The agreement provides for a transitional period that will last until at least 31 December 2020. During this period, the UK will remain in the EU customs union and internal market, and most of the EU legislation will continue to apply to the UK, but the UK will lose the opportunity to participate in EU legislation and the benefits of free trade agreements with third countries. In order for the UK to continue to benefit from these free trade agreements during the transition period, it will need the agreement of the EU and all third countries. In practice, trade in goods and services between the EU and the UK will therefore remain broadly unchanged during the transitional period. The political declaration provides for the granting of adequacy status to the United Kingdom before the end of the transition period, until December 2020, and confirms that the European Commission will begin to assess the adequacy as soon as possible after the UK`s withdrawal. On the basis of the revised political declaration, the EU and the United Kingdom appear to be aiming for a comprehensive but “classic” free trade agreement for goods, services and investment. The political statement is thin in detail, but trade in goods will be based on a free trade agreement that will at least guarantee that there will be no tariffs or quotas, as well as some degree of regulatory alignment with the EU. However, as a result of the free trade agreement, customs controls are required, requiring each party to prove that the goods originate from their respective customs territory, in order to obtain duty-free treatment. This means that the UK and the EU-27 must now agree on detailed rules of origin. This is probably a complex and tedious process.
At least companies need to think about the rules of origin they want for different products and start putting pressure on them as soon as the UK and eu start negotiating the new free trade agreement. It is encouraging to note that the scope of the future trade regime appears to encompass services, including financial services and investment (although the agreement is in turn very detailed) and that it provides assurance that the agreement on future relations will offer a liberalisation of trade in services well beyond the obligations of the United Kingdom and the WTO. Those covered by Part 2 of the Withdrawal Agreement have, on the whole, the same rights to work, education and access to public services and services as they did before the UK withdrew from the EU. If, at the end of the transition period, the EU and the UK fail to reach an agreement on their future relations guaranteeing the absence of a border between Ireland and Northern Ireland, the “backstop of Northern Ireland” will come into force. In this case, Northern Ireland will be part of the UK customs territory, but it will be aligned with a limited set of EU rules, particularly with regard to goods. Trade in goods is affected. There will be regulatory controls on goods taking place at the UK`s entry into Northern Ireland and not through the land border between Northern Ireland and the Republic of Ireland. In addition, the United Kingdom will apply tariffs to the United Kingdom on products from third countries as long as goods imported with Deminland are threatened with entering the EU internal market.