FTA and Legal Implications for UK

Introduction

Under the selected topic, it is analyzed and stated in this report that, the key features of FREE TRADE AGREEMENT (FTA) as the selected Preferential Trade Area (PTA) in EU and access suitability and legal implications for UK along with a comparative analysis for Ukraine, Switzerland and Canada. As we all are aware the United Kingdom ceased to be is not a member state of the European Union on the 31st of January, 2020 when its withdrawal from the EU Treaty came into effect. There are pros and cons of this situation which will be discussing in this report later on. This will cover the background to the report, which is essential for the UK jurisdiction, because it is not a party to the PTA since very recently and this report will provide a comprehensive analysis about the legal changes thereon and the pros and cons of it. Further, this report will provide information about the background for the topic as well as the key features of the FTA and assess suitability and legal implications for UK. Therefore, this report is limited to the jurisdiction of UK and how it affects to the legal consequences of the current situation and it is compared with the Ukraine, Switzerland and Canada and its relation with FTA. Finally, this report will provide you a comprehensive conclusion from the whole report and recommendations for the actions that is founded in this report.

In consideration of the numerous consequences it remains to be seen how deep and shallow this FTA will approach, therefore, a comparative analysis is done based on the counties such as Ukraine, Switzerland and Canada.

BACKGROUND TO THE REPORT

Preferential trade agreements (PTAs or Preferential trade areas) refer to various arrangements in which certain goods from member states are given particular levels of preferential access though the reduction of tariff and non-tariff trade barriers which, however, will still apply to non-members of the PTA. PTAs, especially free trade agreements (FTAs), have gained in popularity and grown in numbers in the recent years.

This report is focused on the main background events that took place for the withdrawal of UK from EU. Accordingly,

• “The UK invoked Article 50 on 29th March 2017; therefore it was scheduled to leave the EU on 30th March 2019.

• A Withdrawal Treaty (WT1), incorporating a Withdrawal Agreement (WA- ‘with annexed – legally binding – Protocols’) and PD were eventually negotiated and concluded in November 2018, but failed to come into force after being rejected three times by the UK Parliament.

• Therefore, the UK sought, and was granted, further extensions, first until 30th June 2019 and then again until 31st October 2019.

• After the resignation of Theresa May and the subsequent appointment of Boris Johnson as UK Prime Minister, a revised Withdrawal Treaty (WT2) was concluded on 17th October 2019. The WT2 incorporates the original WA (not amended) with an amended Protocol on the status of Northern Ireland (PNI) and amended PD.

• The UK sought (and was granted) a further extension until the 31st January 2020 to allow for proper Parliamentary scrutiny of WT2 and the impending GE. The UK left the European Union at 11pm (UK time) on 31-01-2020.”

Accordingly, there are pros and cons of being EU member state where UK now has faced for both advantages and disadvantages as well

Advantages:

The European Union has been in existence since 1957, and has benefited the citizens of all its member states through its efforts to foster and promote by peace and development. The EU has always sought the protection of the fundamental political, social and economic rights of the citizenry. Peace & Security, Single Market, shoppers feels safe because they have money-back guarantees should they return products, and travellers are assured of refunds for their train or plane tickets should their journey be delayed or cancelled. The EU looks out for the minority and vulnerable groups, and defends them against any form of expression targeted at them. The EU promotes and stresses on the equal treatment for all, despite their nationality, social background, race, culture, education, sexuality or language group. Compared to if all the 27 European nations acted individually and separately, their bundling together into EU gives them more voice and power in the world.

Disadvantages:

A country should bear high cost membership fees and issues will arise with the single market common policies since it is made in favor of small countries where lager countries will face many disadvantageous policies. Moreover issues will arise with the single currency and overcrowding with the single currency.

The difference between Article 50 (The European Union Withdrawal Agreement) and Article 218 on future relationships with EU non-member states

Article 50 was adopted majorly to direct how a country could depart from the EU, while Article 218 outlines how the EU relates and makes agreements with countries or international organizations that are not party to the EU. In this case, therefore, Article 50 will determine the exit of the UK as a non-member state of EU, while Article 218 will help it negotiate terms and form the basis of how it will relate with the remaining EU member states in future.

Significance of Political Declaration Concerning Future Relations

EU and UK have agreed to carry out their future relations under the Article 50(2) of The European Union which provides, “for the negotiation of an agreement setting out the arrangements for the withdrawal of a departing Member State, taking account of the framework for its future relationship with the Union.” Political Declaration seeks to establish how future relations and engagements, including Free Trade Agreement (FTA), law enforcement and criminal justice, foreign policy, security and defense, among other cooperation areas, between the UK and the EU will be conducted. The declaration sets out the key features and values of these future engagements and cooperation- ambitious, broad, deep and flexible, comprehensive and balanced Therefore, this report will is based on the FTA in EU and the suitability and access to it by UK along with a comparative study to Ukraine, Switzerland and Canada.

Implications of Trading with EU27 on non-preferential terms under WTO law

The “Future Relations Treaty (FRT) will be negotiated after the UK leaves the EU” and it will concentrate on how the UK and the EU trade and cooperate with each other in future. It is difficult to predict what the content of this Treaty will be, and could potentially bring about several outcomes;

“A soft form of Brexit coming closest to creating a frictionless trading area between the UK and the EU27. This could be based on the current arrangements between the EU and Norway, or something even deeper a Norway ‘Plus’ relationship or;

A looser relationship between the UK and the EU27 creating a free trade agreement (concluded between the Ukraine and the EU), but which would result in new barriers to trade between the UK and the EU27.

It is possible that a FRT will not be successfully concluded. In this case the UK and EU27 will have to trade on WTO terms.”

EXAMINATION OF THE EU AND UK FREE TRADE AGREEMENT AS COMPARED TO AND ANALYZED IN THE SCOPE OF UKRAINE, SWITZERLAND AND CANADA.

Still no one actually knows and predicted how and what will be the agreement looks like or how shallow and deep it will be but what this report publish is that to examine the FTA’s the EU has concluded with Ukraine as an example. A Free Trade Agreement is a multinational agreement between two or more nations in which they agree to reduce or remove any tariff and non-tariff barriers to imports and exports in order to promote trade among the member states.

Comparison with Ukraine

The Deep & Comprehensive Trade Agreement (DCTA)

The DCTA is seen as the agreement that will push Ukraine into finally becoming a full member of the EU. This agreement is the main and most important step taken by Ukraine to fall into the EU membership. “The Deep and Comprehensive Free Trade Area (DCFTA) is part of the Association Agreement (AA) between the EU and the Republic of Ukraine, one of EU's the most ambitious bilateral agreements yet. The DCFTA will offer Ukraine a framework for modernizing its trade relations and for economic development by the opening of markets via the progressive removal of customs tariffs and quotas, and by an extensive harmonization of laws, norms and regulations in various trade-related sectors, creating the conditions for aligning key sectors of the Ukrainian economy to EU standards.” Ukraine took a long time to negotiate. In numerical it took 8 years for the negotiation and was in force since 2007. “DCTA covers goods and services in related to trading but, for services, only for businesses established within EU. Further, it excludes FMP but co-operation in EU visas, immigration and asylum policies. Also, there was an agreement to reduce and eventually eliminate tariffs and non-tariff barriers to trade and Industrial products immediate removal of tariffs for most of the products and Agricultural products such as cereals, pork, and beef and poultry immediate removal was done. Moreover, access to EU Market conditional on EU-standards being met including workers’ rights and environmental rules and Ukraine even planned extensive harmonization of rules in accordance with EU regulatory standards.”

Needed in any event if Ukraine to meet the conditions for EU Membership under Art. 49 TEU?

The institutional framework of Ukraine to meet EU membership could be described as below.

Power to be consulted was vested with the Parliamentary Association Committee.

Power to reach binding decisions with EU was vested with EU/Ukraine Association Council.

Power to be consulted was with the members of “EU Economic & Social Committee and representatives from Ukrainian civil society.”

The Dispute Settlement system in order to meet the conditions for EU membership could be stated as below.

“There is a duty towards the persons who are bound to the domestic administrative and judicial proceedings with a legally recognised interest under DCFTA. This means, that the persons who are legally interested and bonded with DCTA has an obligation towards the domestic administrative and judicial proceedings of Ukraine.”

“If a dispute cannot be resolved at national level then, EU and Ukraine dispute settlement only via mediation and / or they can establish an arbitration panel (Mediation and Trade Dispute Panel) which must defer to the EU Court of Justice on questions of interpretation of EU law or WTO dispute settlement can be used as the dispute settlement systems within the two states.”

Scope related to Switzerland.

A highly complex series of different EU / Swiss Agreements has created a very deep relationship compared to other FTA’s. The complexity of this relationship is unlikely to be countenanced by the EU27 for the EU / UK FRT. “Switzerland is an EFTA Member but is not part of the EEA.Switzerland has signed around 150 separate Bilateral Treaties with the EU governing different sectors of EU activity.” This is a system which is very complex and time consuming and too unwieldy and complex.

Dispute Settlement between EU and Switzerland.

The relevant EU laws must be implemented into Swiss laws, the relevant laws should be harmonized and amended and enforce before Swiss courts.

Joint Committee monitors application of the Treaties and deals with dispute settlement but often end in stalemate. Ultimately, Swiss failure to implement or comply with the EU laws can lead to the suspension or cancellation of some agreements.

As part of renegotiated package deal EU is seeking better application and enforcement of its rules in Switzerland via and Switzerland Joint Committee and if no resolution an Arbitration Panel that would be obliged to use Article 267 TFEU to resolve questions of interpretation and validity of EU rules. Therefore, the EU Court would oversee Switzerland’s application of EU law.

Switzerland has now resolved this issue to the satisfaction of EU and now Switzerland can operate a local preference scheme. “Agreements are limited for services only and services can be provided in EU / EEA for a maximum of 90 days per annum.” But the UK is not likely to accept this. “Switzerland does not participate in CCP and therefore Switzerland has its own external trade policy.” Also, since Switzerland is not a party to the “EU Customs Union”, it imposes border controls and restrictions on for the goods coming into EU. “The Goods which are deemed to be mainly or basically from outside EFTA / EU, will be subjected to the EU Common External Tariff.” Therefore it could be concluded that Switzerland may not likely hand back control of their national ‘sovereignty’ to EU in relation to their trade relationship any time soon.

Scope Related to Canada.

The UK leaves the EU but could continue to trade with the Free Trade Agreement (FTA) EU27 like Canada does.

Comprehensive Economic and Trade Agreement: EU & Canada (CETA)

This agreement came into force 2017 and it is not fully in force yet. But it took a long term nearly 7 years to negotiate with EU. The Comprehensive Economic and Trade Agreement is the “most comprehensive free trade deal the EU has concluded with a non-neighboring country.”

The institutional framework of Canada to meet EU membership could be described as below.

Agreement of Council (UV) and EP.

Agreement by all national parliaments.

Pending outcome of an “Opinion from the EU Court about the compatibility of the investments dispute settlement method with EU” is provincially imposed.

“Comprehensive free trade agreement (CFTA)” but “Canada does not gain the same preferential access to the EU SM as the EU neighbors. Nevertheless, a tariff free access and eliminating on reducing quotas for most goods was gained by Canada. And phased reduction for some products like cars and ships took place in favor of Canada. Most agricultural produce is covered by the deal (except meat and eggs) though quota system.

FMS included but limited in scope the following:

“Canadian firms will need to be established in EU and accept EU rules to operate (excludes audio-visual and aviation)

Framework for future mutual recognition of professional qualifications

Canada does not pay fees to EU for its preferential access.

Some concern in Canada that the EU is the rule maker and Canada is the rule-taker”. Means, Canada always agrees and follow upon the rules that EU establish.

Conformity Certificates:

“Until standards are harmonized, Canadian products will have to be approved by EU before they can be sold in the SM. EU and Canadian certification bodies issue certificates to certify that products meet the EU standards and vice-versa. These conformity certificates will reduce customs checks. Even without a certificate, goods could be excluded.”

All goods that had EU market access should be treated in equal measure.

No Common Customs Area, therefore products from Canada are subject to rules of origin as established by EU.

“In addition to Conformity Certificates, Canadian products must be supported by Certificates of Origin to establish they are manufactured in Canada. Goods deemed to be primarily from outside Canada will be subjected to the EU Common External Tariff.”

Dispute Resolution:

“If rights given to a Canadian business under CETA are breached, there is an obligation that domestic administrative and judicial proceedings are available to persons with a legally recognized interest under CETA.

If a dispute cannot be resolved at national level, EU and Canada dispute settlement method could be only used.

They can establish an arbitration panel.

WTO dispute settlement can be used.”

For investment / State disputes:

Investment Court System can award compensation for breach of investment protection rules by the contracting parties. Compensation for losses only and no punitive damages

CONCLUSION AND RECOMMENDATIONS

Conclusion

As the conclusion of this report, we could state that after UK being independent and when the Withdrawal Treaty came into force, EU removed their membership and UK became a non-member state to the EU. However, UK does wishes to carryout future trade policies with EU where according to the Article 50(2) of TEU, UK will have to negotiate with EU for a harmonization of laws in order to gain future trade policies just as Ukraine, Switzerland and Canada harmonized the laws in order to carryout trade relationships and future relationships with EU. This report also looks into the advantages and disadvantages that come with membership to the EU and also it discusses the pros and cons of harmonization of laws for future trade relationships. Moreover, this report provides a comparative analysis to the EU member and non-member state to identify the gravity that UK have with regard to the future trade policies and harmonization of laws which will balance the legal aspects of UK and EU. Further and finally this reports provides dispute resolution methods and systems where UK will have to adopt, this will be discussed further below with the recommendations in this report.

Recommendations

Outline of the report:

The proposed PTA of this report is Free Trade Agreement (FTA) where the report discusses the relevance of the FTA for EU and UK relationships.

Since UK ceased to be an EU member state effective January 2020, it cannot isolate itself and remain purely independent in the European Continent. And if it is then it will be disadvantageous to the UK as a country and for its citizens as well.

Therefore, UK should participate in future trade policies and harmonize their laws by negotiating.

Further, this report will compare future trade relations in respect to Free Trade Agreements in the scope of Ukraine, Switzerland and Canada.

Recommendations for UK and EU laws harmonization and negotiation based on the future trade policies of the countries Ukraine, Switzerland and Canada.

Frictionless trading area between the UK and EU27 could be based on the current arrangements between the EU and Norway or Norway ‘Plus’ relationship.

UK and EU27 will be forced to trade on the terms outlined and specified by the WTO.

Dispute settlement methods and systems should be prioritized and follow national laws.

Disputes that cannot be resolved at the local level should be escalated to the international arbitration panel.

If it is complex to harmonize the laws, use several bilateral treaties to reduce the complexity of the future trading relations.

Therefore, along with these recommendations, this report concludes the topic covered, “a comparative analysis of the free trade agreement (FTA) in European Union (EU) and access suitability and legal implications for united kingdom (UK) as compared to Ukraine Switzerland and Canada.”

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