As we flagged up in our post in December, there was a general expectation that the ‎amended EU Withdrawal Agreement negotiated by Prime Minister Boris Johnson would be ‎passed by the UK Parliament without amendment.  While several amendments were ‎attempted, none of them succeeded given the size of Johnson’s majority in the UK ‎Parliament.  The draft agreement received Royal Assent on 23 January and the European ‎Parliament passed the agreement on 29 January.‎

As a consequence, the UK officially exited the EU at 11 pm on 31 January 2020 and is now in ‎a transition period until 31 December 2020, at which point we expect that the transitional ‎arrangement will come to an end and either a new UK-EU free trade agreement will take ‎effect or the UK will commence trading with the EU on World Trade Organisation (WTO) ‎terms.  ‎

Both the UK and the EU have been making various public statements to set out their starting ‎positions for this next phase of negotiations.  The EU proposed on 3 February specific ‎negotiation directives to set out its position (see here for further ‎information).  For the UK, ministers have made various statements recently indicating that ‎the UK will seek to diverge from EU rules and standards and would like to agree to the broad ‎shape of an agreement around fishing rights and financial services by 1 July 2020.‎

While there is an existing revised political declaration that the UK and EU agreed to last year ‎‎(see here), ‎this declaration is not legally binding.  However, it does contain a framework that could ‎form the basis of a future free trade agreement.  In return for zero tariffs and quotas, the ‎UK made commitments on a level playing field to ensure open and fair competition, which ‎is a theme the EU have already revisited.  However, the UK’s approach to a level playing ‎field and regulatory alignment is directed at an outcome-based approach whereas the EU ‎prefers a specific rule-based regime.‎

At the same time, the UK is finalising trade deals with a number of other countries and ‎hopes to also conclude participation in the Trans-Pacific Partnership agreement, a large 11-‎member trade deal that includes Japan, which is now called the Comprehensive and ‎Progressive Agreement for Trans-Pacific Partnership (CPTPP).  In addition, the UK is hoping ‎to make swift progress with a U.S. free trade agreement.  If the UK can make progress with ‎one or both of these, the UK’s negotiation position with the EU will be significantly ‎strengthened.‎

Our current outlook is that some form of agreement will be reached with the EU prior to ‎the end of the current transition period on 31 December of this year.  That agreement may ‎very well be light and not deep or comprehensive, but it will be enough to keep things ‎moving with further detailed agreements to follow in 2021 and beyond.  ‎