The tariff-free trade accord in goods that the U.K. and the EU signed on Thursday, days before the post-Brexit transition expires, should mitigate somewhat the consequences of Britains narrow decision, in 2016, to leave one of the largest trading blocs. The eleventh hour agreement averts a catastrophic no deal scenario. This is borne out by the findings from the U.K. Office for Budget Responsibility. The country now faces a potential 4% loss of GDP over 15 years, compared to remaining in the EU. Leaving without any agreement would have led to a potential loss of 6% of GDP, estimates the fiscal watchdog. Moreover, given the U.K.s reliance on the EU for about 75% of food product imports, the significance of zero duty trade for consumers and the retail economy cannot be exaggerated. Brexits biggest trade-off for the ordinary citizen is perhaps the restrictions on the right to free movement and work. The tariff-free access to Europes single market has been realised in exchange for guarantees that Britain would not undercut EU competition rules and environmental regulations. Among the more contentious issues in the talks, the arrangement allays apprehensions about the potential economic threat from the Singapore-on-Thames growth model the U.K. might pursue outside the EU. The biggest stumbling block was the access for EU fisheries to British seas, which London was keen to reclaim as demonstration of wresting sovereignty after Brexit. There is now a five-and-a-half-year transition period that guarantees continued access for the affected EU states. The reduced terms for the latter are expected to help British fisheries. A major challenge now would be to keep border checks and red tape to the minimum, besides ensuring that supply chains are not unduly disrupted. U.K. businesses have given a cautious welcome to the agreement, which has left the EU market in services out of its purview, requiring Britains pre-eminent financial services sector to negotiate ad hoc measures with European counterparts.
Politically, the post-Brexit partnership could end the rancour that has polarised British society. Prime Minister Boris Johnson has predictably claimed victory for restoring the nations sovereignty that had supposedly eroded under its 47-year EU membership. His Conservative partys massive parliamentary majority would enable its automatic approval early next week. The Opposition Labour party has announced its backing for the agreement. Thursdays terms will provisionally enter into force on January 1, while the European Parliament is expected to give its nod in a few weeks. Conservative hardliners surely have their moment of triumph. But they can hardly escape the reality of their country juxtaposed to the EU 27 in areas of mutual cooperation. That will set the limits of national sovereignty.