After almost two years of negotiations, the European Union and the United Kingdom have agreed on the terms of Brexit. If implemented, the deal would involve a lengthy transition to allow companies and households in the European Union and the United Kingdom to adapt to the new reality. However, the agreement is very controversial in the United Kingdom and the British government's position is fragile, which means a no-deal Brexit is still possible.
The European Union and the United Kingdom have reached an agreement on two important Brexit-related documents: The withdrawal agreement, which sets the terms of the United Kingdom's exit from the European Union, and a political declaration outlining the framework for a future relationship.
What's Included in the Withdrawal Agreement?
The withdrawal agreement covers the terms of the United Kingdom's exit from the European Union and includes special provisions to keep the Irish border open. The main points of the document are as follows:
- Brexit will be followed by a transitional period. After the United Kingdom leaves the European Union in March 2019, it will remain in the EU single market and customs union until December 2020, but it will not participate in the bloc's decision-making. During the transitional period, the United Kingdom will have to comply with all EU rules and decisions on domestic and foreign policy, and will also remain a part of the bloc's international treaties (such as free trade agreements). The document states that the European Union and the United Kingdom can negotiate an extension to the transitional period by July 2020.
- Citizens' residency rights will be protected. The roughly 3 million EU citizens who live in the United Kingdom and the roughly 1 million British citizens who live in the European Union will be allowed to remain in their country of residence.
- Issues connected to the withdrawal agreement will be decided by a joint committee. Any issues related to the withdrawal agreement, including any disputes over its interpretation, will be handled by a joint committee including EU and U.K. officials. If this joint committee fails to reach a solution to the dispute, it could call for an arbitration panel, which has the obligation to consult the European Court of Justice.
- The United Kingdom will remain in a "customs arrangement" with the European Union until a better solution is found. After the transitional period ends in 2020 — or at a later date if it's extended — the United Kingdom will remain in a customs arrangement with the European Union until a better solution is found to keep the Irish border open. As a result, there will be no need for tariffs, quotas or checks on rules of origin between the European Union and the United Kingdom. Food and other agricultural products will require checks, but this will be done "in the least intrusive way possible" (for example, at ports). During this time, the United Kingdom will apply the European Union's common external tariff and will not be allowed to enter free trade agreements with non-EU countries. At the same time, Northern Ireland will remain aligned with some rules of the EU single market to ensure that there will be no need for border controls with the Republic of Ireland. Fisheries will not be included in this customs arrangement.
- The agreement on the customs arrangement can be reviewed. The United Kingdom will not be permitted to unilaterally withdraw from the customs arrangement. Ending such an arrangement will require a joint decision by London and Brussels.
What About the Declaration Addressing the Future EU-U.K. Relationship?
In addition to the withdrawal agreement, the European Union and the United Kingdom also produced a much shorter document that vaguely describes the parameters of their future relationship. Essentially, the document is a declaration of intent, because the pair will negotiate the details in the coming months and years. The main points of this document are as follows:
- The European Union and the United Kingdom will negotiate a free trade agreement. The European Union and the United Kingdom promise to negotiate an agreement to eliminate barriers in the trade of goods. They also promise to negotiate "the liberalization" of trade in services.
- Trade in financial services will be handled through equivalence. After the end of the transitional period, financial services companies in the United Kingdom that wish to sell their products to the single market will have to do so through the European Union's equivalence framework. This system allows companies from countries that have similar regulations to the European Union to access the EU financial market. This framework has limitations — for example, it does not include commercial banking — and the bloc has the right to cancel foreign companies' access with 30 days' notice.
- The parties will cooperate on security and defense. The European Union and the United Kingdom promise to cooperate and consult with each other on issues connected to foreign policy, defense and security. They also pledge to exchange information and keep the United Kingdom involved in EU initiatives connected to these issues.
- The parties will work toward a quick agreement. The European Union and the United Kingdom promise to negotiate an agreement fast, so that their future relationship can enter force by the end of the transitional period in late 2020. To achieve this, the two parties will conduct "high-level conferences" at a minimum of every six months.
What Happens Next?
Now that there is a withdrawal agreement, the European Union will likely organize a summit on Nov. 25 to formally sign it. After that, the agreement will go before the British Parliament for a vote, probably in December. That, however, is the potential fly in the ointment: Most opposition legislators and a significant number of legislators from the governing Conservative Party are against the deal. Critics of the agreement argue that it forces the United Kingdom to continue following EU rules for an indefinite period, while London will not have the right to unilaterally leave the agreement. As a result, the House of Commons could reject the agreement.
Moreover, the instability in the United Kingdom could result in a vote of no confidence against Prime Minister Theresa May even before the vote in the Commons takes place. And if some of May's rivals within the Conservative Party succeed in ousting her, the prime minister could be replaced by another member of the party, or there could even be an early election. Ultimately, if the Commons votes against the deal, May makes way for a hard-line Conservative prime minister or lawmakers call a snap election, the chances of a no-deal Brexit will increase substantially.