The United Kingdom and the European Union recently concluded the terms of their new trade deal. This deal emphasizes improving the movement of goods, particularly in the ag supply chain. This agreement will provide significant assistance to small and medium-sized enterprises (SMEs). It has the potential to significantly reduce the technical non-tariff barriers they encounter in trading with their largest international partner. Many experts have stated that the deal will only increase UK goods and services trade by 0.3%. They think its aggregate economic effect will be small.
The agreement especially tackles the bloated bureaucracy that has plagued British exporters since Brexit. Jill Rutter, a noted observer of the developments, called the agreement “the biggest win ever for small and medium enterprises.” She highlighted that British exporters are under unprecedented pressure. Unfortunately, the combined bureaucracy of both sides makes it extremely difficult for them to pass perishable foodstuffs, plants, and animals across the frontier into the EU. This just serves to further illustrate the uphill battle smaller businesses continue to face in terms of adjusting to new, complicated post-Brexit regulations.
Though the deal is inspiring, industry executives are still worried by some of the details. Representatives from the National Farmers Union, including Tom Bradshaw, raised concerns regarding specifics contained in the agreement. He acknowledged the government’s ambition to facilitate trade but stressed that “the detail is king” and that scrutiny would continue as negotiations progress.
Economic Impact of the Trade Agreement
Research from the Centre for European Reform (CER) has led its authors to conclude that the new trade deal could massively boost UK trade. For goods and services, they project a 0.3% increase. However, even with this massive increase, the GDP impact will be minimal. Yet, the unusual terms of the deal call into question its long-term economic importance. The Office for Budget Responsibility (OBR) thinks that Brexit would reduce UK exports and imports by around 15% in the long term. Even as it raises questions about whether the agreement will yield any net increases.
Economist Jonathan Portes called for tempered expectations in terms of the deal’s direct economic impacts. He maintained these effects are nothing to shake a stick at—they’re all positive. Indeed, as Mr. Sullivan noted at that time, “The direct economic impacts of today’s agreements will be relatively small, but nonetheless positive.” Portes emphasized that up until now, the conversation has overwhelmingly centered around food and fishing concerns. He argues even bigger dividends can come from working together on energy and defense procurement.
Guntram Wolff added that fisheries and wider economic cooperation are key. Connecting the defense industrial base across the Channel is an even more urgent challenge. He contended that the political importance of fisheries and other methods of cooperation are economically trivial. He recommended that future negotiations pursue more extensive integration in industries where the economic benefits are larger.
Agricultural Standards and Regulatory Alignment
A core part of the trade deal focuses on equalizing UK agri-food standards with European regulations. New, enhanced deal covenant to begin reducing trade barriers. It will allow British animal and plant products to be subject to fewer checks when exported into EU member states. This alignment comes with conditions. From the outset, the UK has had to agree to keep aligning with EU rules, including on sanitary and phytosanitary (SPS) regulations.
A proposed SPS agreement could permit the UK to export raw sausages and burgers to the EU for the first time since Brexit. Charles Grant remarked on the importance of adhering to these evolving standards: “An SPS deal is important in another way. The British will need to accept that they’ll commit to following EU rules as they develop on SPS.” He echoed past testimony at our hearing that this requirement could establish a model for compliance in other sectors, like energy and pharmaceuticals.
Rutter agreed but added an important caveat. The new agreement provides a basis for cooperation, but doesn’t bring us back to customs union territory. Tanya added that only rejoining the single market and customs union would really fix things. She stressed that you’re far from out of the woods just yet. The cloak and dagger nature of trade deals will require that each side be prepared to enter into long and serious negotiations in the future.
Future Negotiations and Challenges Ahead
As both sides adjust to the complexities of this new deal, it remains to be seen how it will all play out. The deal document itself describes the agreement as the basis for a “renewed agenda” during upcoming negotiations. Rutter described it as “quite a large agenda for a confusing jumble of future negotiations.” This serves as a stark reminder of how much work still lies ahead.
The devil is always in the details, and industry stakeholders are understandably concerned about what challenges may surface as those details are worked out. Bradshaw reminded us that this is all to say that positive steps have been taken. Continuing negotiations between the UK government and the EU will decide just how good this deal gets.
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