After Years of Debate, UK and EU Reach Final Deal on Brexit

At long last, the UK and the EU have reached a free trade deal for the post-Brexit era, bringing four years of negotiation over the terms of Britain's exit near to a close. The deal still leaves out major details, like the status of the UK's financial services sector - which represents seven percent of Britain's economy - but it brings an end to wrangling over many of the thorniest issues, like the fishing rights of European vessels in British waters. 

"This was a long and winding road but we have got a good deal to show for it," said European Commission President Ursula von der Leyen at a press conference Thursday. "To all Europeans I say: it is time to leave Brexit behind. Our future is made in Europe."

For British exporters and importers, the deal means that they will still be able to trade with European customers and suppliers after January 1 without incurring tariffs. However, they will now have to complete import and export declaration paperwork, which is expected to cost UK companies billions of dollars for compliance. Their shipments will be subject to customs measures, which were not required for trade when the UK was part of the EU single market. 

“The prospect of continued tariff free trade with the EU and other market access arrangements is certainly something most in the freight and logistics industries will welcome. It looks as if our agricultural and automotive trade with the EU can continue without being subject to the high tariffs that could have been introduced. It also means that the fish we land will be able to exported its biggest market," said British Ports Association CEO Richard Ballantyne. "However despite this deal the UK is definitely leaving the EU’s Customs Union and Single Market which means major changes for cross border trade. Goods being transported between Great Britain and the EU, including Northern Ireland, will be subject to a number of new controls and requirements and there is no escaping the increase in costs that this will create for UK traders, businesses and potentially consumers."

The fisheries element of the deal falls short of the demands of UK fishermen, who wanted to see French vessels excluded beginning January 1. Under the agreement, EU-based fishing vessels will still be able to ply Britain's territorial seas for five years, while the UK's quota shares will rise to 25 percent over the same period. If Britain revokes EU fishing access to its waters after this five-year adjustment period ends, the EU retains the right to deny British fishermen access to its own waters and to apply tariffs to UK fishery products. 

Economists cautioned that the deal is likely to have a negative net effect on the UK economy. In addition, with a new administration about to take power in the United States, the prospect of offsetting it with a new UK-U.S. free trade deal (one of the major Brexit selling points) now appears remote.

"The bad news for the UK, in our view, is that the EU appears to have secured a deal which allows it to retain nearly all of the advantages it derives from its trading relationship with the UK, while giving it the ability to use regulatory structures to cherry pick among the sectors where the UK had previously enjoyed advantages in the trading relationship," wrote JP Morgan analyst Malcolm Barr in a research note Thursday.