Advantages of an FTA

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There are advantages of an FTA over ‘no deal’. Further, although tariff barriers result from the Trade and Cooperation Agreement (TCA), it has advantages over a basic FTA (see Table 15.4).

Aside from the economic damage under ’no deal’, basic FTA or TCA, there are other considerations. In August 2020, the Centre for European Research looked at the main advantages of a basic FTA over ‘no deal’.

The table below summarises the paper’s key points (the view at August 2020), updated to include comments on the Trade and Cooperation Agreement. These include:

all three options meant exiting the Single Market and the Customs Union. However both the TCA and an FTA would reduce the impact of tariffs that would arise under ‘no deal’;
cross-border services trade is also severely impacted under all three options, but less so under the TCA;
implementation of the Northern Ireland Protocol fails under an acrimonious ‘no deal’ but not under the basic FTA or TCA;
the TCA establishes governance structures to facilitate issue resolution and future developments.

	Table 15.4: Advantages of TCA and a basic FTA over ‘no deal’
	Implication	No deal	Basic FTA	Advantage in EU-UK Trade and Cooperation Agreement?
1	Exit Single Market and Customs Union	Yes	Yes	No. UK-EU trade is more difficult due to new regulatory and technical barriers to trade in goods and services. For goods trade, both options lead to new customs processes, delays and costs.
2	Tariffs on UK-EU goods trade	Yes	No	Yes. Under ‘no deal’, some sectors would have been particularly hard hit by new tariffs e.g. agriculture, food, drink and automotive manufacturing.
3	Restrictions on cross-border services trade	Yes	Yes	Yes. Services trade is restricted but the TCA has fewer restrictions on services than ‘no deal’. The TCA governance structure creates basis to negotiate easing of some restrictions e.g. recognising professional qualifications and providing short-term work visas.
4	Cooperation on customs procedures	No	Likely	Yes. Included as part of TCA. Avoids UK-EU border ‘freezing’ on 1 January 2021 and allows UK and EU to work together to minimise disruption.
5	Interim trade agreement	No	Possible	No. Under ‘no deal’, WTO rules would not have permitted an interim agreement. But, with TCA, there is no overall transition path to implementation mapped out. Some trade aspects of SM/CU could have been extended for limited time to facilitate TCA implementation.
6	Agreements on other areas	No	Likely	Yes. TCA creates governance structure that allows changes to TCA and future negotiations in areas such as social security and cooperation on scientific research.
7	EU grants equivalence to UK financial services regulation	No	Possible	Not yet granted. Would facilitate some financial services trade out of UK to EU.
8	EU assesses UK data protection as adequate	No	Likely	Would allow UK businesses to store EU citizens’ personal data on UK servers (necessary for some UK businesses to operate effectively with EU customers).
9	NI – Ireland Protocol implementation	Difficult	Yes	Yes. The Protocol is part of the legally-binding Withdrawal Agreement, an international treaty. It applies in the event of ‘no deal’ or an FTA. However, implementation depends on EU-UK cooperation. For example, UK officials and agencies have to treat goods crossing westwards across the GB/NI border as entering the EU. Therefore, an acrimonious ‘no deal’ would have made its implementation difficult. Even with the TCA, the Protocol was not fully operational by 31 December 2020.
Source: CER paper “Five Reasons Why Even a Basic EU-UK Trade Deal is Better Than Nothing”