The UK signed a free trade agreement (FTA) with Iceland, Liechtenstein and Norway on 8 July 2021. The Government has stated that, following the UK’s exit from the EU, it has developed new bilateral agreements “that replicate, as far as possible, the effects of the UK’s existing trade agreements with existing partners”.
The FTA has not yet come into effect. Until then, trade in goods between the UK and both Iceland and Norway are covered by arrangements set out under the Agreement on Trade in Goods between the UK, Northern Ireland, Iceland and Norway, which entered into force on 1 January 2021. Discussing the trading relationship between the UK and Liechtenstein, the Government has stated that trade in goods has been “protected […] and will continue to be protected” by the UK-Switzerland trade agreement, which also entered into force on 1 January 2021. This is because Liechtenstein is in a customs union with Switzerland.
UK–Iceland, Liechtenstein and Norway Free Trade Agreement
The FTA sets out the future trading relationship between the UK and Iceland, Liechtenstein and Norway. According to the Department for International Trade, the FTA “builds on the existing arrangements for goods trade with Iceland and Norway”. The department states that it also sets out “new arrangements on services, investment and digital trade between the United Kingdom and Iceland, Liechtenstein, and Norway”.
The FTA includes provisions on:
- trade in goods and services, including provisions on tariff rate quotas, customs and rules of origin;
- sanitary and phytosanitary measures;
- technical barriers to trade; and
- trade remedies.
The Government has published several supporting documents alongside the FTA:
- Explanatory memorandum: This comprises of information on the content of the agreement and policy considerations. In the explanatory memorandum, the Government states that the FTA includes provisions on cross-border trade in services and investment that “secures continued market access across a broad range of sectors”. This includes professional and business services, financial services, and transport services. The memorandum notes that provisions of the FTA relating to goods will extend to the Crown Dependencies and will take effect immediately upon entry into effect of the agreement. The memorandum also details that the FTA includes a mechanism that “will allow for further extension to the Crown Dependencies and Overseas Territories”. It says that signatories to the FTA previously set out in a joint declaration their intention to “discuss the use of the extension mechanism” for services and investment provisions “as soon as practicable”.
- Impact assessment: The impact assessment notes that between 2019 and 2030, Norway and Iceland’s demand for imported goods is projected to grow by around 40 percent in nominal terms and 20 percent in real terms. Therefore, if the UK “retained its existing market share in those countries”, the increase in demand would “translate into an additional £3.5 billion in UK exports based on the projected growth in imports in nominal terms”. The impact assessment estimates that this would increase total UK exports to Norway and Iceland to around £12 billion by 2030, an increase from £8.3 billion in 2019.
- Joint declarations: These joint declarations were adopted by the parties at the signing of the FTA and cover several areas, including financial services, culture and entertainment.
- Report to Parliament by the Department for International Trade: This report details the core provisions of the FTA. This includes existing provisions covering trade in goods with Iceland and Norway (as per the Agreement on Trade in Goods) and provisions setting out new arrangements between the UK and Iceland, Liechtenstein and Norway on services and investment. It also examines the impact of the agreement on other areas, such as climate change and women’s economic empowerment.
Parliamentary scrutiny and ratification
The FTA must be ratified by its signatories before it can come into force. Under the Constitutional Reform and Governance Act 2010, a treaty must be laid before Parliament before it can be ratified. Once a treaty is laid before Parliament, both Houses have 21 sitting days to review and signal any objection to the treaty. If either House passes a motion against ratification during this period, the Government must lay a statement before Parliament explaining its justification for ratifying the treaty. If the House of Commons passes a motion against ratification, another 21-day period is triggered. The House of Lords does not have the power to delay ratification.
The Government formally laid the FTA before Parliament on 16 July 2021. The objection period is set to end on 26 October 2021.
The FTA was considered by the House of Lords European Affairs Committee on 14 September 2021. The committee drew the agreement to the special attention of the House. The committee’s report into the FTA is expected to be published before the House of Lords debates the agreement.
On 14 October 2021, the House of Lords is due to debate a motion by the Earl of Kinnoull (Crossbench) to take note of the agreement.
- Department for International Trade, Trade and Investment Factsheets: Iceland, 17 September 2021
- Department for International Trade, Trade and Investment Factsheets: Liechtenstein, 17 September 2021
- Department for International Trade, Trade and Investment Factsheets: Norway, 17 September 2021
- Department for International Trade, ‘United Kingdom signs free trade deal with Norway, Iceland and Liechtenstein’, 8 July 2021
Cover image by Chuttersnap on Unsplash.