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The Financial Express
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Will Brexit be a no-deal exit?


Will Brexit be a no-deal exit?

Two developments are being watched very carefully by both the leaders of the United Kingdom as well as those in the European Union. Germany's taking over the Presidency has brought forth a new option within the equation. The other factor has been the passing away of the extension deadline. This evolving situation has brought forth a different dynamics to the Brexit saga.

The end-of-June deadline for agreeing on an extension to the Brexit transition period beyond December 31, 2020 has expired. Consistent with previous understanding it means that in all likelihood, the EU-UK negotiations will have to conclude at the end of this year, regardless of whether a deal has been reached or not.

These developments, however, appear to have raised UK expectations that the German Council Presidency would unlock talks. There is also hope within the UK side that EU negotiator Michel Barnier's position will now be slightly more flexible, and this is creating new hopes for a deal. Analysts have pointed out that such hopes to a great extent will also require indication for movement on the UK side. Till now, progress has remained limited, but those in London and in Brussels are hoping that that a new format of intensified talks will emerge on the scene

Anxiety has also gained ground on both sides because of the fact that less than five months are left to find and ratify an agreement.

Accordingly, different scenarios are being considered by political strategists on both sides of the English Channel that could unfold by the coming autumn, as well as the likelihood of finding acceptability. Those across the Atlantic and in the Far East have, however, been terming them more as 'guesstimates' rather than absolute predictions. There is one least common denominator - the anticipated dynamics is likely to be dependent on political developments, particularly within the UK in the near future.

Five possible scenarios are generally being referred to in this context.

The first scenario being referred to deals with the unlikely possibility of a fundamental deal that over-steps the EU's red lines concept. One needs to understand that there might have been a change in the EU Presidency but it is highly unlikely that the EU will change its fundamental negotiating principles substantially. It is true that the EU has signaled a degree of willingness to consider UK's red lines (e.g. the role of the European Court of Justice and a different sort of deal on fisheries) and discuss possible compromise 'landing zones'. Nevertheless, it is less than likely that it will drop its fundamental demands. It is true that the EU might be willing to have some compromises which will enable the UK government to claim 'victories' and save their face. However, such flexibility would in all likelihood reach its limits when faced with the connotation of the EU's economic interests and political unity. As such, EU economists have underlined that a basic trade deal that is decoupled from the EU's demands on governance and does not include an agreement on fisheries, is going to be a least likely scenario.

One needs to understand that a basic deal with regard to Brexit needs to be completed by the end of summer 2020. This has to be accomplished within a matrix where EU economists consider that the EU red lines have not been overstepped.

This is where the second scenario comes into focus. At the same time British media has suggested that given the current situation and the sensitivity of reconstruction of the British economy after the pandemic, it is unlikely that the UK government will concede any of its red lines before the end of summer. Despite Prime Minister Boris Johnson's claim of wanting a deal, sooner the better, it is doubtful that he will seriously seek to finalise a deal at this juncture. It is more likely that the UK government might follow a strategy where they will try to apply indirect pressure on the EU discussion team into making last-minute concessions when faced with the threat of a no-deal outcome. Such a situation related to softening of red lines and compromise is, however, seen as less then possible-- from an EU struggling to find its feet and unity after the socio-economic implications of the Covid pandemic.

The third possible scenario is arriving at a basic deal between the two parties by the end of autumn 2020 with some of the EU red lines in place. Such a trade deal might be possible, provided that the UK starts to seriously engage with the political trade-offs between market access and divergence. The UK, in this regard needs to understand that such a solution will require some compromise from both sides. However, it is also clear that the factor of balancing power in that form of negotiation dictates that the UK will need to concede significantly more than the EU. Such a possibility will require British Prime Minister Boris Johnson to be convinced that such a deal is politically desirable enough for him to shift from his earlier positions. Such a circumstance appears to be slightly uncertain.

It must also be understood here that even if EU and the UK eventually agree on moving towards a deal, negotiating all the technical details by the end of the year will remain a serious challenge. Several factors related to the internal paradigm of governance within the UK will need to be addressed, for example, how the UK's state aid regime will work. The time needed on the EU side to ratify any deal will additionally reduce the time available to finalise an agreement. One must not also forget that ratifying the deal will include a European Parliament vote. This will limit the EU's room for maneuvering given the EU Parliament's firm stance on the level-playing-field issue. 

Geo-strategists have remarked that under a different scenario there might even be a late extension of the datelines which might eventually lead to a basic deal based on UK concessions. However, such a situation is seen as less than likely. In this regard, the fourth scenario being mentioned is that if the British Prime Minister realises that his brinkmanship might not pay off and that the EU is indeed serious about its affirmations to not agree to a deal at any price, he might then consider a short extension with a new title rather than facing a no-deal outcome. However, one needs to remember that the road seeking an extension under the terms of the Withdrawal Agreement elapsed at the end of June. It will be difficult to get another extended period.

However, it is being speculated that it might be technically possible to secure some more time in autumn. This might be facilitated through discussion and creation of a new treaty as part of a future relationship deal. One knows that this might be tried but it will face different political and legal challenges. Jurists have, in this regard, pointed out that such a request from the British side will definitely require UK concessions like-- continued application of EU law during the agreed extended period and also likely UK financial contribution. Such concessions might end up being a difficult measure to undertake for Johnson and will in all likelihood cause anger within his Conservative Party. This might end up in restraining Johnson from travelling this path.

The fifth and last possibility is that there might be a no-deal by default or by accident. The British media has expressed the view that such an outcome would not be desirable for either side.

One thing is very clear. UK's inability to fulfill its Withdrawal Agreement obligations would seriously undermine the prospects for a future agreement, and thus would most likely lead to no-deal. One needs to also remember here that political events in the future could be adversely affected by a second COVID-19 wave later this year. This situation will definitely take the spotlight away from Brexit at a time when a political push will be most needed.

The British Prime Minister knows that the British public is tired of Brexit and have started paying little attention to the actual content of the negotiations. Consequently, if Johnson sees that nothing significant might be achieved through discussions, he might in all probability quietly reduce his demands, turn around, get out of further discussions, leave the platform quietly and claim in the British Parliament that the Brexit deal has been completed successfully. He will, however, have to strongly defend one aspect-- the economic incentive of continued tariff and quota-free trade with its largest trading partner, especially in a post- Covid Europe.

He might also after such a scenario, lay the blame for a no-deal Brexit on the persistent intransigence of the EU. In any case, it is most likely that a comprehensive deal between the two Parties is less than probable.

Muhammad Zamir, a former Ambassador, is an analyst specialised in foreign affairs, right to

information and good governance.

muhammadzamir0@gmail.com

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