The International Business Transactions Blog

Brexit’s Far-Reaching Impact on EU-UK Trade

By BethEl Nager, Law Student Editor
& Aaron Fellmeth, Faculty Co-Editor

Brexit, the exit of the United Kingdom (UK) from the European Union (EU), was finalized on January 31, 2020. However, the EU and UK agreed to maintain most of their trading arrangements unchanged throughout 2020, while negotiations continued for a new free trade agreement. The EU-UK Trade and Cooperation Agreement, signed on December 31, 2020, is over 1276 pages long. The document is exceedingly complex. It continues free trade in goods and some services between the parties, keeps investment relatively open, regulates transportation, and contains some joint regulation of workers’ rights, social security, energy policy, and environmental regulations.  However, some matters formerly harmonized under the aegis of the EU, such as financial services, data protection, and certain sanitary or phytosanitary measures, are not included.

As a result of this new agreement and its finalization just days before the transition period concluded, business firms are struggling to understand the new rules. Trade between the UK and EU now requires a customs clearance, adding labor and costly delays to trade between the regions. Some suppliers are moving their operations from the UK to countries within the EU to avoid administrative costs and delays occasioned by new customs procedures.

The agricultural sector is also impacted by this trade agreement. The EU has adopted new sanitary regulations on UK-sourced animal products, which represents a major source of UK exports. Additionally, there have been sector-specific notices in place that affect food quality guidelines and the importation of produce. As of January 1, 2021, existing import licenses relating to food products between the parties have been revoked, and new clearances will need to be obtained to continue agricultural trade.

Because trade in services is now limited, some service-based industries have experienced the negative impacts of Brexit. UK professionals such as doctors, accountants, and lawyers, no longer have broad admission to every country within the EU. Instead, UK professionals will need to comply with the country-specific laws regarding licensing and certification. This makes it more challenging for UK individuals to provide their services to EU countries. Even so, the UK and EU have committed to continued negotiations to further harmonize trade in services. 

The trade agreement has also caused turmoil with COVID-19 vaccines. In January 2021, the EU invoked emergency measures under the deal to block shipment of Belgium-produced vaccines to the UK in retaliation for AstraZeneca allegedly shipping the vaccine preferentially to the UK, rather than supplying the EU. The announced measure was almost immediately reversed, however, due to concerns over its effect on Ireland and Northern Ireland. The UK’s vaccination rate is 12.5 doses per hundred persons; in comparison, in the EU, the rate is only 2.5 doses per hundred, which has magnified the already considerable tension between the treaty parties.