A Brexit trade deal by December 2020 won’t be much of a deal at all

trade deal

And we’re off. European Commission President Ursula von der Leyen arrived in London on Wednesday for her first meeting with Boris Johnson.

Meanwhile, the government seems set to drive its Brexit legislation through parliament in a matter of days. Attention is therefore turning to the negotiations, and the UK’s future relationship with the EU.

The prime minister insists he will not extend the transition period, that sees the UK being bound by EU rules and paying into the EU budget until the end of this year. And so the key question is whether a deal can be reached by then.

A prior issue is whether Mr Johnson means what he says. Is the end of this year really a firm deadline? He has, after all, been known to say one thing and do another before.

Perhaps not this time though. The PM seems to have decided that his USP is that he gets things done, dusted and “oven ready” rather than kicking the can. So a screeching U-turn on extension will not be easy to pull off.

All the more so because, as the chief executive of the European Policy Centre Fabian Zuleeg has pointed out, the rules round transition do not help. Brexit deadlines to date have been extended as a cliff edge approached.

However, an extension to transition must be requested six months before it is due to end. Harder, then, to use a sense of impending panic to pull off a course reversal.

So let’s assume the end of December 2020 is a real deadline. Can a deal be done by then? The short answer is possibly – though it won’t be much of a deal at all.

The political declaration – which outlines a framework for the future relationship between the UK and EU – foresees “an ambitious, broad, deep and flexible partnership across trade and economic cooperation with a comprehensive and balanced free trade agreement at its core, law enforcement and criminal justice, foreign policy, security and defence and wider areas of cooperation”.

This list alone provides grounds for caution.

The UK-EU relationship is both broad and deep. Renegotiating it will be time consuming.

Indeed, some on the EU side are arguing that even working out specific sector deals by the end of the year will be difficult. And it’s the EU we’re talking about here, which means things will take time.

It looks as if the union won’t be ready to start talks until the beginning of March at the earliest. And then, according to the political declaration, agreements should be reached on financial services and fisheries (by the end of June and the start of July respectively).

Neither will be easy. On financial services, influential voices in the city have warned against UK alignment with EU rules.

Bank of England governor Mark Carney used his valedictory interview to warn against accepting alignment, which he described as outsourcing “regulation and effectively supervision of the world’s leading complex financial system to another jurisdiction.”

As for fisheries, while only some eight of the member states are really concerned by the issues, several of these care a lot – and one of them is France. President Macron declared that the EU should negotiate “in cold blood” – referring specifically to fisheries.

On the UK side, while fisheries accounts for a laughably small proportion of the national economy, its political importance in a Brexit context can hardly be overstated – remember the standoff on the Thames between Nigel Farage and Bob Geldof?

Assuming that both these hurdles can be cleared or that both sides decide that the future relationship negotiations should start in the absence of agreement, there are more potential roadblocks ahead.

Perhaps the most important stems from the fact that the EU simply does not buy the argument, popular among Brexiteers, that the UK’s general election result aligned the country’s standards making negotiations quicker and easier.

As far as Brussels is concerned, it’s not the starting point that matters, but the destination. And British rhetoric about the opportunities offered by divergence from EU rules has not gone unheeded.

EU member states will almost certainly insist that even a bare bones free trade agreement will include fair and level arrangements.

And while the Conservative manifesto is careful not to rule this out, it remains to be seen whether the prime minister will be willing to shift from his stated position of ensuring non-alignment.

So yes, some kind of deal is possible by the end of the year.

The alternative – not just no trade deal, but a further poisoning of the ongoing relationship between the UK and EU, and possible confrontations over the Northern Irish border and fish – are very unattractive to both sides, so the incentives are clear.

However, for this to happen, one side or the other will have to display a greater flexibility than their rhetoric implies. History suggests that it will be mostly – but not entirely – the UK that concedes on substance.

Most importantly, the type of deal that is politically acceptable to both sides and can be negotiated in the time available will have two major features.

First, it will result in a substantial increase in regulatory barriers between the UK and EU. And second, it will leave many aspects of the future relationship unresolved.

It will still be years, not weeks or months, before we “Get Brexit Done.”

By Professor Anand Menon, Director of the UK in a Changing Europe. This piece was originally published by The i Paper.

Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of the UK in a Changing Europe initiative.

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