Brexit deal in the balance as leaders fail to make breakthrough
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Brexit was never going to be easy. Break-ups never are — especially not if the union has been going for close to half a century.
For four years, Brexit has dominated the headlines, as of late more so in the UK than in the EU. Deadlines have come and gone, and a deal now looks ever more elusive. Last week, the negotiators were about to throw in the towel. Phone calls between European Commission President Ursula von der Leyen and UK Prime Minister Boris Johnson could not get them over the hump, so Johnson on Wednesday dashed across the Channel for dinner with Von der Leyen. The outcome was sparse, but the negotiators will reconvene in Brussels immediately and, by Sunday night, the principals will decide. Another deadline and this time it may actually be real, because there are just three weeks left until the transition period ends and businesses on both sides of the Channel need clarity.
The fundamental crux of these four years is that the parties have talked at cross purposes. For the UK, Brexit is about sovereignty: “Taking back control” over borders, laws and money, as per the slogan coined by former Johnson adviser Dominic Cummings. The EU’s approach was more sanguine: It was about making the best of a bad situation and ensuring the bloc’s economy was hurt as little as possible. In the view of recently deceased former French President Valery Giscard D’Estaing, the UK stood to lose more than the EU. The numbers seem to suggest that he had a point: The UK will lose access to a market of 450 million relatively affluent consumers, contrasting to the EU’s loss of 66 million. The International Monetary Fund forecast that a no-deal Brexit would shave a mere 0.5 percent off the EU’s gross domestic product (GDP) but a whopping 3 percent off the UK’s.
This, along with the fact the EU accounted for 43 percent of the UK’s exports and 52 percent of its imports in 2019, would suggest a more emollient negotiating stance by London, if commerce and the economy were the key objectives. But the tough stances of chief UK negotiator Lord David Frost and his predecessors are proof that Brexit is about the emotive subject of sovereignty rather than the country’s economy. From an EU perspective, Britain’s negotiating behavior can be classified as brinkmanship. From the UK’s perspective, it is all about principle. Johnson’s defiant tweet before he set out for Brussels underscores this point: The UK would “prosper mightily as an independent nation,” he wrote.
When the two leaders parted, Von der Leyen called the discussions “lively and interesting” and Johnson said there had not been “much of a glimmer of progress.” Only the two leaders know whether these statements can be attributed to reality or whether they reflect a negotiating stance. Everybody agreed, however, that they remain far apart on the key issues.
So what are the sticking points? One was removed on Tuesday, when the UK agreed to take out controversial clauses from its Internal Markets Bill regarding Northern Ireland’s status as remaining in the EU customs union, thus necessitating a border across the Irish Sea. This legislation would have fallen afoul of the Withdrawal Agreement and, with it, broken international law in a “limited and specific” way, as a UK minister had admitted.
While everybody, especially Dublin, breathed a sigh of relief at that, two related issues remain. First, these clauses added another twist to the complex negotiations and at a late stage, eroding the trustworthiness of the UK government in the eyes of the EU. In the end, London’s concession was achieved, at least in part, by the incoming US Biden administration’s unequivocal stance that Britain would not qualify for a trade agreement with the US if Brexit endangered the Good Friday Agreement, which brought peace to Ireland after decades of sectarian strife (open and unencumbered borders are an important part of that agreement). Second, the sea border between Northern Ireland and Great Britain is a fact and it will have ramifications for the UK’s union down the road.
The remaining sticking points are about fisheries and the level playing field. The UK’s desire to “take back control” includes its rich fishing grounds. The fishing industry accounts for 0.12 percent of the UK’s GDP and €650 million ($786 million) of catches for EU fishermen: Small numbers but highly emotive nonetheless.
The fundamental crux of these four years is that the parties have talked at cross purposes.
Cornelia Meyer
The level playing field is another thorny issue because the EU does not want to see a neighbor gaining an unfair advantage by undercutting its standards on the environment, labor issues, etc. It also needs to regulate state aid to avoid companies obtaining an unfair advantage via subsidies. The resolution mechanisms for disputes arising from the level playing field are a further bone of contention.
We should not overlook the fact that any deal struck between the EU and UK in the next few days will be skinny and minimal. There will be disruption at the borders and goods will flow more slowly because of increased customs paperwork — deal or no deal. If there is no deal, some items will become more expensive, particularly in the agricultural and automotive sectors. The service sector, which accounts for close to 80 percent of the UK’s economy, is not part of any agreement. Finance, which is an important part of the service sector, makes up 7 percent of UK GDP and employs hundreds of thousands of people, particularly in London.
High stakes negotiations are always difficult when both parties come at them with different objectives: Sovereignty and economics in this case. Irrespective of the numbers, a failure to strike a deal would bode well for neither the UK nor the EU, as it would highlight their inability to resolve conflict. The two entities were part of the same union for half a century and they will remain neighbors no matter the outcome of these negotiations.
- Cornelia Meyer is a business consultant, macro-economist and energy expert. Twitter: @MeyerResources
