Major Issues In Brexit Negotiations In Transition Period And Their Impact

The future UK-EU trade relations has been the main topic of negotiations during the transition period.This paper discusses the major areas where the two sides diverged in their negotiations-regulatory alignment,fisheries,and financial services.This article analyzes reasons behind these divergences and accounts for the interests and stances of the two sides.Before the end of the transition period,the "Trade and Cooperation Agreement" has been reached by the two sides and consensus on their future relationship has been formed.This paper discusses how the two sides weighed their gains and losses and what concessions they made to reach consensus on the issues mentioned.This paper explores to what extent the agreement satisfies both sides and the impact on their future development.Although the EU and the UK expressed their desire to achieve zero tariffs and zero quotas free trade,the EU believes that the prerequisite for achieving this goal is that the UK would seek alignment with EU’s regulations.But it is against UK’s pursuit of regulatory sovereignty.With TCA,the UK’s access to the single market could be restricted if it goes too far from EU standards.The same applies reversely.An arbitration panel has been established to ensure that divergence decisions must be independently arbitrated.Both the two can state that they have got what they wanted from the deal.Compared with other trade agreements signed by the EU,it contains stricter conditions of fair competition.The UK can choose to diverge from EU rules while there would be no role of the European Court of Justice in imposing the deal.Even though the UK has obtained the right to break away from EU rules,it would have to calculate whether it would be worthwhile.The EU would remain one of the UK’s major trade partners.Greater regulatory divergence might inevitably mean more distant partnership.On the other hand,the costs of EU regulation may have been exaggerated by Eurosceptics.Far beyond the EU even globally that the European product standards have been recognized.However,the UK could set the standard for liberal,nimble regulatory regimes,rather than taking whatever rules Brussels make.The fishing industry only accounts for a tiny part of the economy of the two sides;however,the political leverage of this sector could never be overrated.Once the transition period ends,territorial sovereignty of the UK would be restored,which would be a blow to the fisheries of EU countries that rely on fishing rights in British waters.Therefore,the EU claims its member state’s access to fishing in British waters to be the prerequisite for a trade agreement between the two sides.The UK believes such arrangements violate its territorial sovereignty and negotiations on fishing should be separated from those on trade.In addition,the EU hopes to reach a permanent agreement on fishing,while the UK prefers an annual agreement so that future adjustments according to specific circumstances would be possible.It seems that Britain’s negotiating position is stronger as it has more coastal water than any other EU country does.But fishing quotas cannot be levied as absolutely a powerful bargaining chip as it seems because just like businesses in many other industries of the UK,trade in its fishing industry can hardly deny access to the EU’s single market.Brussels indeed insists trade negotiations and fisheries talks are linked.Although TCA promises zero tariffs and quotas,that is subject to border checks,which would add cost and bureaucracy;moreover,border delays pose special problems for fresh produce.Financial services industry in the UK is closely connected with the EU market.The EU claimed that it has the absolute right to decide what kind of "equivalence" it would grant the British financial services businesses whereas the UK disagreed.According to TCA,the UK has lost the "passporting right" to conduct business within the EU.To access the common market,British firms must either meet with the regulatory standards for market access required at the level of individual member states or depend on equivalence decisions.The motives of Brussels are complex.The EU is playing tough to discourage others from leaving the union.It’s determined to build its own clearing ability to reduce reliance on the UK.However,the EU is divided on what kind of financial sovereignty it hopes to obtain.However,the EU lacks coordination in taking on London.EU27’s global financial performance has been declining.Despite Brexit,as a financial center,London still has many advantages over those in the EU.The UK could rewrite EU’s one-size-fits-all book of rules so that the City would be more open to innovation.One of the challenges facing the UK is that the global importance of its domestic and neighboring markets in Europe is shrinking proportionally.Even though London is far ahead of other financial centers in Europe,it still faces fierce competition from other places.The big risk facing London would not be from the EU,but in the near future,Asia would not need it.