Thank you for contacting me about progress in the EU negotiations.
The Government is seeking a new relationship with the EU which ensures the UK regains sovereign control of its laws, borders and waters with a Free Trade Agreement similar to the ones the EU has already concluded with friendly third countries in the past.
The UK has been consistently clear about the terms on which an agreement would be possible. These fundamentals have not changed. UK negotiators have made proposals providing for fair and open competition with high standards and this has been set out in a way that is in line with modern trade agreements between sovereign and autonomous equals.
The UK left the EU at the end of January and entered a transition period which will end on 31 December. This is set out in UK law. It means that the UK will leave the transition period with either a Canada-style free trade agreement or on the terms of 2019 deal which will see a relationship with the EU similar to Australia’s. This would be a good outcome for the UK. We would be in full control of our laws and we would have the freedom to make new trade deals with countries around the world.
Our position as one of the EU’s largest trading partners means that reaching a deal with the UK is important to the bloc. Tariff-free trade will benefit the significant number of EU businesses which engage in cross-Channel commerce. The EU sells more to the UK than we sell to them and our trade deficit increased from almost £12 billion in 1999 to £66 billion in 2018.
The UK is also important to individual countries. There is no other country in Europe with which Germany, for instance, has a larger trade deficit. In 2018 we imported £78.5 billion worth of goods and services from the country. This resulted in a German trade deficit of £22 billion with the UK.
The UK is also a leading provider of professional services in Europe. We are the world's leading exporter of financial services, we have the largest banking sector by assets in Europe and the largest insurance industry. The UK and the EU have committed legally to reaching an agreement in good faith by the end of the year and my ministerial colleagues are working their hardest to achieve that outcome.
The UK left the EU with a deal in January. UK negotiators are now seeking a Canada‑style free trade agreement with the EU that is based on the types of agreement that the EU has already agreed with friendly third countries in the past. The UK is not seeking a unique or special deal.
The UK will leave the single market and the customs union at the end of the year regardless of whether further agreement is reached. Businesses must prepare now for these changes. A significant investment in ports and border infrastructure has been announced and a nationwide advertising campaign on the steps we must all take at the end of the year is underway. Further information is available at www.gov.uk/transition.
Should the UK leave the transition period without further agreement, the Government has been clear that it would be ready to talk to our EU partners. We would continue to trade with each other but we should seek to find solutions to issues such as flights, lorry freight and scientific research.
The deadline for extending the transition period has now passed but a free trade agreement is still possible. I know UK negotiators are working hard to achieve it.
As you may be aware, the Government recently published a new UK most favoured nation (MFN) schedule, known as the UK Global Tariff (UKGT). The UKGT will take effect from 1st January 2021 following the end of the transition period, and for the UK’s purposes will replace the EU’s Common External Tariff (CET).
If it is not possible to reach an agreement by the end of the transition period, then from 1st January 2021 the UK will apply the UKGT to EU imports, and the EU would apply its Common External Tariff to UK exports.
I understand that the Government has consulted with businesses and individuals across the UK on the development of the UKGT, which has been tailored to the needs of the UK economy. Indeed, the UKGT will be simpler and easier to use than the CET as it is calculated in pounds, brings in lower tariffs and rounds tariffs down. Overall, with the UKGT just under 50 per cent of products will be zero tariff, compared to 27 per cent under the CET.
The UKGT also backs UK industries, for example by keeping tariffs on agricultural products like lamb, beef and poultry, as well as maintaining a ten per cent tariff on cars and tariffs on the vast majority of ceramics imports. At the same time, the UKGT will remove tariffs on £30 billion worth of imports entering UK supply chains.
Thank you again for taking the time to contact me.
Craig Whittaker MP