European leaders signed a British Brexit agreement on Sunday, which set out the conditions for the UK to leave the EU and tried to outline the future relationship between the two sides. The agreement is divided into two parts: a 585-page exit agreement, which is legally binding on both parties; and a 36-page non-binding principle statement that sets out the framework for future trade, economic and security relations. Both of these must be approved by the European and British Parliaments.

The legally binding document reads:

The UK will pay about $50 billion to fulfill its commitment to the EU budget. The UK will guarantee that approximately 3 million EU citizens living in the UK have broad legal rights and the EU will guarantee reciprocal rights to approximately 1.3 million British citizens residing in EU member states.

The agreement stipulates that the UK will have a 21-month transition period after leaving the European Union in March next year. The UK and the EU hope to negotiate future trade and security agreements during this period. From 2021, the UK will no longer be bound by the EU’s free-flowing rules, and EU citizens will not be able to work in the UK as they have in the past.

Irish border issue:

The core of the agreement is to find a workaround to avoid a re-emergence of hard borders between British territory Northern Ireland and the European Union member states of Ireland. If the UK and the EU cannot finalize the trade agreement by December 2020, the parties can extend the transition period to December 2022.

Another option is that the United Kingdom and the European Union will establish a joint customs area so that there is no need for border inspection between Northern Ireland and the Republic of Ireland. This arrangement actually avoids the UK’s trade agreements with non-EU economies such as the US or China. The UK also needs to comply with a number of EU national aid, environmental, labor and social standards.

Only if the EU determines that the UK’s withdrawal from this tariff arrangement will not lead to the re-emergence between Northern Ireland and the Republic of Ireland, the UK can withdraw from this tariff arrangement, which may require a new trade agreement between the two parties, or through technological innovation to achieve no border inspection.

Non-legally binding framework statement:

The two sides also reached an agreement on a 36-page future relationship framework statement that clarifies certain matters. The document calls for the establishment of broad economic ties between the two parties, but excludes the possibility that British manufacturing companies can enter the EU’s single market with zero barriers. The document also calls for the establishment of close and security partnerships between the two parties. However, from the establishment of a flexible economic and trade relationship that allows British companies to successfully sell products in the EU market, to sign a much looser FTA with limited tariff rates but limited market access, a series of possibilities that exist in the future trade relations between the two sides, this document is not clearly stated.

Whether these possibilities can be implemented will depend on whether the UK is willing to continue to comply with EU regulations and guidelines, which is strongly opposed by many Brexit supporters.

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