Monday, 14 September 2020

Could the Brexit Trade Deal Collapse?

British Prime Minister Boris Johnson has warned Britain could walk away by October 15 from post-Brexit trade talks with the European Union if no deal is achieved in the next round of discussion. The key sticking points are European boats' access to UK fishing waters and state aid to industries.

Mr Johnson insisted a no-deal exit would be a "good outcome for the UK". The EU, in turn, accused Britain of failing to negotiate seriously. Britain left the now 27-nation EU on January 31, more than three years after the country voted in favour of ending more than four decades of membership. The political departure will be followed by an economic break when an 11-month transition period ends on December 31 and the UK leaves the EU's single market and customs union.

Without a deal, 2021 will bring tariffs and other economic barriers between the UK and the bloc, its biggest trading partner.

Why does the UK need an EU trade deal? A post-Brexit trade deal will stop tariffs and reduce other trade barriers coming into force after the transition period ends on 31 December 2020.
During the transition period, the UK remains part of the EU's trading arrangements - the single market and the customs union. That means no tariffs, quotas or checks will be introduced.

The point of the transition is to give both sides some breathing space while a trade deal is negotiated, and to give businesses time to get ready.

What about a Canada-style deal?

Prime Minister Boris Johnson has spoken in favour of an EU trade agreement that builds on the deal that Canada has.

Tariffs on most Canadian goods, such as machine parts, have been eliminated. However, there are some additional checks, such as customs and VAT.
Services, like banking, are much more restricted.

The financial sector is important to the UK economy - so getting a deal in this area will be a priority.

How easy will it be to negotiate a UK-EU trade deal? Right now, the UK and the EU share the same rules in areas like workers' rights, competition and environmental policy - they're known as level playing-field rules.

While the EU insists the UK must stick to these rules - so UK businesses don't gain an advantage - the UK government says it wants the freedom to move away.
Access to fishing waters has also proved to be a major sticking point.
Even if a trade deal is agreed, it will not eliminate all checks, because the EU requires certain goods (such as food) from non-EU countries to be checked.

What happens if UK-EU trade talks fail?

If negotiators fail to reach a deal, the UK faces the prospect of trading with the EU under the basic rules set by the World Trade Organization (WTO). If the UK had to trade under WTO rules, tariffs would be applied to most goods which UK businesses send to the EU. This would make UK goods more expensive and harder to sell in Europe. Having WTO terms would also mean full border checks for goods, which could cause traffic bottlenecks at ports and lead to significant delays.

And the UK service industry would lose its guaranteed access. This would affect everyone from bankers and lawyers, to musicians and chefs.

What trade deals has the UK done so far?

While it was an EU member, the UK was automatically part of around 40 trade deals which the EU had struck with more than 70 countries. So far, 19 of these existing deals, covering 50 countries or territories, have been rolled over. This represents just over 8% of total UK trade.
All of the following agreements are expected to take effect at the end of the transition period, according to the Department for International Trade:

The government says it is still in negotiation with a further 18 countries which have existing EU trade deals, including Canada and Mexico. In addition, the UK government is also holding trade talks with the US, Australia and New Zealand.

Whatever Johnson says or believes, a no-trade deal is a massive disaster for the UK and EU. Will commonsense prevail?

1. United Kingdom to quit Brexit trade-deal talks if no agreement with European Union by October 15, ABC News (
2. Brexit: What trade deals has the UK done so far, Tom Edgington, BBC Reality Check, 20 July 2020

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