• Wednesday, Jan 20, 2021
  • Last Update : 09:25 am

Close-run Brexit talks underline political dilemma for UK

  • Published at 06:40 pm November 21st, 2020
File photo: Euro and pound banknotes are seen in front of BREXIT letters in this picture illustration taken on April 28, 2017 Reuters

Failure to strike a trade deal would more than halve the pace of Britain's economic recovery from the pandemic

Prime Minister Boris Johnson's brinkmanship has brought UK-EU talks down to the wire and his choice boils down now to a barebones deal or serious economic disruption in the middle of the coronavirus pandemic.

Covid-19 has intervened directly in the fraught Brexit process, pausing the talks in Brussels when an EU negotiator tested positive, days after Johnson was himself forced to self-isolate after he came into contact with an infected MP.

The blip was particularly ill-timed ahead of Britain's exit out of a post-EU transition period on December 31, and came at the end of a stormy week in London when Johnson's efforts to reset his government were derailed by various political crises.

The policy reset was intended to steady the ship after the departure of arch-Brexiteer and top Downing Street aide Dominic Cummings.

But on Brexit itself, the government is maintaining its hard line.

"Our negotiating position remains the same... to take back control of our money, laws and borders," the prime minister's official spokesman told reporters on Friday.

"We want an agreement that recognizes the UK as a sovereign nation," he said.

The negotiations will continue remotely from Monday, but EU officials are clamouring for Johnson to take a hands-on role on negotiating away the blockages that have bedevilled the process for months.

One EU diplomat feared the gap between the two sides is "only slowly shrinking" and time may run out before ratification can be achieved by the end of year.

"Nevertheless, there is hope that the negotiations can be concluded quickly if and when the necessary political decisions are taken in London," the diplomat added.


But how badly does Johnson want a deal?

He insists that Britain will "prosper" without one, if need be, even with the kind of quotas and tariffs that have been absent from cross-Channel trade for decades.

And if a deal is secured, he will have to sell it to restive Conservative MPs, many of whom will baulk at any brakes on UK freedoms imposed by the EU as the price of agreement.

In any case, a deal would fall well short of the benefits of EU membership.

British exporters will still have to contend with reams of new customs paperwork, and complain the government's preparations on that front have fallen woefully short.

Johnson passed up an opportunity in June to request an extension to the transition period.

That decision, given the pandemic, now looks more "bonkers" than ever, according to Anand Menon, director of the think-tank UK in a Changing Europe.

Speaking in an online seminar, he expressed "amazement that we are weeks away from the end of transition and businesses do not know what to prepare for."

In the little time left, there is no chance of anything more than a thin deal that does the minimum required to stop cross-Channel trade freezing up entirely from January 1.

While the two sides are arguing over issues such as fishing, which barely registers in Britain's economy, far heftier service sectors such as finance have been left to one side.

UK alone 

Johnson has never admitted the trade-offs needed with the EU, according to Menon, who said the government had also peddled a false narrative about how the talks might climax.

"There is still this canard doing the rounds that if we just hold out for long enough, Chancellor (Angela) Merkel and President (Emmanuel) Macron will ride to the rescue," he added, referring to the German and French leaders.

That has not happened, Menon noted, and "President Macron certainly will play hardball more than the (European) Commission will."

The cost-benefit implications were laid out in a KPMG report last week.

Failure to strike a trade deal would more than halve the pace of Britain's economic recovery from the coronavirus pandemic next year, to 4.4% from a potential 10.1% expansion with an agreement, the consultancy said.

The economy could grow 7.2% in 2021 under a so-called "skinny" scenario that assumes a slimmed-down Brexit deal excluding services, it added.

While other countries should power back from the pandemic, according to KPMG UK chief economist Yael Selfin, "the impact of Brexit will single the UK out among advanced economies next year."

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