TIME is running out on an EU-UK trade deal.
Boris Johnson’s much-hyped dinner with European Commission President Ursula von der Leyen, on Wednesday evening, made no progress at all on the crunch issue of how to ensure fair competition and a level-playing field. The EU’s 27 leaders then had an all-nighter summit Thursday to Friday to resolve some of their own big priorities including the future EU budget, Covid recovery fund and climate change targets for 2030.
President von der Leyen briefed EU leaders on Brexit at the summit for less than ten minutes with a gloomy prognosis that “No Deal” is now more likely than a deal. But other EU leaders, including France’s president Macron and Dutch prime minister Rutte, continued to insist on Friday that a deal could be done.
The question of how to ensure fair competition over time lies at the heart of the disagreements, with access to each other’s fishing waters also yet to be resolved.
Johnson has repeatedly claimed since Wednesday that the EU are trying to limit the UK’s sovereignty and wants the UK to be the “twin” of the EU on future regulation in areas such as workers’ rights, environmental laws and state aids. But von der Leyen emphasised on Friday this was not the case.
In the end, No Deal, if it happens, will clearly be the choice of the UK Government
In principle, the two sides have already agreed not to reduce standards below where they are now. What they haven’t agreed is what happens, if in five or ten years time, one side has increased its standards so much that there is a competitive advantage to the other side from its lower standards.
The EU want a mechanism to tackle this, first through talks around the issue should increasing divergence undermine fair competition, and if necessary with tariffs introduced to protect the EU market (or the UK’s market). Finding such a mechanism should not be rocket science, but Johnson is continuing to bluster about unacceptable attacks on UK sovereignty.
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Yet Johnson also attempted to set up calls with Germany’s Merkel and France’s Macron on Friday – rapidly and embarrassingly rebuffed by the EU who directed him back to von der Leyen. This does not look like a prime minister who is at ease with No Deal. And chief negotiators David Frost and Michel Barnier continued to talk in Brussels on Friday – as the new deadline of Sunday (for finding a path to a deal or No Deal) looms.
In the end, No Deal, if it happens, will clearly be the choice of the UK Government. It will have major short and long term effects – reducing growth relative to what it would have been, raising prices (from cars to foodstuffs) as WTO tariffs come in, and creating yet more border bureaucracy and chaos from 1st January.
What is also clear is that if it is No Deal, new EU-UK talks will be needed urgently in the new year
Even with a deal, there will be major new barriers to EU-UK trade with negative economic and other effects including on travel and on security cooperation. The UK’s Office of Budget Responsibility has emphasised that No Deal will hit sectors that have not been amongst the worst hit by the Covid crisis – financial services, manufacturing and others will be especially hard hit. And the OBR argues a No-Deal Brexit will delay the UK returning to its pre-Covid economic peak by a year.
Scotland will face a substantial hit to GDP growth from a No-Deal Brexit. The impacts will be widespread – from financial and other services losing substantial access to EU markets, to tariffs on fish, food products, cars and more, all causing rising prices. Scottish universities will no longer be able to participate in the EU’s core Horizon research fund. There will be queues and delays at ports for a range of goods, including medicines and pharmaceuticals.
What is also clear is that if it is No Deal, new EU-UK talks will be needed urgently in the new year. The EU is offering some unilateral, temporary mechanisms to keep planes flying and shipping and other transport going between the EU and UK. But these will only last a few months. And attempting to manage EU-UK relations for long under WTO rules will surely not only do substantial damage to the UK but to Boris Johnson’s popularity too.
Blaming the EU and Covid is not going to be persuasive as the damage mounts.
If a No-Deal, WTO Brexit does persist that will also impact on the scenario of an independent Scotland in the EU. The Scotland-England border would become a hard WTO-rules border. Whereas, with a basic EU-UK free trade deal, there will be scope for building additional cooperative agreements and a closer relationship in the future, something that would ease Scotland-rUK links after independence.
In the end, there’s a deal to be done in the coming days if the two sides choose to. If Johnson instead continues to offer no compromise, then the responsibility for the ensuing chaos will land at his door only.