Stalemate

There has been no progress in the Brexit negotiations since they resumed, following the covid-19 interruption. Both sides have blamed the other, who’s fault is it and who will suffer if there is no agreement?

Michel Barnier has accused the UK of not engaging constructively in the Brexit negotiations and of wasting time. He said: “I am disappointed because, frankly speaking, we have moved.” He didn’t say how they have moved except that we can have sovereignty over our seas as long they can keep taking their same share of fish – how does that make them sovereign again?

This is one of three major sticking points that have prevented the negotiations from moving forward. The UK asks to be treated the same as other countries that have FTAs with the EU. It asks that the negotiations get going on the easy stuff but the EU insists on solving the difficult things first, thereby stalling everything. This is the tactic that worked so well against Mrs May except that it caused her administration to collapse, so the tactic ultimately failed. Is this Frank Barnier or Funk Barnier? (Funk from the French funquer/funquierto give off smoke”).

The EU insists that the UK must follow its rules on fair and open competition so British companies given tariff-free access to the EU market will be prevented from undercutting their European competitors. Sounds fair doesn’t it? Does the EU place the same restrictions on other countries that have agreed FTAs? No, they can appeal to the WTO on grounds of anti-dumping and they can simply leave out things that can’t be agreed—FTAs are seldom 100% free trade.

The EU insists that it must maintain some legal powers above those of UK courts rather than appeal through international courts, this is not something any other country has agreed to. It also wants to determine its fishing quotas on the disgracefully unfair basis that Ted Heath conceded, destroying many British coastal-region economies.

Without an FTA UK goods exports would face tariffs in EU markets – from 10% on cars to 40% on dairy, etc. But the UK’s strength is in services which are not generally helped by the Single Market (SM), and its powerful financial services are heavily impacted by EU rules.

Opponents of no-deal say retaliating by imposing tariffs on EU imports would also require imposing them on every other nation in the world under WTO ‘most favoured nation’ rules. But by initiating FTA negotiations with Japan, Australia, New Zealand, Canada, USA, Korea, CPTPP, Israel, Switzerland, Norway, and others, the UK can buy up to 10 years grace under GATT24. That should be enough time to settle things, even with the EU at some pragmatic level.

Of course there would be border disruption and possible restrictions on UK lorry drivers. The WTO’s Director General, Roberto Azevedo, said that WTO terms were “not a catastrophe”, but “will impose a number of adjustments and those can be painful, particularly for some sectors” [1]. He told Boris Johnson that standard trade terms “would slow Britain’s recovery from coronavirus” andsticking closer to present arrangements would be better for jobs”. [2] He also said that no deal would “not be the end of the world in the sense that trade is going to stop and that everything is going to fall down but it’s not going to be a walk in the park either.”

The UK economy may suffer for a time but it will gain opportunities it is currently denied – meanwhile the EU is likely to continue its relatively low growth and shrinking share of global GDP. Britain will regain its sovereignty and its precious legal code. What about the losses and gains for the other side though?

In 2016 the UK was the European Union’s second largest economy, representing 16% of its GDP, equivalent to the total of its 19 smallest countries. Ireland will lose 4% of its output; German carmakers will suffer in their biggest export market with an extra €1.8 billion of costs; the 40% tariff on cheese will hit French makers and their wine will lose yet more favour to new world alternatives – French companies will lose €4 billion a year; the cost to the Dutch economy will be an extra €4.5 billion a year.

Future economic growth across the EU may fall by up to 1.5 percent in the long run and employment by 0.7 percent [3, 4]. But on the plus side it will gain by losing the heaviest boot on the brake to Ever Closer Union.

[1] BBC Andrew Marr show

[2] The Times report

[3] IMF – blogs.imf.org/2018/08/10/the-long-term-impact-of-brexit-on-the-european-union/

[4] Bloomberg: bloomberg.com/graphics/2020-no-deal-brexit-trade-tariffs-european-union/


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