Exactly what will change on 1 January 2021 is currently still unsettled. Although much has been agreed between the negotiators (with some divergence on both sides from the agreed principles set out in the original “political declaration” ), the message from both sides is “nothing is agreed until everything is agreed”. This “all or nothing” approach could still see us ending the arrangements under the Transition Period with no negotiated trade deal to replace them. As the Government did not request a formal extension, the end of the Transition Period will be on 31 December. Both sides had originally envisaged negotiations on the future relationship would be concluded by the European Council meeting of 15 October, which would have allowed ratification of an agreement to take place before the end of the Transition Period. However, by the time of that meeting there were still substantial areas to be agreed on, as outlined below.
Governance: One of the main areas of difference is over “governance”. In brief, the EU wants to have an overarching institutional framework (an association agreement), under which would sit “chapters” and linked agreements relating to the separate areas of cooperation (economic partnership, including the free-trade agreement and employment, as well as a security partnership). But this approach is not popular with the UK government, because having one agreement would mean there was only one body in charge of overseeing compliance with the association agreement, a common dispute resolution mechanism (referred to as “governance”) and crucially, the EU want this to involve the UK continuing to be bound by rulings from the European Court of Human Rights and the European Court of Justice (CJEU), so the UK is instead arguing for a series of separate agreements each with their own governance provisions.
The level-playing field: This concerns competition law and state-aid (government subsidies) in particular. The EU fears that the UK could reduce levels of regulation and protection in areas such as competition and state aid as well as tax, employment and environmental standards, and so gain a competitive advantage over EU members. The UK however sees the ability to diverge from the standards set by the EU as a key advantage to leaving the EU. The UK has strongly rejected any obligations for the UK’s laws to be aligned with the EU’s or for the EU institutions (like the European Court of Justice) to be make rules binding the UK.
Fisheries: The UK’s position is that fisheries negotiations should be separate from trade and market access issues and the wider economic partnership, but the EU is keen to deal with the issues together. EU member states are concerned about the loss of access to UK waters and want to maintain the status quo for activities, access and quotas. The UK government wants annual negotiations.