There is little in the TCA for services. UK service suppliers will lose their automatic right to offer services across the EU from 1 January 2021 and may need to establish themselves in the EU to continue operating. Brian Daly, Head of Brexit, comments on the impact of the TCA on cross-border services trade between the UK and the EU.
UK service suppliers must now comply with the host-country rules of each Member State, which are often varying, as they will no longer benefit from the ‘country-of-origin' approach or ‘passporting' concept, under which authorisations issued by one Member State under EU rules enable access throughout the entire EU Single Market. See key aspects of the TCA in relation to Services.
The mode of supply
The actual level of market access for services will depend on the way a service is supplied: whether it is supplied on a cross-border basis from the home country of the supplier, e.g. over the internet; supplied to the consumer in the country of the supplier, for example a tourist travelling abroad and purchasing services; supplied via a locally-established enterprise owned by the foreign service supplier, or through the temporary presence in the territory of another country by a service supplier who is a natural person.
The application of other rules that complement the provision of services will also impact on future trade. For example, rules governing the mobility of people between the UK and the EU or regarding the transfer of data will have an impact. Whether a service is regulated or requires professional qualifications (and their recognition) will also have an impact on future trade.
In assessing the level of access to trade in services between the UK and the EU going forward, it will therefore be necessary to understand the application of the relevant provisions of the TCA, (e.g. visa free travel), the relevant national laws of Member States, any evolution of the Single Market in services and also the limited and evolving rules that govern trade in services at WTO level - covered under the General Agreement on Trade in Services (GATS).
In terms of the application of GATS, the UK has deposited a schedule with the WTO that sets out the services that can be provided to the UK under GATS and whether any restrictions apply to those services. The schedule is quite lengthy and broadly liberal in terms of the services that can be provided to the UK.
In the context of the significant complexities noted above, we recommend that businesses take the following actions:
Services supply chain
Understand what services your business imports and exports to / from the UK.
Review supply chain
It is essential for businesses to review their supply chains to understand the movement of services into and out of the UK and the potential for disruption as a result of the UK no longer being a member of the Single Market.
Understand whether the services are regulated or unregulated and whether any elements of the TCA apply to them or whether they are included in the UK / EU WTO services schedules.
It is essential to understand that even though certain services may be provided between the UK and the EU freely on WTO terms, other rules associated with EU membership (and not dealt with in the TCA) may prohibit their import / export. For example, consider:
Can steps can be taken to mitigate some of the impacts of other rules on the movement of services?
Once it is understood what issues may give rise to difficulties in the import / export of services to / from the UK, consider whether there are specific actions that may be taken to mitigate these. For example, where a service involves the flow of data subject to EU GDPR, consider the options / exclusions available within GDPR that would facilitate the transfer of data from the EU to the UK should the EU not ultimately grant an adequacy decision in respect of the UK (on time).
The World Trade Organisation (WTO) General Agreement on Trade in Services (GATS) divides the provision of services into 4 modes – set out below:
Mode 1: Cross-border supply - Service delivered within the territory of the Member, from the territory of another Member, e.g. an Irish consultant provides a report to a UK consumer via post or email.
Mode 2: Consumption abroad - Service delivered outside the territory of the Member, in the territory of another Member, to a service consumer of the Member, e.g. an Irish individual travels to the UK for legal advice.
Mode 3: Commercial presence - Service delivered within the territory of the Member, through the commercial presence of the supplier, e.g. an Irish architect establishes an office in the UK.
Mode 4: Presence of a natural person - Service delivered within the territory of the Member, with supplier present as a natural person, e.g. an Irish consultant or health worker travels to the UK to provide their service to a UK recipient.
Mode 5: Over the last few years the concept of a new mode of supply of services (mode 5) has emerged, though this mode has not (yet) been formally adopted by the WTO. Mode 5 refers to services which are incorporated into goods which are then traded across international borders, e.g. a UK car manufacturer sells a car with inbuilt software, etc. into Ireland that will require the provision of future services as part of the contract.
Get in touch
If you have any queries on how Brexit will affect your business, please get in touch with our dedicated Brexit Response Team.
Brexit deal agreed: Sections
- Business Impact and Planning: In Ireland
- Business Impact and Planning: In Northern Ireland
- Suggested Business Planning Framework
- Key Dates to be aware of
- The Trade and Cooperation Agreement (TCA)
- The Withdrawal Agreement
- The Northern Ireland Protocol
- The Brexit Omnibus Act enacted in Ireland
- VAT and Customs: The Rules of Origin
- Key VAT and Customs actions for Irish businesses to take
- Key VAT and Customs actions for Northern Ireland businesses to take
- An explanation of the key VAT and Customs measures
- Impact on employees' mobility – immigration and social security
- Impact on Financial Services
- Impact on Services
- Impact on Data movements
- Impact on Direct Tax matters
- Impact on some Company Law provisions