With the end of the year fast approaching, it not only brings a close to an unprecedented year but also signals the ending of the UK’s participation in EU trade deals.
Since the Brexit vote in 2016, the British government has been scrambling to secure new free trade deals with the EU, USA and other major players in world trade. 4 years on and the work is still unfinished, with many uncertainties around trade and the UK swirling in the air.
But first things first…
What is a free trade deal?
The idea of a free trade deal is to make trading between countries as simple as possible. Free trade deals often involve reducing or eliminating tariffs on goods going in and out and removing quotas, boosting trade and profits.
In the EU, every membership country follows the same rules, with the standards of goods being identical. Britain has decided they want more say on the regulations of trade and their borders, using Brexit to enact a change.
This video on the BBC website does a good job of explaining the sprawling topic of free trade deals succinctly.
Done and Not Done
So far Britain has secured 29 free trade deals that cover 58 territories and countries. Most of these are rollovers from the previous EU deal, with little changing in the circumstances of the deals.
What is more important to Britain and the world is the deals they have not yet agreed. The two major deals hanging over the UK are the ones with the EU and the US.
Despite President Trump and Boris Johnson’s friendship, no free trade deal has been agreed and negotiations are set to continue into 2021. Talks began in May 2020, but the pandemic has made negotiations slow going.
Another good article on globalvillagespace.com goes into more detail on US-UK negotiations.
The Big One
For a long time, it seemed that Britain would go into 2021 with no deal agreed with the EU. As of Christmas Eve, however, that looks to have changed.
An agreed free trade deal is set to be announced between Britain and the EU, changing what was looking like a bleak picture for the leaving nation. Conditions over fishing rights have been traversed and the long road to Brexit seems to finally be coming to a somewhat positive end.
What it Means
This news is already affecting Forex and other types of trading. The pound has already rallied against the euro and US dollar and continues to hold the gains it made when the news broke. The uncertainty around a no-deal outcome had caused the pound to be erratic in the market. The coming announcement though means that the future looks brighter for global currencies.
The Year Ahead
The next year is looking brighter for the UK now that a majority of free trade deals have been agreed. These agreements will bring more stability to the UK and allow them to focus on other pressing issues like the pandemic response and the economy.
With 2021 on the horizon their eyes will turn to a deal with the US, and hope of normalcy.