Commentary on Political Economy

Friday, 11 December 2020

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Standing on the edge of the Brexit precipice

Any last chance of a deal will depend not just on compromise from Prime Minister Boris Johnson and European Commission president Ursula von der Leyen, but a preparedness to understand each other better
Any last chance of a deal will depend not just on compromise from Prime Minister Boris Johnson and European Commission president Ursula von der Leyen, but a preparedness to understand each other better © Aaron Chown - WPA Pool/Getty

The Brexit clock is ticking towards midnight. Three weeks before the UK’s transition period ends, the mood in talks on a future EU trade deal is bleak. A no-deal outcome, on top of a pandemic that has taken a grim toll of lives and livelihoods, would be a failure of statecraft with grave economic consequences. The harm would be worse for Britain, given the proportion of its trade that goes to the EU, but EU members would be damaged, too. Any last chance of a deal will depend on a preparedness by both sides not just to compromise, but to understand each other better.

London and Brussels have consistently underestimated the strength of the other’s core concerns. Prime minister Boris Johnson sees the 2016 Leave vote as about sovereignty above all — the expression of an urge for the UK once again to be master of its own destiny and shape its own rules. The economic cost of failing to secure a deal is, for him, a secondary consideration. For the EU, safeguarding its 450m-strong single market, which depends on adherence to strict regulations to function, is paramount.

Mr Johnson opted for a minimalist, “Canada-style” deal in large part because it seemed to promise the UK maximum sovereignty. But the comparison is misleading. The UK argues that, since it is only asking for the same as Canada, it should not have to accept more onerous safeguards. That ignores Britain’s proximity and vastly greater volume of trade with the EU compared with Canada’s — requiring tougher controls to ensure the UK cannot become an unfair competitor.

Thin as it is, moreover, the deal the UK is pursuing goes further than Canada’s by including zero tariffs and quotas on all goods — especially agriculture and fish — other trade facilitation measures, and some services. Mr Johnson missed an opportunity here. He could have used the argument that Britain was in fact seeking a “Canada-plus” agreement to justify concessions on the need to accept EU rules.

The EU may give ground on fisheries, giving Mr Johnson cover to shift elsewhere. But Ursula von der Leyen, European Commission president, made clear over dinner on Wednesday what negotiators have said for months: the 27-nation bloc will not do a deal without robust level playing field arrangements. That does not necessarily mean entirely dynamic alignment with EU market rules, forcing the UK to mirror every change. But it does mean going beyond British commitments simply not to roll back rules, and accepting an evolving agreement that ensures free and fair competition over time.

Securing an agreement will require some concessions from the EU; the French and the Dutch have, at the last moment, tightened the level playing field demands. But the UK is the weaker party. As with the withdrawal agreement a year ago, Mr Johnson will have to find ways to make the bigger compromise while selling the deal as a triumph of hardball negotiation. As with the Northern Ireland border last year, a solution might involve arrangements allowing him to claim formal, de jure, sovereignty while conceding, de facto, much of what the EU demands.

Time is desperately short to find a solution. But if there is even the slimmest chance of a deal, talks should continue beyond the Sunday “deadline” that has now been set and Mr Johnson should engage with European leaders including France’s Emmanuel Macron and Germany’s Angela Merkel. The health of the post-virus recovery, and hundreds of thousands of jobs in the UK and in the EU, are now hanging in the balance.

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