Policy paper

Minutes: third meeting of the Trade Partnership Committee under the UK-EU Trade and Cooperation Agreement, 7 December 2023

Published 2 September 2024

London and virtual (UK host)

7 December 2023, 9am to 2:30pm GMT / 10am to 3:30pm CEST

1. Opening and adoption of the agenda

The UK welcomed the EU delegation to London. Both parties welcomed positive recent developments in the wider relationship such as agreement on the Windsor Framework. The agenda was adopted.

2. Review of this year’s Trade Specialised Committees

The parties highlighted that all ten Trade Specialised Committees had met this year, that the process is running smoothly, and that fruitful exchanges were held on common challenges such as supply chain resilience and AI.

3. Stocktake on actions since the previous meeting of the Trade Partnership Committee

The parties welcomed progress in a number of areas:

• the Rules of Procedure for the sectoral Technical Barriers to Trade working groups have been agreed, and co-chairs confirmed.  Both parties agreed that the working groups should meet before the next Trade Specialised Committee on Technical Barriers to Trade takes place and report back to the latter Committee
• both sides have confirmed continued equivalence of UK and EU organic standards, concluding the review required under the TCA
• at the Trade Specialised Committee for Services, Investment and Digital Trade, the review of Article 201 (Cross-Border Data Flows) was concluded
• the review of further measures to facilitate trade in wine was concluded. The UK noted that it saw value in further engagement on how trade in wine could be facilitated beyond measures envisaged in the TCA
• finally, both sides welcomed the signature of the Financial Services MoU earlier in 2023 and that the first meeting under the MoU has already taken place. The EU stressed that this is not part of the TCA implementation

4. Discussion of key topics from the Trade Specialised Committees, and other matters relevant to the scope of the Trade Partnership Committee

4.1 EU and UK approaches to supply chain resilience

The EU set out recent initiatives on supply chains and noted that it was working with the UK and others through the G7, G20 and OECD. The EU explained that it will  ensure that initiatives are WTO compliant and transparent. On Critical Raw Materials, work is ongoing on both multilateral and bilateral front where for instance the EU has signed bilateral strategic partnerships with trading partners to boost investment in this supply chains. The EU was also promoting the launch of a Critical Raw Material Club with partners. The EU also noted that it was developing a board of crisis management to facilitate information sharing during crises.

The UK noted the similarities in EU and UK approaches. The UK noted it is due to shortly publish its critical imports and supply chain strategy, which will build upon other recent strategies such as the Critical Materials Strategy Refresh. The UK published its semiconductor strategy in May 2023, which focusses on securing a leading position in R&D, design, and compound semiconductors. The UK requested further discussion on the EU Single Market Emergency Instrument as it continues to have concerns on potentially trade restrictive aspects and an interest in how engagement mechanisms for coordinating crisis response can be best implemented.

The UK and EU agreed to continue cooperating through multilateral fora as well as having further bilateral discussions within the context of the TCA framework.

4.2 Small and medium sized enterprises

The UK set out its initiatives to support SMEs. Access to finance was highlighted, including Start Up loans and the Covid recovery loan scheme, as was exporting support in the form of insurance and guarantee schemes. The UK is focused on addressing practical issues such as late payments and supporting SMEs to trade internationally. The EU set out its initiatives to support SMEs, reflected in the SME Relief Package, consisting of two new legislative proposals on late payments and on simplifying cross-border taxes for SMEs as well as several non-legislative measures to support the regulatory environment and access to finance for SMEs. The EU and UK agreed that further exchanges would be useful in the context of the TCA framework.

The UK believes that there are some specific barriers that UK SMEs face, including the need to appoint an EU fiscal representative to use the EU’s Import One Stop Shop. The UK set out its view that all the implications of the Import One Stop Shop  had not be foreseen when the TCA was negotiated but that it was a matter that could easily be resolved under the TCA. The EU noted that the obligation to appoint a fiscal representative is non-discriminatory and intended to ensure the recovery of VAT when warranted. This topic had previously been discussed in various Committee meetings, including in the Partnership Council, and the EU does not consider it as a barrier. The EU noted that it wants to monitor VAT protocol implementation before considering any change. The UK expressed disappointment but agreed to continue collaborating on the VAT protocol.

4.3 Green transition

Overall approaches to the green transition

The EU explained that the core instrument to ensure the green transition is the EU Green Deal Industrial Plan (GDIP).

The EU explained the EU GDIP’s pillars, notably a predictable and simplified regulatory environment, faster access to sufficient funding, enhancing skills, and trade and resilient supply chains. The EU noted that legislative initiatives embedded under the EU GDIP such as the Net Zero Industry Act (NZIA) or the Critical Raw Materials Act (CRMA) are still Commission proposals that are undergoing the EU’s legislative process. The EU also underlined the importance of open trade for resilient supply chains and the importance of global co-operation.

The UK set out its commitment to delivering Net Zero by 2050 and noted that it had set out its latest plans for making the transition to Net Zero through publication of Powering Up Britain: The Net Zero Growth Plan. The UK noted the importance of ensuring the efforts to reach Net Zero are not unnecessarily trade restrictive or distortive.

Non-subsidy elements of GDIP

The UK stressed that it welcomes the EU’s climate ambitions of GDIP, but continues to have questions around how the EU will uphold TCA commitments while making changes to environmental planning and permitting processes and introducing new selection criteria for Strategic Projects. The UK added that proposed manufacturing capacity benchmarks could result in less favourable treatment for non-EU firms. The UK noted the proposed strengthening of the public procurement weighting for sustainable and resilient contribution and stressed the importance of guidance in this area, including to ensure provisions are implemented in a non-discriminatory manner. The UK noted its interest in EU’s plans for Net Zero Industrial Partnerships.

The  EU explained that in order to achieve the green transition, it has developed a series of instruments. These tools – provided for under the different pillars of the EU GDIP – are compliant with the EU international commitments and the TCA.  As regards the new planning and permitting rules under the NZIA and CRMA, the EU explained that these new proposals introduce environmental planning rules that foster the easier identification of areas suitable for NZIA and or CRMA projects at an early stage. The EU explained that these rules have the objective to streamlined environmental processes and that they do not lower the standards of environmental protection as agreed in the TCA.

On procurement and the NZIA, while underlining that the proposal is still going through the legislative process, the EU explained that the application of the sustainability and resilience element of the draft NZIA will be in compliance with the EU’s international commitments.

The EU also presented the approach relating to the capacity benchmarks contained in the NZIA and CRMA. The EU explained the benchmarks in the NZIA and CRMA were conceived to incentivise demand and stimulate funding and that they are not discriminatory. The EU noted that these benchmarks are still a Commission proposal that is undergoing the EU’s legislative process.

The UK also noted that it will continue to monitor the impact of the EU’s evolving initiatives and welcomed the opportunity to explore further in technical discussions.

UK net zero policy announcements

The EU expressed concerns as regards the amendments to the Net Zero policy that were recently announced by the UK Government in the Plan to Net Zero. The EU considers that there is a risk that these amendments have an impact on achieving the UK Net Zero ambitions.

The UK stressed its commitment to hitting its net zero target by 2050 while ensuring energy security and economic growth. The UK noted that the discussion in the UK is about how, not if, the UK pursues its climate targets. The UK argued that this mirrors the debate in the EU about how to deliver net zero in a way that supports growth and recognises cost of living pressures. The UK noted that the UK and EU share the same net zero goals and similar challenges and looked forward to continued collaboration on this matter.

Carbon pricing and carbon leakage

The EU noted that it has in place two fundamental measures - the EU Emissions Trading System (ETS) and EU Carbon Border Adjustment Mechanism (CBAM)  which are complementary. Both the EU ETS and EU CBAM aim at achieving EU’s ambitious climate goals as well as addressing carbon leakage. They are both aimed at reducing carbon emissions by setting a price on carbon, with the ETS applying to intra-EU goods and the CBAM applying to goods imported into the EU.

The EU also explained the latest amendments to the EU ETS framework in the context of the European Green Deal and the ‘Fit for 55’ package. These amendments ensure that the EU ETS will deliver further emission reductions in line with the EU’s 2030 climate target.

As regards the approach of the UK on carbon leakage, the UK noted that the results of its recent consultation are under consideration. The UK thanked the EU for its presentation on the EU CBAM and underlined that it was keen to continue engaging on this. The UK noted the complexity of applying CBAM to the electricity sector in particular stressing the need for further technical dialogue.

The UK and the EU each provided an update on the development of their respective carbon pricing schemes, the UK Emissions Trading Scheme and the EU Emissions Trading System

The EU expressed concerns on the impact it considers the UK ETS reforms of July 2023 have had on the significant drop in price on the UK ETS allowances.  The EU noted that it is closely following possible divergences between the EU and UK Emission Trading System as well as the impact these divergences may have on the price of UK ETS allowances.

On carbon pricing, the UK noted that it would not be appropriate to comment on market prices but pointed to the UK ETS Authority’s announcement of an explicit and legislated allowance cap in alignment with the UK’s Net Zero commitments, and expansion of the UK ETS to additional sectors such as maritime. The EU noted that it would expect that that the market for UK ETS allowances would respond to climate policy decisions made by the UK government.

4.4 EU approach to subsidies under GDIP

The UK noted its concerns about the trade and investment impact of a more flexible EU approach to subsidies combined with an increase in funding through the Green Deal Industrial Plan, which it would continue to monitor. The UK recognised that the EU had given assurances that the usual State Aid assessments would apply but noted that this does not necessarily address concerns about the cumulative impact of increased EU and Member State spending. The UK view is those aid measures are flexible. The UK noted its view that if they were to be combined in the future with measures that favoured EU suppliers, this would pose a threat to the UK-EU Level Playing Field.

The UK sought clarity on details of the proposed Sovereignty Fund and noted that the EU level funding picture is complicated. The UK questioned how the combination of funding measures would result in targeted and proportionate aid for firms. Finally, the UK outlined further questions on the Temporary Crisis and Transition Framework (TCTF) – in particular the provisions which target long term investment incentives and therefore represent the use of a crisis mechanism to support long term policy objectives. The UK sought reassurance that any use of mechanisms such as the aid ‘matching mechanism’ would be transparent and set out evidential thresholds clearly.

The EU gave a presentation on the subsidy control and spending elements of its Green Industrial Plan. The EU provided an update on the TCTF and its objectives, as well as more details on the ‘matching’ mechanism. The EU explained that the subsidy measures granted under the TCTF are in compliance with the subsidy principles of the TCA.

The EU noted that the subsidy elements of the EU GDIP have a clear public policy which is to help Member States to accelerate the green transition. The policy objective is also mindful of cohesion objectives, which ensure that aid reaches those areas where it is most needed. The EU explained that the subsidy rules under the EU GDIP provide for strong safeguards to minimise distortions on competition and trade. The EU explained that these rules are intended to ensure the respect of subsidy principles such as proportionality and the incentive effect of subsidy measures.  

The EU explained that the matching mechanisms had not yet been used, and that its intention is to ensure aid is targeted to where support is needed. The EU stressed that none of the subsidy rules under the EU GDIP contain any criteria that would favour EU suppliers as opposed to non-EU suppliers. In addition, the EU reiterated that there are strict cumulation rules in the EU that must be respected when a subsidy is granted and that would ensure that the distortive impact of a subsidy on trade or investment is minimised. The EU reiterated its view that the EU’s approach was compliant with the EU subsidy framework and the TCA subsidy principles.

4.5 UK subsidy control

The EU noted that the enforcement of the UK subsidy control regime is still an area of concern for the EU. The EU set out areas it will continue to monitor, including the role granting authorities had in assessing a subsidy’s compliance with the subsidy principles and the fact that the main route for businesses to make a complaint is by going to the Competition Appeal Tribunal. The EU underlined the importance of information being uploaded to the UK subsidy database in a complete and timely manner. Finally, the EU raised the role of the Subsidies Advice Unit, noting that its  reports were non-binding. The EU also asked why legislative proposals that contain subsidy measures and that are presented to Parliament (e.g. such as tax measures) undergo a different scrutiny process to other subsidies granted by public authorities in the UK.  

The UK noted that the TCA provides an overall framework and set of principles for subsidy control but does not prevent the parties from having different systems. The UK highlighted that public authorities have a legal duty to consider the subsidy control principles. All stand-alone subsidies and all subsidies above £100,000 paid under a subsidy scheme must be uploaded onto the publicly accessible database. The UK affirmed that UK courts provide an effective mechanism for challenging subsidies. The UK explained that subsidies granted by Acts of Parliament are subject to the UK’s international commitments and that guidance is provided to public authorities including Government Departments. The UK noted that its subsidy control regime is robust and fully in line with its obligations under the TCA.

4.6 UK reach

The EU noted differences between UK and EU approaches. In particular, the EU noted divergences on the number of substances considered for authorisation as well as for restrictions; the pace of implementation of restrictions; as well as differences in process in registrations and evaluation. The EU noted that UK chemicals policy remains a topic of interest and concern for the Union and that divergences between our respective chemicals policy may lead to impacts on environmental protection and consumers’ health, as well as trade and investment between the UK and the EU. The UK underlined that any regulatory decisions taken under UK REACH must be based on evidence of Great Britain (GB) use and exposure to effectively address specific conditions and risks as they exist in GB. The UK also noted other options beyond REACH restrictions exist to effectively manage risks. The UK indicated that it would welcome opportunities for future technical exchanges with the EU on matters of shared interest, in line with the provisions of the TCA chemicals annex. 

4.7.1. Professional mobility: UK Sponsorship Scheme and provision of designated legal services by UK lawyers in one EU Member State

The EU expressed concern with the UK sponsorship scheme, which it considers has a negative impact on the mobility of EU service suppliers. The EU explained that it considers the scheme complex, non-transparent, expensive and lengthy and to create an incentive for UK clients to hire local service suppliers instead of applying for sponsorship licences. Finally, the EU considered the fact that only 16 Service Suppliers visas were issued to EU nationals between June 2022 and June 2023 as problematic in terms of compliance with the TCA. The EU requested that the UK considers excluding EU Mode 4 service suppliers from the requirement to be sponsored. The UK noted that the sponsorship requirements were reasonable and proportionate. Once an employer has that licence, they do not have to provide that information again for four years, even if sponsoring multiple workers. The UK noted that all immigration systems have complexities, but that it was open to feedback. The UK stressed that it considers its guidance is clear and comprehensive and that the UK granted 321,000 work visas (in both Mode 4 and non-Mode 4 categories) in the year ending June 2023 most of which involved sponsorship requirements.

On the provision of designated legal services, the UK requested an update on implementation of the relevant TCA obligations, in particular with regards to one Member State where there is a lack of clarity on the conditions under which UK lawyers can provide designated legal services. The EU emphasised its commitment to good implementation of the TCA and set out that legislation was due to shortly be submitted to the national parliament of the Member State in question. The UK welcomed the update and noted it would follow up in writing with further questions.

4.7.2. EU and UK measures related to cybersecurity

UK reiterated that it considers the “immunity protections” contained in the scheme in one EU Member State represent an unnecessary trade barrier. The UK believes the scheme sits uneasily with the provisions of the TCA and it considers that it had not received clear justification that TCA exceptions could be relied on. The UK stated that to address its concerns it would need to see changes to ensure that UK suppliers are treated no less favourably than EU suppliers and that any exceptions are specific, limited and targeted at specific risks in the least trade restrictive manner possible. The UK asked that the EU set out in writing the types of sensitive information in scope of the restrictions. The UK noted similar concerns in relation to the upcoming EU-wide scheme, still in development.

The UK noted that the EU and UK have worked together internationally to promote open digital markets and to oppose digital protectionism, and that adoption of unjustified restrictive measures in the EU could risk undermining this stance.   

The EU explained that cybersecurity is a priority for both the EU and its Member States and that it appears also to be a priority for the UK. Keeping sensitive data safe is essential, and the EU noted that the UK itself has introduced requirements that the EU see as potentially forcing the storage of NHS data inside the UK. The EU then stated that the Member State scheme in question applied only to a subset of government entities handling particularly sensitive data (and only to the sensitive data held by such entities). The EU restated its position that the scheme is compliant with the EU’s international commitments both under the TCA and the Government Procurement Agreement and is clearly covered by the general exceptions under these and that it does not constitute an unnecessary barrier to trade. The EU stated that for a large amount of data that was not highly sensitive, restrictions did not apply. The EU noted that the UK has so far not been able to provide any examples of UK companies being excluded from any public contracts in the given Member State because of the Scheme.

The EU underlined its view that the approach taken by the NHS of potentially forcing the storage of data inside the UK, is less transparent than the one chosen by the Member State in question where clearly defined conditions apply – and which only concerns a limited amount of highly sensitive data for limited public entities.

On its own treatment of government data, the UK explained that it considers that it takes a risk-based approach, and that case-by-case decisions are more proportionate to the potential risks than blanket bans on the basis of nationality. In relation to an example raised, the UK noted that the NHS allows data to be moved outside of the UK including where the UK had deemed the third country adequate from a data protection perspective – which in its views is in stark contrast to the Member State measure where no mechanism for data to be stored outside of the EU was in place.

In reference to an upcoming scheme being developed at EU-level, the EU noted that it is still in development.

4.7.3. Trade in seed potatoes and live bivalve-molluscs

The UK noted that it had raised the issues of trade in seed potatoes and undepurated live bivalve molluscs (LBMs) from Class B waters consistently and remained committed to finding a solution. On seed potatoes, the UK noted that it had shared a proposal which in their view, is based on an EU third-country precedent, including an offer to expedite outstanding Member State applications for seed potato marketing in Great Britain. The UK requested a response and discussions in January and noted that if sufficient progress is not seen the UK will consider all available options to resume trade. On LBMs, the UK requested discussions on the basis of the risk assessment the EU provided and on alternative, less trade-restrictive measures. The UK noted that the risk assessments provided by the EU did not provide sufficient detail of the specific Great Britain (GB) risks or consider alternative measures that are less trade restrictive.

The EU set out that both seed potatoes and class B LBMs measures requirements that apply to all third countries and were in force before UK left EU. The EU stated their measures are not specific to the UK but inevitably affect imports from GB due to third country status. The EU said it does not expect to modify these requirements but confirmed that the UK proposal on seed potatoes was being examined.

4.7.4. UK Border Target Operating model

The UK set out the forthcoming milestones for implementation of the Border Target Operating Model (BTOM). The UK noted out there has been a lot of engagement with competent authorities across the EU. In the situation that certificates need to be revised, the UK underlined its commitment to giving up to a 6-month implementation period, not including potential emergency measures for emergent biosecurity issues.

The EU thanked the UK for extensive engagement on the BTOM and the UK’s availability to clarify questions. The EU asked that any future changes to timescales are communicated as soon as possible, including changes to risk categorisation and that sufficient time is allowed for their implementation. The EU raised their concern   in relation to the frequent modifications to the UK’s SPS import requirements (such as changes to model health certificates and commodity risk categorisations) through changes on its official website, with very limited or no possibility to access older versions of the measures. The EU urged the UK introduce modifications to such significant measures only following prior consultation with trading partners by means of notifications through the WTO Secretariat according to Annex B of the WTO SPS Agreement.  Finally, the EU underlined that the UK and EU have a shared interest to ensure the new arrangements run as smoothly as possible.

4.7.5. Electric Vehicle Rules of Origin

The EU noted that the Commission has adopted a proposal on product specific rules for electric vehicles and batteries. The Commission position contains two elements: (i) postponing the entry into force of the revised product specific rules for batteries and electric vehicles in 2024; and (ii) ensuring that the Partnership Council will not be able to modify the timing or content of the product specific rules that will enter into force in 2027. The UK welcomed the update and took note of the EU’s position.

5. Look ahead to 2024

UK noted that the Foreign Secretary and the Executive Vice President responsible for interinstitutional relations met the previous week and had agreed to aim for a meeting of the Partnership Council in early 2024. The EU added that they look forward to a constructive 2024 and to continue to engage positively.

6. AOB

The UK raised the ongoing challenges faced by touring artists – and openness to identify solutions that worked for both parties, although it acknowledged and welcomed the positive steps taken by a number of Member States, such as improved guidance. In response, the EU maintained that this issue has been covered at length in previous occasions and recalled that the situation of UK touring artists was the result of the UK leaving the single market, including the free movement of persons, and the customs union.

7. Closing remarks

The UK and EU agreed the meeting was positive and thanked everyone involved.

Participation list

UK delegation

• UK Co-chair of the Trade Partnership Committee
• UK government officials from various departments, including the UK Mission to the European Union
• Scottish Government, Northern Ireland Executive, and Welsh Government officials
• officials from the Bailiwick of Guernsey

EU delegation

• EU Co-chair of the Trade Partnership Committee
• European Commission officials from various DGs
• EU Officials from Delegation of the European Union to the UK
• representatives of EU member states