Why was the EU and UK deal important for Malta and to you?

After many years of slow negotiations, the UK has left the EU. This means that in the eyes of the EU, there is no difference between the UK, the US, Canada, India and other countries around the world. However, economies have the right to sign free trade agreements (FTAs), which are essentially pacts between two or more nations to reduce barriers to imports and exports between them. The EU and the UK came to such an agreement in December 2020 and the deal came to be known as the the Trade and Cooperation Agreement (TCA),



What’s in this agreement?

In short, the agreement will allow trade in goods to continue to flow between the UK and EU member states without certain barriers, such as additional tariff costs, and will maintain a level of openness for trade in services and investment. Nevertheless, while the agreement commits the parties to duty-free treatment on goods, non-tariff barriers will tend to increase, together with administrative and customs procedures.

Goods


The agreement guarantees the continued absence of tariffs and quotas on goods traded between the UK and EU. However, to benefit from this tariff-free treatment, the exported goods must originate in the UK or an EU member state.

The movement of goods through the borders will now go through customs procedures that were not present when the UK was part of the EU. Therefore, expect your online purchases from UK firms to take a while longer.



Services

As the UK has left the EU Single Market, UK service suppliers have lost the automatic right to offer services across the EU and vice versa. Instead, they will have to comply with a patchwork of rules in each member state.

The non-discrimination obligations of the TCA, however, ensure that service suppliers or investors from the EU will be treated no less favourably than UK operators in the UK, and vice-versa. This entitles them to receive more favourable treatment than that granted to service suppliers or investors of third countries.

Despite their strategic importance in the UK economy, the EU-UK trade negotiations did not deal with the bulk of financial services. In fact, the specific financial services provisions in the TCA are limited, and concern the general commitment to implement international standards in the area of prudential, anti-money-laundering, tax avoidance and anti-terrorism standards.

Following the UK’s exit from the EU, recognition of professional qualifications between the two Parties is no longer automatic. The TCA does not prevent a Party from requiring professionals from holding the necessary professional qualifications specified in their territory if they want to perform activities there. The TCA outlines the framework of recommendations for future mutual recognition agreements (MRAs) to be agreed between the UK and the EU.

Free Movement of People

On short-term travel, the agreement states that short-term travel (up to 90 days) remains visa-free. EU member states and the UK have the right to introduce visas for short-term travel in future, but must give at least three months' notice before doing so.

For business travel, the TCA allows EU and UK nationals to travel and stay for business purposes without requiring work permits. This includes business visitors for the purposes of setting up a company, contractual service providers, independent professionals and short-term business visitors.

For example, a company may send managers and specialists to work in offices abroad for a period of up to three years. All other kinds of travel, including for research, study, training and youth exchanges, are outside the scope of the TCA, and therefore subject to the conditions set out in EU and individual member states' law applicable to non-EU citizens, or in UK law, as appropriate.

Why was this agreement important for Malta?

Data shows that Maltese imports from the UK between the years 2014 and 2019 exceeded €3 billion. The largest values lie in the imports of motor vehicles and their parts, aircraft and boats. Imports of food products and clothing also make up a significant part of British imports.


As already mentioned, the agreement makes sure there are no tariffs on goods. Had no agreement been in place, Maltese importers would need to pay hefty tariffs. Different products adhere to different tariff lines, but when aggregated to WTO rules Maltese importers would have to pay around €30 million a year more to get products from the UK. This cost would be then transferred to the Maltese consumer.

Whilst it is possible that importers would have replaced their British partners with other suppliers within the EU block, the reality is that this would have created huge problems in the supply chain slowing stock flows to Malta. This would not just affect your day-to-day shopping for clothes and other consumer items, but more importantly, it could have been detrimental to our supply of medicines and medical equipment.

Needless to say, many Maltese people live and work in the UK, whilst others are studying there as well. A no agreement scenario could have also created some problems in that area.

The Importance of Trade Policy


Being an import-focused country, we rarely discuss trade policy in Malta, but Brexit may have given us a lesson as to why it should matter more, and not just to our businesses. It also matters to the Average Joe, as it will affect not only consumption patterns but also opportunities and competition from abroad in terms of employment, education and even health.


Sources:

MT Trade Data was collected from Trading Economics