Analysis of Brexit Trade Deal

26 December, 2020
8 Min Read

Analysis of Brexit: Limits of sovereignty

GS Paper II International issues (UPSC Mains 2021)

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The tarifffree trade accord in goods that the U.K. and the EU signed on 24 Dec 2020, days before the postBrexit transition expires, should mitigate somewhat the consequences of Britain’s narrow decision, in 2016, to leave one of the largest trading blocs.
This averts a catastrophic ‘no deal’ scenario.
The country now faces a potential 4% loss of GDP over 15 years, compared to remaining in the EU. Leaving without any agreement would have led to a potential loss of 6% of GDP, estimates the fiscal watchdog.
UK was reliant on EU for about 75% of food product imports. Hence there is a significance of zero duty trade for consumers and the retail economy.
The tarifffree access to Europe’s single market has been realised in exchange for guarantees that Britain would not undercut EU competition rules and environmental regulations.
Among the more contentious issues in the talks, the arrangement allays apprehensions about the potential economic threat from the “SingaporeonThames” growth model the U.K. might pursue outside the EU.
There is now a fiveandahalfyear transition period that guarantees continued access for the affected EU states. The reduced terms for the latter are expected to help British fisheries.
A major challenge now would be to keep border checks and red tape to the minimum, besides ensuring that supply chains are not unduly disrupted. U.K. businesses have given a cautious welcome to the agreement, which has left the EU market in services out of its purview, requiring Britain’s preeminent financial services sector to negotiate ad hoc measures with European counterparts.