Britain's Stalemate With EU Enters Its Endgame

As reported in British media today, Prime Minister Boris Johnson could see a Brexit deal in coming week. While UK's Internal Market Bill is designed to circumvent possible hostile attempts from the EU to leverage Northern Ireland into its domain, it has provoked widespread criticism by overriding parts of the UK Withdrawal agreement signed with the EU who have started legal action against the UK government.

Brexit negotiations between the UK and the EU have been reminiscent of any acrimonious divorce proceedings. Who will keep the dog? Who takes care of the children? Except in the case of Britain leaving the world's largest trading bloc, the dog refers to EU demanding rights to the UK's fishing stock, and the children are European court jurisdiction over tariffs and customs rules in Northern Ireland.

The bickering over level playing fields and threats of trade blockades are the background music to the negotiations that must be resolved by the end of November. The deadline made by the Prime Minister in a statement saying “There needs to be an agreement with our European friends by the time of the European Council on... we should both accept that and move on”. This deadline is fast approaching, and yet little movement has been made on either side.

Part of the reasons a deal can’t be made is that notably the French have made UK fishing access a red line, and so far, have EU unity behind it. A senior EU diplomat has been quoted “If the UK wants tariff-free access to EU markets for its fish, then the EU will want access for its fishing boats to UK waters”. Although fishing is only 0.1% of UK’s GDP, it remains an emotive and symbolic part of the Brexit campaign to withdraw from the EU. Many politicians used British waters, a beleaguered fishing community, and large foreign fishing trawlers, as powerful imagery in the 2016 referendum campaign. Many fear that fishing will be traded in negotiations to support the UK’s large financial sector despite continued heavy rhetoric from Boris Johnson that fishing is not for sale. French fisherman are threatening to blockade ports if their demands aren’t met, and the so called scallop wars have reignited in the English Channel with skirmishes between English and French fishing boats using flares and even frying pans as ammunition.

The UK Government's new Internal Market bill, designed to circumvent possible hostile attempts from the EU to leverage Northern Ireland into its domain, is the other remaining obstacle to a settlement. Cabinet minister Michael Gove explained “what we can’t have, even as we’re doing all that, is the EU disrupting and putting at threat the integrity of the United Kingdom. These steps are a safety net”. 

The bill has provoked widespread criticism by overriding parts of the UK Withdrawal agreement signed with the EU who have started legal action against the UK government. Many politicians have linked this legislation to the Good Friday Agreement which had brought peace in Northern Ireland. Nancy Pelosi, the US Democratic lower house speaker said that there would be “absolutely no chance” of a US-UK trade deal if the Good Friday deal were to be undermined. This was denied by foreign secretary Dominic Raab who insisted that the EU were “politicising the withdrawal agreement” and signalled absolute commitment to the Good Friday agreement to US senators during his visit. Prime Minister Johnson took to writing a newspaper article saying “the EU will use an extreme interpretation of the Northern Ireland protocol to impose a full-scale trade border down the Irish Sea” and that “the EU will not only impose tariffs on goods moving from Great Britain to Northern Ireland, but that they might actually stop the transport of food products from GB to NI”. 

The real challenge to the EU is that to protect its single market, a border must be drawn either down the Irish Sea, which the Internal market bill claims to mitigate against future EU exploitation, or between Northern Ireland and Ireland which would break the Good Friday agreement.

Some currency traders however remain optimistic that a deal will be reached as they recommend buying a weak Sterling with the hopes that it will recover quickly once a deal is made. The brinkmanship as the October deadline fast approaches isn’t giving many people hope. The London School of Economics have predicted the impact of a no deal Brexit at 8% of GDP and much worse than Covid-19. Their report noted “our modelling with LSE of the impact of a no-deal Brexit suggests that the total cost to the UK economy over the longer term will be two to three times as large as that implied by the Bank of England’s forecast for the impact of Covid-19”. 

The threat from Boris Johnson to announce a closure of talks is now reaching its critical moment, but the EU seems ready to call his bluff. EU president Mrs Von der Leyen has said “The EU is working on a deal, but not at any price”.

Like all divorce proceedings, the negotiations must end, with the EU transition period finishing on December 31 this year. The opportunity to further extend this transition was formally rejected by the UK government in June, and the UK will leave with or without an EU deal. So far, UK trade negotiators have secured 19 trade deals, and mutual recognition agreements with Australia, New Zealand, and the USA. The UK is hoping for closer trading ties with India who met at the Joint Economic and Trade Committee in July that “affirmed their shared commitment to an FTA”. It's recruitment of former Australian prime minister, Tony Abbot, as a UK trade advisor is a sign of closer trade ties with commonwealth countries, and hope of light at the end of a long tunnel and a circular twist of historic fate.


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