Amid a global pandemic and domestic political turmoil, the United Kingdom’s turbulent quest to leave the European Union remains. Although the United Kingdom officially withdrew on January 31, it remains an EU member in all but name until December 31 because, until then, it stays in the customs union and contributes to the budget. In this transition period, the United Kingdom is supposed to negotiate key aspects of its post-Brexit relationships with other nations and blocs. The most important task, however, is talks with the European Union—an attempt to ensure a beneficial relationship once the two are severed.
The most pressing issue is whether the United Kingdom and European Union can create a free trade agreement. By the new year, the United Kingdom must make significant trade deals with major partners, or it will be forced onto World Trade Organization terms, which allow other nations to impose economy-crippling tariffs on it, until it can reach a deal. Deals limit tariffs and quotas, boosting British business growth at home and exports across the world. The United Kingdom has had some success on this front, recently striking its first major trade deal with Japan. But, accounting for 51 percent of British imports in 2018, the EU is the true keystone to a free and global UK economy. Worryingly for the United Kingdom, the two sides have all but stopped talking. Yet despite a few key issues that threaten to undermine negotiations, a deal is fully within reach. At this point, however, it is impossible to say whether or not a deal will come, though both sides stand to benefit greatly if it does.
Roadblocks To A Trade Deal
The roadblocks to a deal are numerous, but there are a few major deal-breakers threatening to delay the process indefinitely. At the top of the list is state aid. The European Union is notorious for limiting the subsidies that member states can give to domestic businesses, a restriction that in theory limits state intervention and boosts competition. Since the days of Margaret Thatcher, it has been Conservative Party tradition in the United Kingdom to support this form of limited government. In fact, Theresa May, a Conservative and Prime Minister Boris Johnson’s predecessor, was in full support of remaining under EU state aid laws, even if a Brexit deal were not reached. However, that is not the case for Johnson, who wants to increase subsidies to bolster the international reputation of British firms, and who sees state aid as a matter of national sovereignty. If no deal were reached, the European Union could levy anti-subsidy tariffs against the United Kingdom, as it does to Russia and China. Not only would this move cripple the UK economy and global standing, but it would severely harm the already tense EU-UK relations.
A dispute over fishing rights, a seemingly minuscule issue, is proving to be another major sticking point. Upon leaving the European Union, the United Kingdom will lose the ability to sell its fish on the continent without tariffs. Around 75 percent of the United Kingdom’s exported fish goes to the European Union, making the issue critical to the welfare of British fishermen, but insignificant to many other Brits: fishing, despite the recent focus on the industry, only makes up 0.12 percent of the British economy. Conversely, EU nations would also lose their right to fish in British waters. As it currently stands, nations in the European Union are required to give one another full access to their exclusive economic zones (EEZs)—surrounding coastal waters—for exploration and exploitation. The UK EEZ is one of Europe's most trafficked and desirable. A simple quid pro quo agreement would assure the continuation of both rights: to sell and catch fish freely. However, the United Kingdom is adamant that its waters, a source of livelihood for many in the island nation, remain exclusive. It further demands that it be allowed to sell fish to the European market without tariffs. In return for that privilege, nations like France and Spain argue, European trawlers should be able to fish in British waters. Without a breakthrough on this issue, no matter how insignificant it may seem, the fishing and trawling arm of the British economy will face major repercussions, to say nothing of the reverberations that fishers in EU member states will feel.
Secondary issues include intelligence sharing and environmental regulations, but state aid and fishing rules are the largest threats to a compromise between London and Brussels. Whereas these other, secondary agreements can be tacked on to a trade deal in the future, there must first be a foundational deal on which to build. If a compromise on state aid and fishing jurisdiction is not reached before year’s end, further attempts to negotiate intelligence sharing and environmental law will be even more difficult.
The Clock Is Ticking
The time left for a coherent trade deal is running short. EU leaders met on October 15 to discuss, among other things, their relationship with the United Kingdom. Yet, rather than provide a robust plan for accelerating Brexit negotiations, they simply called on the United Kingdom to make “necessary moves” to break-up the deadlock. This obstinacy obscures the urgent need for compromise on both sides, a fact of which both parties are patently aware: although talks have broken down, neither side wants to walk away—or appear to walk away—from negotiations. Michel Barnier, the chief EU representative, and his British counterpart, David Frost, have reportedly made positive contact, giving hope that talks may soon resume in full.
Instead of making the necessary concessions, the two sides are simultaneously playing hardball and stalling. Johnson, for example, has repeatedly claimed that a no-deal agreement with the European Union, similar to Australia’s, would be more than fine with him, supposedly shifting the onus of compromise on to Brussels.
Johnson’s tactics have caused a particularly outsized impact on the land border between the Republic of Ireland, an EU state, and Northern Ireland, part of the United Kingdom. After months of debate, it was agreed that customs checks would occur between the latter and Great Britain, in a sense creating a border in the Irish Sea. It was deemed essential to forgo a “hard border” between Northern Ireland and the Republic of Ireland lest it upset the brittle peace that the two nations have enjoyed since signing the Good Friday agreement in 1998. In effect, the United Kingdom would leave only Northern Ireland under the EU customs union and single-market.
Nevertheless, Johnson’s government submitted an Internal Market Bill to the House of Commons last month which would renege on the withdrawal agreement’s Northern Ireland solution and in doing so violate international law. The bill provides for uninhibited trade within the internal UK market and customs checks at the border between the Republic of Ireland and Northern Ireland, rather than between Northern Ireland and the rest of the United Kingdom.
It is thought that this move, which drew condemnation from the international community and many members of the Tory party, is an attempt to strengthen Johnson’s negotiating position—a bluff to show the European Union he means business. But, if the bill becomes law, it would have detrimental effects on the United Kingdom’s international reputation, to say nothing of the potential conflict it could generate between Northern Ireland and the Republic of Ireland. As of October 30th, the bill passed the Commons, but is meeting scrutiny in the House of Lords and is expected to be blocked there.
The Potential No-Deal Fallout
The European Union has not yet resorted to equally desperate measures, mainly because it has less to lose from a no-deal outcome than the United Kingdom. Should no deal be reached, the United Kingdom will be forced to trade on WTO terms, making its goods much harder to sell on the continent. Michael Gove, the cabinet minister in charge of Brexit, warned of a worst-case scenario that would include up to two days of delayed crossings between England and France for around 7000 trucks, owing to new customs paperwork that drivers would need to fill out on January 1.
Yet this inconvenience is only the tip of the iceberg. Life for ordinary Brits would be starkly different. Goods from Europe, some 39 percent of the food in British grocery stores, would become more scarce and more expensive for consumers, owing to unpredictability and UK tariffs on products like lamb and beef. The same goes for imported drugs, which might face extra scrutiny at customs checks. Alternatively, British fish sellers would be cut off from their largest market if the fisheries debate is not settled, and prices in Europe could rise. Business in general would be more cumbersome if customs are not aligned, threatening small business especially. And EU students who go to university in the United Kingdom and vice versa could face harsher restrictions on their visas.
In macroeconomic terms as well, the British economy would be decidedly worse off. According to the government’s own studies, in fifteen years, the UK GDP would suffer a roughly 8 percent decrease if it were to leave without a free trade agreement. A deal resembling Canada’s current agreement with the European Union, which would be a major success for Johnson, would still result in a 5 percent decline over the same period.
Yet, for many Brits, all of these dismal prospects are dwarfed by the gravitas of other domestic battles. The pandemic is flaring up again, as the government dithers on how best to implement lockdowns. Many are losing faith in Johnson’s governing (not to mention negotiating) abilities, with his approval rating dropping to an abysmal 34%.
One way or another, the United Kingdom will leave the European Union. But if it does not reach a free trade deal by December 31, forging a future deal will be far more difficult. Both sides would benefit from warm relations once the severance is complete—and the benefit is not just to be found in economic terms. Losing out on shared intelligence databases, joint diplomacy, and the free movement of citizens would weaken and estrange both sides significantly in an increasingly hostile international community. As of now, it is still possible that a deal will be reached. But in order to do so, both sides need to make serious compromises. As Johnson promised during his election last year, it is time to “get Brexit done.” For the United Kingdom and the European Union, time is running out to act on that mantra.
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