15 Jul 2020

DIGITALEUROPE priorities for a free trade agreement between the United Kingdom and the European Union

DIGITALEUROPE calls upon the United Kingdom and the European Union to reach a comprehensive free trade agreement which preserves business continuity, as negotiations progress during the transition period. To facilitate this objective, we outline our recommendations on the approach and the key priorities needed to achieve the best possible outcome.

Executive Summary

The UK left the EU on 31 January, beginning a transition period until 31 December this year. In the limited time that remains, both partners have committed to engage in best efforts to reach a comprehensive free trade agreement, with negotiating objectives set by both sides in February 2020.

Considering this challenging timeline, EU and UK businesses are extremely concerned as to the difficulties that seem certain to emerge for trade between the two partners. DIGITALEUROPE calls upon both parties to observe a golden rule of business continuity as negotiations progress.

This will necessitate an approach that is cooperative, open to external input and expertise, and allowing for a sufficient implementation period.

To achieve the best possible outcome, the agreement needs to encompass a number of key priorities (outlined in this paper), including tariff- and quota-free trade insofar as possible, simple and liberal rules of origin, and the preservation of data flows. The latter is also addressed in a separate document on data adequacy.

In the annexes, we provide further detail on the priority areas, and highlight means for trade facilitation to ensure business continuity.


About our sector

Digital is a mix: The tech sector comprises a rich mix of hardware, software and services from microbusinesses to global platforms. Across the EU and the UK, digital transformation is a societal phenomenon that sees our sector contributing to everything from increased industrial productivity to the green transition.

Services: Out of 6.5 million jobs in our sector, 80% are in services. These account for well over 90% of added value in the EU ICT sector, and for 96% of UK digital business. UK exports of telecommunications, computer and information services to the EU total approximately £10 billion, around half of global UK services exports of this type. The UK is also the top destination for EU exports in services.

Complex supply chains: Companies can be in simple supply chains of two or highly complex networks of many organisations, across Europe and beyond. Overall, 49% of inputs of goods and services to the UK’s ICT-producing sectors are imported, compared to 28% for the economy as a whole. Of these the EU made up 52% of goods inputs and 49% of services inputs.

Highly regulated market: All products currently placed on the EU market, as well as services delivered to it, are subject to a wide range of regulations. Up until this point UK services and products have automatically complied, through the application of the same rules. Now that the UK has left the EU, this automatic entitlement will end, with checks and certifications required. Many UK and EU ICT products have supply and distribution chains which cross Ireland and Northern Ireland, meaning the clear and timely implementation of the Northern Ireland protocol is essential for the distribution of products.

Innovation is a crucial driver of growth in the sector: The ICT sector has a long history of company involvement in EU research and innovation programmes, such as Horizon 2020, creating innovation ecosystems for collaboration between skilled researchers in large industry, SMEs, research institutes and academia across and beyond European borders.


Our approach to the negotiations

Input: DIGITALEUROPE welcomes the publication of the negotiating objectives of both sides and the commencement of negotiations aiming to conclude an agreement before the end of the transition period. DIGITALEUROPE also welcomes any opportunity to provide input where the key areas of concern lie for the digital and tech sectors. 

Expertise at disposal: Our members are keen to lend our extensive expertise of navigating global supply chains, customs systems and regulatory frameworks to support the conclusion of the best agreement possible within the scope of the UK and EU negotiating objectives.

The digital and tech sector’s key priorities centre around the effective management and reduction of non-tariff barriers, the minimisation of customs delays, managing regulatory divergence, the mobility of people for business, research and other purposes and supporting the continued free flow of personal and non-personal data.

Implementation period: As the UK will be leaving the Single Market, businesses will face additional import and export requirements and paperwork, irrespective of the outcome. To allow businesses time to prepare to manage these additional requirements and reduce the impact of new trade barriers, the two parties should seek to negotiate an implementation period that provides sufficient time for businesses to prepare. This period should provide sufficient lead-in time for businesses to enact the system and process changes required to support the smooth implementation of the future relationship.

Following consultation with members, it appears unlikely that adequate preparations can be made within the transition period alone, making such an implementation more essential than ever. The necessary length of this period will depend on the extent of businesses’ preparation during the transition period as well as the detail of technical support offered by the UK and EU during this period. As such, any implementation period should be commensurate with the level of preparations that need to be made and could be applied sector by sector. Further details on this can be found in Annex 2.

Call for continued cooperation: The UK as a member of the EU has enjoyed a strong relationship with the 27 other Member States with collaboration between citizens, business and policy makers helping to shape the success of the European tech sector. While the UK cannot enjoy the same depth of relationship with the remaining 27 member states through the type of deal being pursued, DIGITALEUROPE wishes to see the collaboration which has strengthened both sides upheld to the greatest degree possible.

Multiple processes: In this document DIGITALEUROPE sets out our position on the priorities needed to achieve the best possible outcome. In a separate document, DIGITALEUROPE outlines its position on data adequacy, a distinct process, separate from the negotiations over the free trade agreement.

Elsewhere, we call on the parties to support the continuation of no roaming charges between the UK and the EU, by reaching an agreement on international mobile roaming that will help facilitate market based solutions to prevent the return of roaming fees. This approach should seek to support competition and transparency within and between the respective markets of the UK and the EU. The EU Japan Agreement provides a useful precedent for the negotiations which promotes transparency, competition and consumer choice.

The UK has spelled out in its negotiating objectives a willingness to enter into relationships in line with non-EU Member State participation rules across a number of EU programmes[1] as well as supporting service access agreements for other programmes[2]. DIGITALEUROPE encourages both parties to support such applications, respecting the UK preference for participation on a third country basis. The EU should however examine how any partnerships can be deepened after the conclusion of negotiations on the agreement.

Best possible post-Brexit relationship: Over the course of the negotiations DIGITALEUROPE and our members are open and willing to support both parties agree the best possible relationship for the digital and tech sectors.

[1] The UK has provided the examples of Horizon Europe, Euratom Research and Training, and Copernicus.

[2] The UK has named EU Space Surveillance and Tracking, and the European Geostationary Navigation Overlay Service. It has further suggested it will consider elements of Erasmus+ on a time-limited basis.


Key priorities for an EU-UK Agreement

Data protection

  • Though a separate process, we call upon both sides to pursue their best efforts to facilitate a positive adequacy decision by December 2020.
  • We encourage both sides to create a permanent forum for dialogue, cooperation and the sharing of best practices.
  • We urge both parties to commit to the mutual recognition of each other’s alternative transfer mechanisms so that in the event of an adequacy decision not being reached, or not being maintained, there is a commitment to recognised contractual alternative transfer mechanisms within the FTA upon which to fall back.

Tariff-free and quota-free trade, and simple rules of origin

  • We call upon both parties to conclude an Agreement that ensures tariff-free, quota-free trade, including additional commitments to smooth, frictionless trade, and to facilitate the trade in goods over time.
  • We urge both parties to negotiate simple, liberal and predictable rules of origin similar to the most recent free trade agreements of the European Union, including the proposed revised pan-Euro-Mediterranean Convention allowing for the use of 50% non-originating material.
  • We further request that the parties investigate whether accumulation schemes can be included in other trade agreements, particularly with third countries with high volumes of bilateral trade with the EU and the UK. These should ensure that the UK share can also continue to be included in the determination of preferential origin.
  • While supporting the right to regulatory autonomy, we encourage the establishment of permanent fora and mechanisms to support regulatory cooperation, as key enablers of frictionless trade in the longer term.

Services and investment

  • We suggest that the Agreement covers all modes of supply and covers sectors such as professional and business services, telecommunications services, courier and postal services, distribution services, environmental services, financial services, tourism related services and transport services. A negative list approach should be taken to such schedules.
  • We ask that the Agreement supports regulatory cooperation, non-discrimination, mobility of professionals for work purposes, and frameworks for the mutual recognition of qualifications.

Digital Trade

  • We call for an Agreement that advances upon the positions and principles within the EU-Japan and CETA agreements as well as advanced anti-data localisation principles drawn from international best practice.
  • We encourage the UK and EU to agree new provisions for the free flow of non-personal data. The parties should seek to agree provisions equivalent to those of the existing EU regulation on the free flow of non-personal data. Any new agreement should prioritise anti-localisation, non-discrimination and uphold good data protection and public procurement practice.

Intellectual Property

  • We encourage both parties to seek to secure the maximum possible mutual recognition of each other’s IP systems as well as a high level of information sharing, judicial and regulatory cooperation to underpin future innovation.

Public Procurement

  • We urge both parties to support and build upon the UK’s envisaged accession to the WTO Government Procurement Agreement (GPA).
  • We recommend an Agreement that seeks to allow for competitive procurement processes that do not discriminate against extra-territorial business, other than in specifically spelled out areas where there are justifiable public policy reasons for doing so, for example in relation to national security and defence.

SMEs

  • We support the inclusion of a specific SMEs chapter with commitments from both parties to provide support to their respective SMEs allowing them to take advantage of the agreement.

Mobility

  • We advise that commitments to mode 4 be horizontal across the Agreement, going beyond the provisions in the CETA and EU-Japan agreements, and improving coverage in research, study, and other forms of temporary movement. There should also be a sufficient level of social security and healthcare cooperation commensurate with the depth of the final mobility arrangements.
For more information, please contact:
Barry McKeon
Senior Policy Manager Trade and Competition
Back to Digital trade
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