What is the deal with Brexit?

International Dec 28, 2020

Britain and the European Union (EU) struck a trade deal on 24 December settling their terms on their commercial relations after Britain completes its hard-fought split from the EU on 31st December.

The British Lawyers had to fight for years over the divorce which popularly came to be known as Brexit. Britain formally left the EU on January 31, closing its books on half a century of close relations with Europe, but it continued to follow EU rules and regulations during the transition period which gave the two sides time to negotiate the trade deal.

Here are the basic terms of the deal

  1. It saves Britain from crashing out of the EU
    British companies have been long trading with the EU without paying taxes and tariffs under the EU trade bloc. If the two sides would have failed to reach a deal before 31 December, tariffs would have been imposed raising the price on commodities and making it more difficult for British traders to trade with the EU. The new agreements mean that Britain avoids onerous tariffs and quotas on goods. The agreement was not a surprise as a NO-Deal Brexit had always looked more like useful leverage for political purposes than a probable outcome of negotiations.
  2. Both sides compromised on fishing

The number of people employed in Britain’s fishing industry has fallen in recent decades. The government sees its split from the EU as an opportunity to revive the industry by cutting European companies access to British waters. Britain originally sought an 80% reduction in the share of fish that EU boats would be allowed to catch in British waters. British Prime Minister Boris Johnson made significant concessions on that point: The European Union’s fishing quota in British waters will be cut by 25%. But Brussels also compromised; That quota reduction will come into effect over five and a half years, roughly half as long as the European Union originally wanted. British workers are unhappy not to have exclusive access to their fishing waters but a no-deal scenario would have forced tariffs on British fishing companies making it hard for them to sell what they have caught in European counties at competitive prices.

  1. Pro-Brexit lawmakers got many of their wishes

Citizens of the EU can look for jobs elsewhere in the Bloc and can work there without needing a special permit and stay after they have left their jobs. But the deal limits the free movement of people between Britain and the EU. It also puts an end to Britain’s involvement in the popular Erasmus Student Exchange Programme. As a single market and a customs union, the EU also agreed to adopt the same rules and regulations so that goods and services and capital can move freely across borders of the countries within the bloc and it also agreed to apply same tax system outside the bloc meaning that they can be shipped within the EU without facing addition tariffs.

  1. But the European Union won assurances

In return for allowing British companies to avoid tariffs, the EU wanted to ensure that those companies would not gain unfair advantages over their European rivals. The bloc is worried that Britain might give its companies a hand through state aid and by lowering environmental and labour standards. As a last resort if Britain and the EU couldn’t find a common ground in such a scenario tariffs could be imposed to ensure that one side does not have too big an advantage over the other.

  1. The British economy faces enormous

The trade deal was primarily concerned with goods crossing borders but the economy is enormously reliant on its services sector and the deal wouldn’t make everything immediately easier for British companies to sell services to EU nations. Once the transaction period ends on December 31. Traders in London will leave the EU single market for financial services. The system will not be as straight-forward for banks and traders and the current one.

The changes have been made and it will take time for both EU and Britain to adopt and  until then they will have to just learn to live with each other in harmony.

This article has been written by Siddhesh Patil for The Paradigm

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