The Brexit saga has been ongoing for over four years, and as the deadline for the transition period draws closer, negotiations between the UK and the EU have taken center stage. One of the key aspects of the Brexit deal is the potential for a free trade agreement (FTA) to be reached between the UK and the EU.
What is a Free Trade Agreement?
A free trade agreement is a pact between two or more countries that removes or reduces barriers to trade, such as tariffs and quotas. The objective of an FTA is to increase trade between the participating countries, promote economic growth and create jobs.
Why is a Free Trade Agreement important for Brexit?
The UK`s trade relationship with the EU is critical for its economy. According to the Office for National Statistics, the EU is the UK`s largest trading partner, with approximately 44% of total UK exports going to EU countries. The UK`s exit from the EU will disrupt this trade relationship, and the country will need to establish new trade relationships with the EU and other countries.
An FTA between the UK and the EU would ensure that goods and services continue to flow between the UK and the EU without the imposition of tariffs, thereby minimizing the economic disruption caused by Brexit. It would also ensure that the UK remains an attractive destination for foreign investors, who may be hesitant to invest in a country without trade agreements.
What are the sticking points in the negotiations?
The negotiations on a free trade agreement between the UK and the EU have been ongoing for several months, but progress has been slow. The main sticking points are the level playing field, fisheries, and governance.
Level playing field: The EU insists that the UK commits to a level playing field on issues such as state aid, environmental protection, and workers` rights to ensure fair competition. The UK government argues that it should have the freedom to set its own regulations.
Fisheries: The EU wants its fishing fleets to retain access to UK waters, while the UK wants to assert its control over its fishing waters.
Governance: The EU wants a dispute resolution mechanism that involves the European Court of Justice, while the UK wants an independent arbitration panel.
What are the implications of no Free Trade Agreement?
If a free trade agreement is not reached before the end of the transition period, the UK will be trading with the EU on World Trade Organization (WTO) terms. This means that tariffs would be imposed on goods and services traded between the UK and the EU, which would increase the cost of trade and could lead to price increases for consumers. There would also be additional administrative costs and delays for businesses, which could lead to a decrease in trade and economic growth.
In conclusion, a free trade agreement between the UK and the EU is vital for minimizing the economic disruption caused by Brexit. While negotiations have been slow, both sides have expressed their commitment to reaching a deal. If a deal is not reached, businesses and consumers on both sides will feel the impact.