It’s done – follow-up agreement between the EU and the UK: Not only can vaccines be developed in a short period of time, but also trade deals. The EU and Great Britain agreed on a comprehensive free trade agreement before Christmas. To anticipate: It turned out well.
Brussels diplomacy showed what it is capable of. Since the fateful UK EU referendum in 2016, we have considered it unlikely that two such important partners would say goodbye without a trade agreement. Politically and economically, the EU needs to join forces with the United Kingdom. Conversely, a hard separation from mainland Europe would have resulted in an economic disaster for Great Britain.
The agreement is fair to both sides. The key point is: The trade in goods will remain duty-free. There are also no quotas for trade in goods. Great Britain maintains its EU-level environmental and social standards. If the United Kingdom does not go along with stricter EU requirements in the future, there may be consequences. Customs duties on products would then be conceivable. Both parties could also take cross-sectoral retaliation in the event of breaches of the agreement. So not only for those parts of the agreement that are directly affected.
From January 1, 2021, there will be controls and new export formalities at the borders to check product or environmental standards. There is a particularly simple procedure in the areas of automobiles, pharmaceuticals, chemicals and wine. The movement of goods should be as simple as possible for the goods that are most traded.
In the case of financial services, key issues have to be clarified by March. For now, the free movement of financial services does not go beyond normal trade agreements. The banking industry still has to wait for the final results and framework conditions.
The agreement comes into force provisionally. It still has to be approved by the British Parliament (which should happen this year), the EU states and the EU Parliament. However, consent is considered certain.
The EU and Great Britain split peacefully. Both parties maintain a close economic partnership. It is crucial that the agreement leaves room for future governments to intensify the trade relationship. For example, an EU-friendly UK government could agree that new EU environmental and social standards are automatically adopted. But that was precisely what the EU-skeptical Prime Minister Boris Johnson wanted to prevent, which he succeeded in doing. But this is not an eternity clause.
It remains to be stated soberly: The EU also works without Great Britain. The heads of state and government of the EU recently agreed on a large-volume reconstruction fund to cushion the consequences of the corona pandemic and ensure an economic upswing. Would that have happened so quickly with the United Kingdom? Presumably London would have made special arrangements for itself – as so often in the past. Great Britain’s departure from the EU should not be lamented any further. The agreement is good and is fair to both sides.
The pound should continue to appreciate against the US dollar in the coming weeks. The currency pair GBP / USD should head for the 1.40 mark. For the EUR / GBP currency pair, however, we expect prices to remain largely the same.
Livestream on December 14th, 2020 from 6 p.m .:
With Hans-Werner Sinn, former President of the Ifo Institute: Corona and the miraculous increase in money in Europe
– Here is the stream! –