As the dust settles on the Brexit deal, making sense of the 1,200-page trade treaty will be no easy task and the early months of 2021 will be a steep learning curve for many businesses.
EU employers, who warmly congratulate the European Commission’s negotiating team, masterly led by Michel Barnier, are relieved but they are certainly not happy with how things turned out. Indeed, Brexit, in itself, is a divisive event and, at best, the EU could only seek to soften the negative impacts of such a unilateral decision.
The EU managed an orderly Brexit, it remained united throughout the negotiations process, which was not a certainty in 2016, and removed any temptation for other countries to follow the Brexiteers out. More importantly, the EU protected the Single Market and the current level of labour, social and environment standards, avoiding the risk of potential abuses of market power and an unlevel playing field.
Though businesses on both sides are relieved, as there will be no tariffs levied or restrictive quotas imposed on goods traded, they are concerned by a whole series of new customs and regulatory checks, including rules of origin and stringent local content requirements.
With the deal agreed only days before it came into force on January 1, businesses face a lot of paperwork, possibly slowing down processes, and supply chains will take a while to adjust to the new reality.
This is why companies need an adaptation period to comply with the changes. Even without the pandemic, it would be unthinkable to believe companies exporting billions of euros worth of goods each year could adapt to a fundamentally different trading model in just one working week. At the same time, there is a clear need to go back to the negotiating table at least for three reasons.
The deal does not include the services sector, which represents 80 per cent of the UK economy, including the financial sector. While banks had an agreement covering basic transactions, there are up to 40 treaties affecting cross-border activities in the financial services industry that need to be renegotiated. More clarity is required.
In this context, there is no time to waste to revamp the European Union’s banking union and the capital markets union (CMU) plans. Because of Brexit, EU capital markets and supervision need to become more integrated to better allocate financial resources and to make the EU a more attractive place for foreign investments.
The ongoing deep recession increases the need for equity finance mobilised by capital markets.
The UK can never be just another third country– Stefano Mallia
Secondly, ensuring the smooth flow of data between the EU and the UK is crucial to the future prosperity of both. The EU has yet to reach an ‘adequacy decision’ regarding the UK – there is an urgent need to make progress here so that data can continue to flow between our economies and our businesses. According to Digital Europe, six out of 10 European companies transfer data on a regular basis between the EU and the UK.
Last but not least, mutual recognition of qualifications is also not part of the deal. In the absence of an EU-wide agreement, the EU will allow UK bodies to pursue other ways of agreeing the mutual recognition of qualifications on a bilateral basis, which could be complex, protracted and only achievable on a country-by-country basis. There is a clear need now for qualification bodies in the EU and the UK to put forward a proposal for mutual recognition to exist in the future.
If we want Europe and the UK to remain closely linked economically, financially and emotionally once the trade agreement has come fully into play, we need to continue working on our relationship.
The agreement must be a solid platform for future cooperation between the EU and the UK in a number of areas that have a strong impact on our competitive environment, ranging from climate change to digital transformation, research and innovation, or standards. The deal was just the end of the beginning.
The UK can never be just another third country. It has a special relationship with the EU that has been built over 45 years of EU membership. Civil society and employers, in particular, must continue to work hard together with their counterparts in the UK on ensuring that the relationship can and will continue in this post-Brexit era.
The European Economic and Social Committee is determined to set up a framework to keep alive the dialogue with British civil society.
On our part, we must fight to keep our channels of trade open and do our best to build a sound structure that allows this to happen.
Stefano Mallia is president of the Employers’ Group, European Economic and Social Committee.
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