Deal or No Deal?

Where are we on the UK-EU trade deal, the latest saga in a long line of Brexit sagas stretching back to 24 June 2016, the day after the Leave vote (which feels like ancient history by now)? EU leaders met in Brussels yesterday for a two-day summit, and apparently got the Brexit business out the […]

Where are we on the UK-EU trade deal, the latest saga in a long line of Brexit sagas stretching back to 24 June 2016, the day after the Leave vote (which feels like ancient history by now)? EU leaders met in Brussels yesterday for a two-day summit, and apparently got the Brexit business out the way early. 

A joint statement said they wished to extend the negotiations, and called on the UK to “make the necessary moves to make an agreement possible”. 

That was in defiance of UK Prime Minister Boris Johnson’s artificial deadline for a deal, which expired yesterday. Johnson had previously said if something couldn’t be done by 15 October “I do not see that there will be a free trade agreement between us, and we should both accept that and move on.”

Before the EU heads’ of state had sat down, Johnson had already shifted, telling leaders in Brussels that he’d wait until the end of the summit before the UK decides on next steps. 

“The negotiations aren’t over,” EU chief negotiator Michel Barnier said yesterday. “We shall remain available until the last possible day.”

The UK’s chief negotiator David Frost fired off a few tweets saying he is “disappointed” in the EU’s statements, and that was that. The summit has moved on to climate change, and presumably the ball is now in the UK’s court to declare its intentions.

Both sides have good reasons to do a deal, but also good reasons to not do a bad one. For Johnson, no deal on top of the current pandemic crisis would be  an accumulation of crises that could add up to his tenure being in jeopardy. At the same time, his support is reliant on Brexiteer MPs, so doing a deal the backbenchers can’t stomach is perhaps even more treacherous. It’s remarkable how quickly Johnson’s political capital has disappeared after the election win last year. 

The EU has lower stakes, but there are still important dilemmas. The Eurozone has also suffered a big economic shock, the last thing the capitals of Europe need is more economic pain, especially for Northern European countries like Netherlands and Germany which have important trade links with the UK. It was notable at the summit that German Chancellor Angela Merkel and Dutch Prime Minister Mark Rutte were the ones most adamant about the need for compromise from both sides. 

At the same time, the EU can’t afford to give too much away. While the rise of the populist right has somewhat subsided in recent years, in countries like France and Italy they remain perilously close to power. Brussels’ does not want the precedent to be set that a country can leave the bloc and get a favourable deal on the way out the door. French President Emmanuel Macron is known to have a hard line on the negotiations, with the most recent poll showing Macron neck and neck with far-right leader Marine Le Pen ahead of the 2022 election.

There does appear to be a deal to be done. The differences pertain to fisheries, state aid and a system for settling trade disputes. All these issues are economically important and politically dangerous, but do not appear insurmountable. A wording has to be found whereby Johnson can say the UK has control over its waters, its laws and its public investment rules, and the EU can effectively say the opposite. Finding language which suits all parties is a Brussels’ speciality. The smart money is that a deal will eventually be done.

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