UK Prime Minister celebrating the post-Brexit trade deal with the EU. Photo / Twitter: Boris Johnson
Just a week before the deadline, Britain and the European Union struck a free-trade deal on Christmas Eve (UK time) that should avert economic chaos on New Year's and bring a measure of certainty for businesses after years of Brexit turmoil.
Once ratified by both sides, the agreement will ensure Britain and the 27-nation bloc can continue to trade in goods without tariffs or quotas after the UK breaks fully free of the EU on January 1. A look at what's in the deal:
What was agreed
There will be a five-and-a-half-year transition period, during which the EU will give back 25 per cent of the value of its catch in UK waters. After that, fishing rights in UK waters will be subject to an annual negotiation process, which must be concluded by December 10 in preparation for the next year.
What the UK Government says
UK officials accepted "fisheries was one of the areas where we had to compromise somewhat" but insisted the UK would have "full control of our waters" after the end of the transition period. "Where we've got to is acceptable, and offers gains for the fisheries industry in the short run and a huge right to control everything and work within that," a senior negotiator said.
What the critics say
Barrie Deas, head of the National Federation of Fishermen's Organisations, said the deal "will inevitably be seen by the fishing industry as a defeat" and accused the Government of sacrificing fishing "for other national objectives". If the UK shuts out the EU after the end of the transition period, the EU could retaliate with tariffs. One Tory Brexiteer yesterday said backbenchers "don't like that".
What was agreed
Under the terms of the deal, both sides could be forced to pay the other compensation if they engage in "anticompetitive" bailouts of failing companies. An independent adjudicator will oversee the resolution of any dispute that arises from one side giving excessive aid to its firms. The UK Government must demonstrate that any company it intends to give aid to has a "credible restructuring plan" - but this condition does not apply to banks.
What the UK Government says
The UK says it can now implement a "modern subsidy system so that we can better support businesses to grow and thrive". Its current aid packages and bailouts of individual industries during the coronavirus pandemic are not included in the deal. Nor is the EU's bail-out package for aviation, aerospace, climate change and electric cars.
What the critics say
Richard Tice, the chairman of the Brexit Party, said the UK was "more linked than I wanted" on state aid under the terms of the deal. He warned the country would "have to find ways to deal with this in future".
What has been agreed
UK manufacturers will eventually face tariffs when exporting electric cars to the EU unless more than 45 per cent of the components used come from European countries. There will be a six-year transition period before the rules come into force.
What the UK Government says
A senior negotiator yesterday said the rules were in line with the wishes of the electric car industry, which had asked that there was no major change to tariff penalties from so-called "rules of origin" on January 1. The UK says the six-year period will allow the British electric car industry time to change their supply chains or face tariffs.
What the critics say
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said there was now an "urgent need for the Government to create the conditions that will attract large-scale battery manufacturing to the UK and transform our supply chains".
What has been agreed
A key element of the deal is that it does not include any tariffs on exports to the EU. Negotiators agreed automatic tariff-free access to the EU's single market, and a zero quota agreement means there is no limit on the quantity of any type of goods that can be traded.
What the UK Government says
The UK Government claims this is a better deal than the EU has negotiated with any other "third country". Boris Johnson called it a "Canada plus" arrangement.
What the critics say
Clement Beaune, the French Europe minister, has said "no country in the world will be subject to as many export rules as the UK". Nicola Sturgeon, the Scottish First Minister, said leaving the bloc was happening "against Scotland's will".
What has been agreed
The UK will share DNA, fingerprint and vehicle data with the EU to help law enforcement agencies and border force to identify criminals. The deal will also "streamline" extraditions from Britain to the EU, although extraditions will be more difficult after January 1 than when the UK was a member state.
What the UK Government says
A senior official said the security agreement with the EU was "surprisingly extensive", and described the arrangement as an "amazing achievement". Priti Patel, the Home Secretary, has said the deal will allow ministers to "seize [an] historic opportunity to make the UK safer". The National Crime Agency said it welcomes the deal, which will allow it to "retain access to the majority of EU law enforcement criminal justice tools that benefit law enforcement across Europe".
What the critics say
Lord Ricketts, a former national security adviser, said the deal was "better than I had feared" but warned: "Cooperation will be still be slower [and] more clunky than now".
What has been agreed
The level playing field, one of the most controversial parts of the negotiations, manages how the UK and EU will manage different standards on goods if the UK diverges from the regulatory alignment it currently has with member states. The UK objected to the EU's suggestion that the bloc should be allowed to impose tariffs on British goods if the standards diverge. Under the agreement, both sides can impose tariffs but they must be agreed by an independent arbitration panel.
What the UK Government says
A UK official pointed to arbitration panels on other trade deals, which are comprised of independent experts and lawyers, and stressed there would be no involvement of the European Court of Justice, an EU body.
What the critics say
Senior Tory Brexiteers yesterday suggested they had no specific objection to the level playing field arrangements. One told The Sunday Telegraph there were no "big, big, problems" with the arrangement and Conservative MPs were pleased about the exclusion of the ECJ from any arbitration.
What has been agreed
The role of Northern Ireland after the end of the transition period is not a specific matter for the Brexit deal. Instead, separate agreements on the management of the passage of goods from England, Scotland and Wales, through Northern Ireland into the single market in the Republic are being managed by Chancellor of the Duchy of Lancaster Michael Gove.
What the UK Government says
The people of Northern Ireland will be able to choose what happens to the country after 2024 through a vote in the Northern Irish Assembly on the Protocol negotiated by Michael Gove.
What the critics say
John Redwood, a Tory Brexiteer backbencher, said the Government should publish more information about the effect of the deal on Northern Ireland. "We need a detailed text to see how [Michael Gove] thinks it is going to work," he tweeted.
What has been agreed
The UK will leave the scheme after the end of the transition period. This means UK students will no longer be able to use the scheme to travel to European universities on exchange programmes. Boris Johnson announced the UK will replace Erasmus with its own scheme named after Alan Turing, which will enable students to travel all over the world, not just to Europe.
What the UK Government says
The UK says the Erasmus scheme was disproportionately expensive for the UK, and cost the Treasury "hundreds of millions of pounds" every year because more European students wanted to travel to the UK than UK students wanted to travel to the EU. The replacement scheme has yet to be established, so there is likely to be some delay before Erasmus is properly replaced.
What the critics say
Michel Barnier, the EU's chief negotiator, said the UK's withdrawal from Erasmus was one of his biggest regrets about the outcome of the negotiations, while Lord Ricketts said the decision to withdraw from the scheme was "short-sighted and mean-spirited". Others pointed out that Boris Johnson previously promised there would be "no threat to the Erasmus scheme".
What has been agreed
Independent arbitration panels will deal with potential conflict in future years over elements of the Treaty. A senior negotiator said there was an established precedent for panels to oversee international agreements such as the trade deal. Members of the panel could involve senior members of the judiciary.
What the UK Government says
David Frost, the Government's chief negotiator, yesterday said EU law would no longer apply to the UK. "The way we've achieved that is there's no more role for the European Court of Justice, there's no direct effects of EU law, there's no alignment of any kind, and we're out of the single market and out of the customs union just as the manifesto said we would be," he said.
What the critics say
Sir Bill Cash, a veteran Tory Eurosceptic, yesterday said: "Sovereignty is the key issue. The ECJ [European Court of Justice] is part of that," he said.
What has been agreed
Zero tariff and quota-free access to the single market means UK farming exporters will be able to continue largely as before, but will face additional paperwork and checks on their products entering the EU. More than 60 per cent of the UK's agricultural food and drink production (known as agrifoods) are exported to the EU. The deal does not apply to seed potato crops, meaning they cannot be exported.
What the UK Government says
A letter from the Department for Environment, Food and Rural Affairs told farmers: "The EU have confirmed they will not accept our case for a permanent change to the prohibition on seed potatoes."
What the critics say
The National Farmers Union said the industry would face a "fundamental change at the end of the transition period" and expected there to be "disruption to trade at the border". Sturgeon accused the UK Government of selling out Scottish seed potato farmers, calling the deal a "disastrous outcome".
What has been agreed
The Brexit deal makes little reference to financial services. Further negotiations will be allowed to establish market access for UK firms, which represent Britain's largest sector. It is expected that firms will be able to continue to trade without much disruption, but specific elements of the agreement will be addressed in a "memorandum of understanding", which has yet to be published.
What the UK Government says
In a summary of the deal, it said the agreement reaffirms "the integrity of our respective, autonomous equivalence frameworks". The agreement also lays the groundwork for continued "market integrity," officials said.
What the critics say
Omar Ali, the head of financial services at EY, warned there would be costs to UK firms if there is not equivalence between the UK and EU after the end of the transition period. "A lack of equivalence decisions would increase the cost of doing business for financial services firms and the clients they serve," he said.
The Eiffel Tower closed its summit due to extreme heat in Paris, France.