- On 2 March the first round to agree the EU’s trading relationship with the United Kingdom began in Brussels.
- Disagreements weigh on fair competition, fisheries and dispute-settlement mechanisms.
- The transition period ends on 31 December 2020: companies must prepare for changes in customs, rules and services.
On 2 March 2020 the first round of negotiations on the future relationship between the European Union and the United Kingdom began in Brussels, four weeks after the UK officially left the Union. The delegations, of around a hundred officials each, opened the talks with a plenary session led by Michel Barnier on the European side and David Frost on the British. The round is scheduled to run until 5 March.
The clock is against them. The United Kingdom keeps applying European rules during the transition period, which ends on 31 December 2020, and the British government had made clear that on 1 January 2021 it would regain its economic and political independence. What is agreed, or not agreed, will determine how Spanish and Catalan companies trade with that country.
What is being negotiated
The EU and the UK are seeking a free trade agreement without tariffs or quotas, but with conditions. The differences are concentrated on three fronts: fair competition, meaning the UK does not lower its labour, environmental or state-aid standards to compete with an advantage; access to fishing waters; and how disputes are resolved and the agreement supervised.
A tariff-free agreement is not the same as carrying on as before. Even without tariffs, leaving the single market means customs checks, declarations, rules of origin to prove and different regulations for products and services. All this adds time and cost, even with a favourable trade deal. A no-deal scenario would also mean tariffs under the general rules of the World Trade Organization.
What it means for Spain
The United Kingdom is both an important tourist source and a customer for Spain: close to 18 million Britons visited the country in 2019. It is also important for sectors such as cars, food, chemicals and financial and professional services. Companies that sell to that market or depend on British components have much to gain from clarity on the new rules.
Families also have pending questions: British residents in Spain and Spaniards in the United Kingdom, recognition of professional qualifications, the movement of personal data or pensions. The withdrawal agreement protects those who already lived in the other country before the end of the transition, but it does not settle everything that will come afterwards.
What to review
Companies with trading relationships with the United Kingdom should analyse their logistics chain: customs, transport, agents, delivery times and storage. It is worth reviewing contracts, especially clauses on price, currency, governing law and jurisdiction, and checking how a possible tariff would affect the margin on each product.
It is also useful to review data protection if personal information is transferred to the United Kingdom, and the licences, trademarks and registrations that could be affected. The prudent course is to prepare at least two scenarios, with and without a deal, and update them as the rounds of negotiation progress. Your adviser can help you identify the most sensitive points. It is also worth appointing someone responsible for following the negotiating process and informing management when there are relevant developments, so as not to depend on rumour.
With a year to go before the rules change, the best moment to prepare is before you know what they will be.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
