EU and UK embark on ‘closer’ relationship amid geopolitical uncertainty

London: In May, the EU and the UK together announced a package of agreements, representing a marked shift in their relationship amid wider geopolitical instability and uncertainty.

Manuel Santos Vitor, an officer of the IBA European Regional Forum, says the agreements – which cover multiple sectors – ‘reflect a closer relationship between the UK and the EU after Brexit for the first time.’ That the UK is making these steps and the EU is open to having these discussions shows that their relationship ‘is possibly going in the direction of more collaboration,’ says Michaela Britton, also an officer of the IBA European Regional Forum.

Santos Vitor, who’s a partner at Abreu Advogados in Lisbon, says the agreements are ‘a reply to a less global world’, which makes bilateral relationships more important. He says the change in US administration, as well as global uncertainty caused by the war in Ukraine and difficulties with Russia, has brought an urgency to other parties coming together to make agreements. The UK and the EU are one example of this trend.

Britton, who’s also a partner at Penningtons Manches Cooper in London, adds that the defence aspect of the agreements shows they’re ‘definitely a reaction to the geopolitical environment that we all live in.’ In this respect, the agreements establish an UK-EU Security and Defence Partnership. This will boost UK-EU cooperation on supporting Ukraine and tackling hybrid threats. It’ll also further collaboration in terms of mobilising military material and personnel, space security and ensuring the resilience of critical infrastructure.

The partnership also sets out an ambition to explore possibilities for mutually beneficial cooperation created by the EU’s €150bn Security Action for Europe (SAFE) instrument which, once adopted, could lead to a more resilient and competitive UK and EU industrial base.

In relation to food imports and exports, the agreements establish a UK-EU Sanitary and Phytosanitary Zone. Export and plant health certificates and Certificates of Inspection for organic products have been removed, while routine border checks on agri-food products will cease on exports from the UK to the EU and on certain imports in the opposite direction. Bans on exporting certain products from the UK – such as fresh sausages and burgers – to the EU have been lifted. It will also be easier to move goods between Great Britain and Northern Ireland. These changes are expected to save both time and money for those businesses affected. Yves Melin, Co-Chair of the IBA International Trade and Customs Law Committee, says the changes to food and drink controls are significant because the previous system was burdensome and had caused issues on both sides of the import/export relationship.

Elsewhere, the parties have agreed to work towards a youth mobility scheme that would give young people the opportunity to travel, work and study abroad. Any scheme would be time-limited and have a defined number of participants that’s acceptable to both sides. Notably, the exact parameters of any scheme remain subject to negotiation. Britton would like to see more clarity on the youth movement agreement. ‘If we could have a really solid agreement there,’ she says, ‘that would be beneficial.’

Britton says that, from a UK perspective, the talks are a good starting point, but don’t take the country to where it might ideally like to be. She says the defence agreement will bring the most economic benefit to the UK by giving it access to a fund that’s worth approximately €150bn.

Melin, who’s also a partner at Cassidy Levy Kent in Brussels, says the agreements are having an impact on ongoing trade remedy investigations. This suggests there may be further agreements to come, he says, and Melin expects the dialogue between the EU and the UK to continue. ‘We’ve entered a different post-Brexit era,’ he says.

According to Melin, US tariffs will probably cause trade diversion to the EU. This happens when goods intended for one market are diverted to another where conditions are more favourable. In response, the jurisdiction the goods are redirected to might close its market to those products because their low prices make domestic production unviable.

In response to the threat of trade diversion, in June the EU established a new surveillance tool aimed at protecting it from sudden surges in imports. The tool will build on customs data to identify import surges. The European Commission has invited EU manufacturers, industry associations and Member States to review the import trends available on the tool’s website and provide further market intelligence and economic data to help the bloc identify products at risk of trade diversion.

Melin says the pressure of potential EU action on trade diversion will ‘push the UK a bit closer’ to the bloc. He says the EU market is more important to the UK than the US market. Faced with unpredictable US trade policies, it makes sense for the UK to focus on what it can influence and to work with likeminded countries, he adds.

The current approach of the US administration will keep the UK and the EU talking more than they’ve done previously, says Melin. ‘It’s so fundamental the change in geopolitics,’ he says, ‘we’ve not seen this in our lifetime.’ He adds that many countries are very transactional, which makes agreements between likeminded parties even more important.