Crunch Time in EU-UK Trade Talks as Brexit Transition Ends

Experts believe a basic deal will be reached at the eleventh hour because the prospect of a no-deal divorce poses so many economic and political risks.

A pedestrian walks past the European Commission headquarters in Brussels on Monday. (AP Photo/Francisco Seco)

(CN) — In only 25 days, the United Kingdom will be out of the European Union for good and on its way toward what many Brits see as their country taking back control of its borders, government and sovereignty. But one crucial thing is still missing: An agreement on the terms of trade between the U.K. and the club of nations it’s turned its back on.

This week, trade negotiations entered the final stretch with all eyes on British Prime Minister Boris Johnson and EU leaders. It remains uncertain if the two sides will reach even a bare-bones agreement to keep trade flowing without tariffs or not before the U.K. formally departs the EU – and is no longer bound by EU treaties and laws – at the end of an 11-month transition period on Dec. 31.

The clock is ticking down for a deal to be approved and ratified by both the European Parliament and the House of Commons before the end of the year. European national leaders are scheduled to meet on Thursday and that is seen as a key moment by which a deal could be approved.

But as of Monday evening, both sides remained locked in talks and staring down the opponent in what has become an extraordinary example of brinkmanship and political survival. Johnson and European Commission Ursula von der Leyen held lengthy talks late Monday.

After those talks, both sides agreed to continue trade negotiations in Brussels this week. Johnson was expected to head to the EU capital in person to try to hammer out a deal. Both sides said in a joint statement that “significant differences” remain before a deal can be reached.

There are major sticking points and growing distrust between the two sides.

At its most basic, the EU doesn’t want the U.K. to have free access to its vast internal market unless it abides by EU standards on state aid, the environment and workers’ rights or face tariffs. In other words, the EU doesn’t want to see the U.K. leave the union and then sell goods back to the EU at cheaper prices because they are made using inferior standards or unfairly supported by state funds. In the minds of European leaders, the U.K. could in this way undercut EU companies and undermine the EU system.

Another disagreement has been over access to U.K. fishing waters. French fleets rely heavily on fishing in British waters and conversely British fishermen sell a lot of their fish to EU buyers. Brexit supporters made sovereignty over U.K. waters a symbolic principle and any deal that allows Europeans to continue fishing off the shores of Britain might be seen as a bitter betrayal of Brexit.

From the perspective of those in the U.K. who backed Brexit, they don’t want Johnson to sign a deal that leaves the U.K. tied down by EU rules, laws and regulations, precisely the restraints that led many in the U.K. to choose to sever ties with the EU so dramatically in the 2016 Brexit referendum. Also, a desire among Brits to end immigration from other EU countries, most significantly from Eastern Europe, and from non-EU Muslim countries was a major driver behind the Brexit vote.

Four years and five months since that referendum, the U.K. is rushing toward a moment of great uncertainty but just how uncertain its future will be may be determined largely by whether it agrees to a trade deal with the EU.

After months of negotiations and acrimony, the outcome is anything but certain though many experts believe a basic deal will be reached at the eleventh hour because the prospect of a no-deal divorce poses so many economic and political risks.

“There is obviously quite a gulf between the U.K and the EU” on many issues, said Lucinda Creighton, a former Irish minister of European affairs, on Sky News television. But she said a deal was possible because each thorny issue has a “landing zone.”

“In each of them, there has been a landing zone, if you like, where compromise can be achieved with both sides saving face,” she said.

There are those who think Johnson will buckle and accept the EU’s demands. Despite his rhetoric and brinkmanship, Johnson’s negotiating position has been weakened by several factors, among them his own falling popularity since he became prime minister a year ago and pushed the U.K. out of the EU. He’s been hurt by his poor handling of the coronavirus outbreak. The U.K. is the worst-hit nation in Europe with more than 61,000 deaths linked to the virus.

Johnson also may end up agreeing to an EU trade deal because the U.K. can’t afford additional economic damage after months of agony caused by the coronavirus pandemic. Another factor may be the election of Joe Biden to the White House. Biden’s victory means Johnson is losing a close ally in President Donald Trump and a Biden White House may lead to a strengthening of ties between the U.S. and EU. At the same time, Johnson is facing a growing independence drive in Scotland that could gain even more momentum if the U.K. drops out of the EU without a deal. A majority of Scots voted against leaving the EU.

Even if a trade deal is reached, major changes are set to kick in regardless. For instance, the trade deal is not expected to include a customs agreement and that means burdensome import and export paperwork will be required, potentially interrupting supply chains and leading to delays in goods crossing the English Channel. 

Also, British goods bound for the EU will need new certifications saying they meet EU standards. The trade talks also do not deal with financial and professional services, all-important sectors of Britain’s economy, and already British banks and financial institutions are dropping European clients. Ernst & Young, the financial consulting company, estimates that 7,500 jobs in the U.K.’s financial services sector and about $1.55 trillion in client assets have already moved from London to the EU in anticipation of the Brexit deadline on Jan. 1.


Courthouse News reporter Cain Burdeau is based in the European Union. 

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