DEAL OR NO DEAL
Each time Michel Barnier and Lord Frost meet to negotiate Brexit, they wear face masks and remain two metres apart. It is kind of symbolic of the whole Brexit debate, as the EU and UK keep their distance and try to hide their true feelings. After talks with the European Commission’s President Ursula von der Leyen, Boris Johnson has set a deadline of Thursday 15th October to secure a deal with Brussels, ramping up the pressure on both negotiating teams. But the Prime Minister has warned that if no breakthrough seems on the cards by 15thOctober, when the European Council is scheduled to meet, then the game is effectively up and the UK will have to spend the rest of this year preparing for a no deal Brexit. Despite the threats and counter-threats, both sides have claimed progress in the talks, with Angela Merkel optimistic that a post-Brexit trade deal with Britain can still be achieved by the end of the year. Lord Frost agrees, but says that the sticking point continues to be fisheries, where, he claims, the gap remains “unfortunately very large.”
President von der Leyen has emphasised that a trade deal with the UK is particularly important given the devastating economic impact of the coronavirus pandemic, but “not at any price”. She points to the need for a “level playing field” that would provide a guarantee of fair competition and would prevent the UK from undercutting EU markets. Von der Leyen has privately warned EU leaders that she would be prepared to fall back on World Trade Organization (WTO) rules following a no deal Brexit, rather than cave in to British demands. "A bad deal would mean no level playing field which would be a threat to our economy," she said. If an agreement cannot be reached by 31st December, Britain will leave without a deal, placing over £900 billion of annual trade in jeopardy. Hopes are now focusing on a last-minute breakthrough, a possibility which Michel Barnier hinted at back in June when he said “Agreements of this type, such important agreements, are always agreed at the last minute, if there is agreement.”
The EU are notorious for reaching last-minute agreements. After years of negotiations withBrazil, Argentina, Uruguay and Paraguay – the Mercosur Bloc – over a free trade agreement, the EU finally caved-in, allowing access to the EU’s single market for South American beef, poultry and other products. The deal was agreed in principle at the end of 2019, but is yet to be ratified and signed, providing access to South American markets for goods from the EU’s 27 Member States. The EU-Mercosur Free Trade Agreement followed hot on the heels of the EU’s agreement with Canada, known as the EU-Canada Comprehensive Economic and Trade Agreement or Ceta, which was ratified in 2017, although it also has yet to be signed off by all of the EU’s Member States. This is the type of deal that Boris Johnson wants for the UK, but he should be aware that it took more than eight years to negotiate. While Ceta got rid of some tariffs on goods traded between the EU and Canada, tariffs will still remain on things like poultry, meat and eggs. The deal also allowed increased export quotas for EU goods going to Canada, but did not abolish quotas altogether. Nor will Ceta open the EU to financial services from Canada.
These issues all have serious implications for the UK. Boris Johnson repeatedly talks about a “zero tariff, zero quota” deal with the EU and cites Ceta as an example. But if we get a Canada style free trade agreement, there will still be some tariffs and quotas and more importantly, our vital financial services industry may be denied EU access. Worse still, Ceta did not remove the need for Border checks. British goods heading to Europe post Brexit may still face long delays at ports while the necessary paperwork is checked to ensure they meet regulatory controls.
It was exactly this kind of border control problem that prompted Boris Johnson to give UK ministers powers to “disapply” rules relating to the free movement of goods in the controversial Internal Market Bill. The Prime Minister feared the EU could use provisions in the original deal to block food supplies to Northern Ireland. When MPs voted in favour of the Internal Market Bill by a thumping 77 majority, it caused international outrage. The Irish Taoiseach Micheál Martin has insisted that the UK must respect the arrangements and the EU has said there can be no trade deal if London seeks to break international law. Indeed, any Brexit deal will have to be ratified by MEPs in the European Parliament and they have already made it clear that they will withhold agreement unless Britain sticks to its international commitments.
But while these arguments may find an equitable solution, the biggest problem remains fisheries. Although the fisheries sector makes up only 0.1% of the overall British economy, it enjoys huge symbolism as an industry. More than 60% of the fish caught in UK-waters is caught by foreign vessels. This has long been a source of deep resentment by British fishermen, who detest the EU’s Common Fisheries Policy (CFP) and blame it for handing over massive quota shares to the French, Belgian, Dutch and Spanish fleets. Michel Barnier has warned that kicking all EU vessels out of UK waters post Brexit will cause catastrophic impacts to coastal communities around Europe. He says that if the UK wants a free trade agreement they will have to allow “continued, reciprocal access to markets and to waters with stable quota shares.” Lord Frost has dug his heels in and the two sides have reached deadlock. Boris Johnson knows that the fishing industry, particularly in Scotland, is of huge economic, cultural and political importance. The SNP government has alienated Scottish fishing communities by pledging to re-join the EU and take them back into the hated CFP. The Prime Minister cannot be seen to fumble this negotiation. If he can overcome the fisheries problem and secure a decent trade deal with the EU, Boris Johnson will have carved his place in British history.