Brexit Agreement on Services

The deal fails to address crucial issues for the UK`s services sector, which accounts for more than 80% of UK GDP. Professional service providers will not be able to switch automatically between EU countries and the UK, as the agreement does not require each jurisdiction to recognise the professional qualifications of each jurisdiction. Similarly, UK-based financial service providers will also immediately lose their “passport” rights, allowing them to do business across the EU without having to register individually in each country individually. Instead, the UK has introduced a global points-based immigration system to try to concentrate work-based immigration on more skilled people. An earlier Brexit withdrawal agreement allowed EU workers already present in the UK to apply for the right to continue working and staying in the UK, but this option expires in June 2021. In another blow to British youth, the ATT ended the EU`s ERASMUS student exchange programme, which likely significantly reduced student exchanges between the EU and the UK. The impact is likely to be felt more broadly in the UK economy, as business services, including areas such as law, accounting and engineering, are the largest form of UK services exports from the UK to the EU. Despite having been members of the Single Market, qualifications in areas such as legal services, architecture and engineering acquired in the UK by UK nationals and EU citizens have been recognised throughout the Single Market with very little additional regulatory oversight, sometimes automatically. Bottom line: For a large services-oriented economy like the UK, which has traditionally recorded large services surpluses with the rest of Europe, the ATT will therefore severely limit an important sector of the economy and potentially lead to labour shortages in some low-skilled UK sectors such as agriculture. The EU has insisted on the adoption of common standards for goods and services to ensure a level and open playing field and to prevent companies in one market from undercutting companies in the other market. EU standards include rules on workers` rights, social and environmental protection, taxes and subsidies to state-owned enterprises.

The parties are not required to adopt identical rules and the UK is not required to comply with EU law. However, UK standards must protect fair competition. One of the most important is the mutual recognition of professional qualifications. The ATT also lacks agreements on the mutual recognition of rules for protection against disease or contamination in humans, animals or plants – the so-called sanitary and phytosanitary (SPS) regulations – which will make the cross-border sale of fresh produce considerably more difficult and costly. The UK imports much of its food from the EU. Fresh produce is much more expensive to import from more distant suppliers. As a result, the ATT is likely to reduce the supply of fresh food and increase food prices in the UK. The EU would suffer, of course, in the same way if it got fresh food from the UK.

TCA: In the name of achieving a level playing field between businesses in Europe and the UK, the EU has insisted on a reciprocal and strict ban on UK national regulations on the environment, labour markets, government subsidies and other issues that would give UK companies a competitive edge. The rule allows the EU to determine, through independent arbitration, that such a benefit has been created. If such an advantage is identified, the EU can impose retaliatory tariffs and other restrictions on UK exports of its choice. Such strict “level playing field” provisions are generally not present in free trade agreements between countries around the world. But clearly, the EU felt that due to the size and proximity of the UK, duty-free access to the EUROPEAN market could not be envisaged without it. In principle, the ACC`s equal opportunities provisions give the UK the sovereignty to deviate from existing EU rules, while giving the EU the equally sovereign right to address such regulatory differences if they are substantial in nature. There is uncertainty about how difficult it is to demonstrate market distortions, so it is not clear how often the EU and the UK would come into conflict in this area. It is also unclear what the UK could do to exercise its now unlimited regulatory rights. The parties have not agreed to recognize each other`s product standards. This could mean that some products will have to obtain two certifications, i.e. under both the export and import regimes. These requirements will result in additional costs and delays at borders, which will pose a challenge for agricultural and animal products, as well as industries with just-in-time supply chains.

The EU will have to assess whether financial services companies qualified and registered to operate under UK rules operate under standards and regulations equivalent to those of the EU. If the EU finds that the standards are not equivalent, financial services organisations will have to create, qualify and register separate companies on the continent. The process in this regard has not yet been determined and has been left to further discussion. The European Commission has indicated that at the time of signing the agreement, it does not intend to adopt any further such decisions. Prime Minister Boris Johnson acknowledged the failures of the deal when it comes to financial services. The agreement also requires that there be only adequate state aid or state subsidies to companies, a rule that needs to be clarified. .