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The Financial Express

BREXIT-- the clock marches on

| Updated: June 28, 2020 22:54:19


BREXIT-- the clock marches on

The clock towards Brexit is running down and the world is closely monitoring how Boris Johnson will respond in the coming weeks to securing concessions from the EU at the last minute. He is relying on brinkmanship but this might end up in a no-deal scenario.

The UK, it may be recalled, formally left the EU on January 31. Since then, it has been in a transition period where it still obeys EU rules in exchange for business as usual in key areas, most notably trade.

Unfortunately, what started as a possible straight line has now become quite complex. Analysts are now consequently pointing out that Johnson made certain firm commitments but now certain domestic issues and the effect of the post-COVID crisis have made things quite different. As a result, he has to tread the path more carefully than before. He now has to create a space where both sides -- the UK and the EU -- can safely negotiate their future relationship without causing disruption to businesses and citizens. However, that transition period ends on December 31 and strategists on both sides have commented that the negotiations are not going very well.

The pandemic has not helped in removing the political deadlock. It has created frustration as negotiating teams from both sides have been unable to physically meet. They have been forced to rely on videoconferencing tools instead. Sources on both sides have said that this has damaged the quality of the negotiations, as individuals are unable to split off for alternative sideline negotiations about how to resolve the  issues.

Johnson has a very difficult task right now. He has to move forward within the parameters of the complicated negotiations with the largest trading bloc in the world, and also oversee the response to the country's worst public health crisis in decades.

It is generally agreed by both sides that a no-deal would be the worst possible outcome. Economists have noted that the British economy relies heavily on imports from Europe. Maximum disruption to this trade would affect supply chains -- making life complicated for businesses, such as car manufacturers, that rely on them and leading to potential shortages on household essentials, like food. Numerous studies have also predicted that it would be a huge economic hit on both households and the nation at large.

There is also another angle that has emerged over the past few months. It is now understood that the whole process of Brexit includes two sides of the same coin. It is not just political. There is also the bureaucratic factor. As apprehended earlier, this is raising other aspects. A UK government official, not authorised to speak on record about ongoing negotiations, has pointed out that "the EU is being unreasonable, demanding that if we want a free trade agreement then it must come at the cost of us continuing to follow EU rules. Clearly, they know we cannot accept that. If we did, what would have been the point of Brexit?" 

The rules that negotiators from both sides are referring to are a particularly thorny part of the negotiations known as the "level playing field." This is essentially an agreement on certain rules and standards designed to stop businesses on one side undercutting businesses on the other.

It needs to be remembered that the EU's single market is the largest economic bloc on earth. Its level playing field is overseen by EU courts and institutions. As a result, if the UK wants tariff-free access to it after the transition period transpires -- as was Johnson's position towards the end of 2019 -- then the EU will need it to sign up to those rules.

However, the lack of consensus between Brussels and London is not limited only to the question of a level playing field. There are also disagreements on fishing rights, security and governance, and what exactly happens on the island of Ireland.

It should, however, be noted that critics have suggested the UK should drop its ambitions for tariff-free trade with the EU, if the EU drops its level playing field demands. The EU is, however, not interested in this idea because it believes there is not sufficient time left in the transition period to negotiate and find an acceptable solution to the tariffs problem. At the same time, perceived capitulation would land Johnson in trouble with his supporters within the British political matrix.

Many analysts within the EU generally believe that the EU will be able to cope with the no-deal shock better than the UK. "Paradoxically, it might make aspects of no-deal more manageable for the EU," says Fabian Zuleeg, chief executive of the European Policy Centre. "Companies that were looking at having to downscale their operations across Europe post-Covid might decide it's easier to completely shut down UK offices and factories. It actually solves a few problems, in some respects." This observation only underlines that the post-Covid world is likely to be a messy, unpredictable place.

To this equation is also being added two other significant factors. Both EU as well as the UK are worried about how China is going to respond to the severe changes that will require to be introduced within this Group. Similarly, they are watching very carefully how the political situation is evolving within the USA -leading up to the November US Presidential election.

On a global level, the pandemic has caused an economic downturn with unprecedented consequences for economic growth, unemployment rates, and living standards. The Bank of England has forecast that the UK economy will experience the deepest recession over the last 100 years. Adding the economic shock of Brexit to this mix is now being considered reckless.

Some socio-economic strategists have also observed something very interesting. They think that the UK government probably believes that by running down the clock on the path of negotiations, it might be able to secure concessions from a 'weak and divided' EU at the last minute.

They are formulating such a hypothesis because according to them, because of COVID-19, the EU is faced with difficult decisions about the financing of EU's recovery, its place in a globalised world, and its commitment to the rule of law within its borders. The British government is convinced that it will be able to exploit these divisions more effectively at the end of the year. That is, when the pressure will be at the highest point and concessions will be required to reach a compromise.

Domestically, Johnson is governing Britain with a large majority and facing little opposition. Since becoming Prime Minister, he has refused to accommodate different opinions on Brexit, even going so far as to expel 21 Conservative Members of Parliament who tried to prevent a no-deal Brexit. Additionally, he has added a section to the EU (Withdrawal Agreement) Act 2020 prohibiting any UK Minister from agreeing to an extension, thus creating an additional obstacle to this possibility.

So far, the EU has been able to maintain its unity in the negotiations on the future relationship. However, now there will be bigger challenges than before. This will be so because negotiations will now entail politically sensitive topics, such as trade and fisheries, on which member states' interests vary considerably.

However, one is forced to note that the UK appears to wrongly believe that EU unity will not last when faced with a final deadline and the threat of no-deal. This kind of thinking generally appears to underestimate EU's willingness to protect the integrity of the Single Market, and the European project as a whole. It is true that the EU wants a deal, but certainly not at any cost. 

One needs to also judge the situation from the legal perspective. It has to be understood that an extension in the discussion process would probably require the conclusion of a mixed agreement and, therefore, a unanimous decision in the European Council, the agreement of the European Parliament, and the approval of national -- and in some cases regional -- Parliaments. Politically, it might also be more difficult to come to an agreement. The EU is likely to demand similar terms and conditions, i.e., a transition period of up to one or two years and a financial contribution from the UK.

Johnson might be preparing the ground for trying to shift the blame for a no-deal onto the EU, alleging inflexibility, intransigence and a dogmatic approach. However, both sides need to understand that once again, whether they like it or not, the EU and the UK are facing a no-deal outcome, whether by design or by accident. All of these elements will make the future equation more complex.

Muhammad Zamir, a former Ambassador, is an analyst specialised in foreign affairs, right to information and good governance.

muhammadzamir@gmail.com 

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