

The chemicals industry is among the most exposed to costs of new trading arrangements, with products that enter a large number of cross-border supply chains, from car paint to haircare products, food to pharmaceuticals.

Steve Elliott, head of the Chemical Industries Association, welcomed the “zero-tariff” element of the deal, saving the industry up to £1bn in feared tariff costs, but continued to raise concerns about UK plans to duplicate the EU’s Reach safety regime, in which UK companies had invested £500m in recent years.

The CIA said that unless the UK government had secured access to costly product safety databases on which Reach was based, the industry faced a bill of more than £1bn in “unnecessarily duplicating that work for a new UK regime”. Peter Foster

Pharmaceuticals

A key pharma industry goal — that tests and inspections for medicines carried out on one side of the English Channel should be considered valid on the other — has been only partially achieved.

The agreement included “mutual recognition” clauses that should mean UK manufacturing facilities will “not need to undergo separate UK and EU inspections”. However, initial indications on Thursday evening were that the deal did not appear to embrace another key industry demand: mutual recognition of the safety and quality tests. This would mean presale safety tests carried out on medicines in the UK will now need to be duplicated in the EU, causing delays for patients and additional costs. Sarah Neville

Car industry 

The car industry warned that the deal would introduce “much more red tape and regulatory burden for the industry”, which trades almost 3m vehicles a year between the EU and the UK. Cross-Channel trade in automotive parts accounts for almost €14bn.

The UK has already conceded that the EU would not agree to taking a more flexible approach when it came to assessing whether UK cars manufactured with large amounts of non-UK components could qualify for zero-tariff access to the bloc under a trade deal. As a result, some cars may incur tariffs on entering the EU.

However, the UK government said it had won concessions for batteries and electric vehicles that would ensure that British-made electric vehicles were at least eligible for preferential tariff rates. Peter Foster

Manufacturing 

The UK manufacturing sector welcomed the fact tariffs had been avoided that risked wiping out profits in the sector but warned that companies still faced border delays and the loss of mutual conformity assessment. 

This could mean two lots of certification and testing to meet both EU and UK standards, according to Stephen Phipson, chief executive of the manufacturers group Make UK. “This would add significant complexity and cost, for a sector that operates on fine margins,” he said.

A so-called ‘trusted trader scheme’ — where qualified companies could speed through customs — was also welcomed, although companies said they would need to see details, given the costs of participating in the system. 

Far fewer companies in the UK have this “authorised economic operator” status than in Europe, given the costs, which means that it may end up benefiting larger groups with in-house experts over smaller operators.

Mr Phipson added that the lack of recognition of professional qualifications was “challenging news for manufacturers wanting to send engineers to the EU”. Daniel Thomas

Professional services 

Professional services providers will lose their ability to automatically work in the EU after the deal failed to obtain pan-EU mutual recognition of professional qualifications. 

This means that professions from doctors and vets to engineers and architects must have their qualifications recognised in each EU member state where they want to work. There will, however, be provisions for short-term business trips and temporary secondments of highly skilled employees. 

Sam Lowe, a senior research fellow at think-tank the Centre for European Reform, said the deal “did little to maintain existing market access for UK services providers” and the UK had failed to secure ambitious provisions, relying on “vaguer commitments that offer little in practice”. Daniel Thomas

Financial services

The deal does not cover financial services access to EU markets, which is still to be determined by a separate process under which the bloc will either unilaterally grant “equivalence” to the UK and its regulated companies, or leave firms to seek permissions from individual member states.

The UK government did claim two “wins” for the City of London: preventing a measure that could have restricted EU firms from outsourcing lucrative work to the UK and excluding financial services from “cross retaliation” measures if other parts of the trade agreement were breached. 

However, legal experts said these were not significant victories for the UK, as equivalence and market access were bigger factors. “These are wins, but pretty small on the Richter scale of regulation,” said Simon Morris of law firm CMS. “What matters is wider wholesale market access, on a basis yet to be defined let alone negotiated.” Matthew Vincent

Defence and security

As expected, UK police and intelligence agencies are to be cut off from the EU’s most sensitive real-time crime databases. However, British security services will still be able to see crucial air passenger data, criminal record information, and DNA, fingerprint and vehicle registration data, with ongoing access to so-called PNR and Prüm databases. 

This means they will still be able to work with EU allies on joint investigations into terrorism and all forms of organised crime. It is not yet clear what exactly will replace the European Arrest Warrant, which allows swift extradition of criminals between EU countries. The National Police Chiefs’ Council, which represents chief constables, said it was working with government to “fully understand the detail” and ensure forces are prepared for any changes. Helen Warrell



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Missing Belarus activist found hanged in Kyiv park

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Belarus updates

A Belarusian opposition activist has been found hanged from a tree in a park near his home in Ukraine, a day after he was reported missing. Local police said his death could have been made to look like suicide.

Vitaly Shishov, who led the Kyiv-based organisation Belarusian House, which helps Belarusians fleeing persecution find their feet in Ukraine, had been reported missing by his partner on Monday after not returning from a run.

Shishov’s death follows weeks of increased pressure in Belarus by authorities against civil society activists and independent media as part of what the country’s authoritarian president Alexander Lukashenko has called a “mopping-up operation” of “bandits and foreign agents”.

Many Belarusians have fled the country since Lukashenko launched a brutal crackdown last summer after nationwide protests erupted following his disputed victory in presidential elections. About 35,000 people have been arrested in Belarus and more than 150,000 are thought to have crossed into neighbouring Ukraine.

Franak Viacorka, an aide to Belarusian opposition leader Sviatlana Tsikhanouskaya who met UK prime minister Boris Johnson on Tuesday in London, said Shishov’s death was “absolutely shocking and unexpected to all of us”.

“He [Shishov] and his friends helped people who were moving to Ukraine,” Viacorka told the Financial Times. “They were very helpful, especially for those who have just arrived and didn’t know what to do.”

Viacorka said many activists living in Ukraine, such as Shishov who fled Belarus in 2020, had “complained about possibly being followed, and receiving threats”.

Kyiv park where Vitaly Shyshov’s body was found
The Kyiv park where Vitaly Shishov’s body was found after he failed to return home following a run © Gleb Garanich/Reuters

Downing Street said that after meeting Tsikhanouskaya, Johnson condemned the Lukashenko regime’s severe human rights violations. “The UK stands in solidarity of the people of Belarus and will continue to take action to support them,” a spokesperson said.

Ukrainian police have now launched a criminal case for the suspected murder of Shishov, including the possibility of “murder disguised as suicide”.

Yuriy Shchutsko, an acquaintance and fellow Belarus refugee who found Shishov’s body, ruled out suicide, pointing out that Shishov’s nose was broken.

“I suspect this was the action of the [Belarus] KGB . . . we knew they were hunting for us,” he told Ukrainian television.

Ihor Klymenko, head of the National Police of Ukraine, subsequently said Shishov’s body had what appeared to be “torn tissue” on his nose and other wounds, but stressed it would be up to medical examiners to determine if these were caused by beatings or the result of suicide.

There was no immediate comment from Lukashenko or his administration.

Belarusian House said: “There is no doubt that this is an operation planned by the Chekists [the Belarusian KGB] to eliminate someone truly dangerous for the regime.

“Vitalik was under surveillance,” it added. “We were repeatedly warned by both local sources and our people in the Republic of Belarus about all kinds of provocations up to kidnapping and liquidation.”

Adding to the swirl of attention on Belarus this week, Tokyo Olympics sprinter Krystsina Tsimanouskaya on Monday took refuge in Poland’s embassy after alleging she had been taken to the airport against her will, having criticised her Belarusian coaches.

The athlete has said she feared punishment if she went back to Belarus but has so far declined to link her problems to the country’s divisions.

Shishov’s death comes five years after Pavel Sheremet, a prominent Belarus-born opposition figure and journalist, was killed in an improvised bomb explosion in downtown Kyiv while driving to work at a local radio station. Lukashenko has ruled Belarus since 1994.

Ukrainian authorities at first suggested Belarusian or Russian security services could have been involved in the hit, as Sheremet was close to opposition movements in Russia as well.

Instead, officials charged three Ukrainian volunteers who supported war efforts against Russia-backed separatists in eastern Ukraine — although they steadfastly denied involvement and authorities were unable to provide a motive in what has been widely described as a flimsy case.

Additional reporting by Jasmine Cameron-Chileshe in London



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EU pledges aid to Lithuania to combat illegal migration from Belarus

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EU immigration updates

In the latest sign of deteriorating relations between the EU and Belarus, Brussels has promised extra financial aid and increased diplomatic heft to help Lithuania tackle a migrant crisis that it blames on neighbouring Belarus and its dictator Alexander Lukashenko.

Lithuania detained 287 illegal migrants on Sunday, more than it did in the entirety of 2018, 2019, and 2020 combined, the vast majority of them Iraqis who had flown to Belarus’s capital Minsk before heading north to cross into the EU state. Almost 4,000 migrants have been detained this year, compared with 81 for the whole of 2020. 

“What we are facing is an aggressive act from the Lukashenko regime designed to provoke,” Ylva Johansson, the EU commissioner for home affairs told reporters on Monday after talks with Lithuania’s prime minister Ingrida Simonyte. “The situation is getting worse and deteriorating . . . There is no free access to EU territory.”

The EU imposed sweeping sanctions against Lukashenko’s regime in June, after he fraudulently claimed victory in last year’s presidential election and then led a brutal campaign to violently suppress protesters and jail political opponents. Lukashenko has ruled Belarus since 1994.

The rising concern over the migrant crossings, which EU officials say is a campaign co-ordinated by Lukashenko’s administration, comes as one of the country’s athletes competing in the Tokyo Olympic Games sought refuge in Poland after team management attempted to fly her home against her will after she publicly criticised their actions.

Johansson said the EU would provide €10m-€12m of immediate emergency funding and would send a team of officials to the country to assess the requirements for longer-term financial assistance, including for extra border security and facilities to process those attempting to enter.

Simonyte said that Vilnuis would require “tens of millions of euros” by the end of the year if the number of people attempting to cross the border continued at the current pace.

Lithuania’s foreign minister Gabrielius Landsbergis told the Financial Times in June that Belarus was “weaponising” illegal immigration to put pressure on the Baltic country over its housing of several opposition leaders. Since then, the flow of illegal immigrants from Iraq, Syria, and several African countries has increased sharply.

Iraqi diplomats visited Vilnius at the end of last week after Lithuania’s foreign minister flew to Baghdad in mid-July. Johannson said on Monday that EU diplomats were engaged in “intensive contacts” with Iraqi officials, which she said were “more constructive than we had hoped”.

State carrier Iraqi Airways offers flights from four Iraqi airports to Minsk, according to its website. Former Estonian president Toomas Ilves suggested on Twitter that the EU could cut its aid to Iraq “immediately until they stop these flights”.

Speaking at the border with Belarus on Monday, Johansson added that the tents provided by Lithuania were unsuitable for families. Lithuania’s interior minister Agne Bilotaite said she hoped the number of illegal migrants would subside in the coming months but that Vilnius was planning to build some housing to accommodate them over the upcoming winter.



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Britain’s wrong-headed approach to refugees

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UK immigration updates

Thanks to the bravery of volunteers who run towards storms at sea to rescue ships’ crews, few British institutions command as much respect as the Royal National Lifeboat Institution. The charity, however, has recently had to negotiate a different kind of storm, over its efforts to help refugees who get into difficulties crossing the Channel from France. Nigel Farage, the former Brexit party leader, accused it of running a taxi service for illegal trafficking gangs. Last week, the RNLI said it had received hundreds of thousands of pounds of extra donations in response.

The RNLI has become embroiled in a now familiar story when the summer months allow more small boats to make the Channel crossing. Compared with the flows to other countries such as Spain, Italy and Greece, only a handful of migrants attempt the journey. That makes the UK’s inability to control the border in an effective and humane way — and shabby treatment of those who do make it across — no less of a scandal.

Britain’s strategy for stemming the flow has relied mostly on paying the French authorities to limit the number of boats crossing and return any that leave to France, while deterring would-be migrants through the unwelcoming environment that awaits them. Just as EU countries are dependent on their neighbours for keeping entrants down — whether Morocco for Spain or Belarus for Lithuania — the UK needs French co-operation to control the mutual border. Diplomatic spats, whether over Brexit or extra Covid quarantine restrictions on arrivals from France, have made that harder.

The UK approach manages to be simultaneously ineffective and cruel. Yvette Cooper, chair of the home affairs select committee, wrote last week to home secretary Priti Patel to complain of unacceptable conditions in the holding facility for migrants who make it to the Kent coast. A recent unannounced visit by MPs found most of those remaining in the overcrowded facility sitting on a thin mattress on the floor, with women and children in the same room as adult men.

Earlier this year, the High Court ruled that “squalid” conditions in the Napier Barracks, a temporary centre set up last year to house asylum seekers during the pandemic, were so bad as to be unlawful. While arrivals have declined since the peak seven years ago, cutbacks have led to a backlog in processing claims, leaving more in a legal limbo.

Since the start of the pandemic Britain has shut down other paths into the country, ending a resettlement scheme. This has ceded the ground to people traffickers. The “push factors” of the risk of violence and torture at home and “pull factors” of higher living standards mean many are still willing to resort to risky and illegal methods to try to reach the UK. Creating a harsh environment for those who make it has done little to dispel the widespread belief among migrants that Britain is a better destination than other European countries, and stem the flow.

That will not stop the government trying. Barristers have warned that a clause in draft border legislation could potentially make it a crime to help asylum seekers arrive in the UK, with a maximum penalty of life imprisonment; at present it is illegal to do so to earn a profit. The Home Office says the clause is aimed at criminal traffickers. But along with a suggestion to set up offshore processing centres, the provision has rightly earned criticism from human rights groups. If the government is unwilling to create safe and legal routes, its only option is to prevent people from coming in the first place. That, ultimately, will mean relying on France.



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