The Financial Express

Brexit Deal: Now the way forward

| Updated: January 03, 2021 21:00:23

Brexit Deal: Now the way forward

It was rather a very quick dash just before the end of the transition period for the United Kingdom (UK) to leave the European Union (EU). Both parties finally have reached an agreement after almost four years and a half of literally haggling over the terms of separation. The defining image of the UK's deal with the EU was a stubbornly confident Prime Minister Boris Johnson with his thumps up in the air. But no such celebratory images emerged from his continental counterparts, except that they could claim to have extracted some vital concessions from the UK.

However, French President Emmanuel Macron was an exception in this saga and gloated over the whole episode. President Macron  always played the role of a spoiler to drive  the EU  for a no-deal Brexit to cut loose Britain adrift preferably into the Atlantic. He has been a vocal critic of Brexit over the last four years and a half, and particularly since trade talks began between the UK and the EU earlier in 2020.

President Macron made it amply clear at a televised press conference with Belgian Prime Minister Alexander De Croo that "France will not accept a Brexit deal that does not respect our long term interests". De Croo responded by saying that he considered it was important to reach a deal but not at any cost. Macron's tough stance did alarm Boris Johnson and possibly caused him to capitulate on fishing rights in British waters to clinch the deal. Now the spirited message of taking back control of British waters has failed.

France was ready to veto the Brexit deal if Paris was unhappy. According to the Bloomberg reports the French Ambassador to the EU "warned Chief negotiator Michel Barnier of how bad it would look if he brokered a deal only to see it vetoed by EU leaders". The veiled threat, surely, Michel Barnier himself a Frenchman definitely took seriously as he could see the history was about to repeat itself. French President Charles De Gaulle vetoed twice the entry of the UK into the European Economic Community (EEC) the precursor to the present day EU in the 1960s. According to a source close to the talks a compromise formula was worked out to avoid a veto "where the UK can claim it has won, and the EU can say they have not lost".

In fact, on the conclusion of the deal,  French President Emmanuel Macron could not resist a glee and took a final swipe at Britain as he twitted "European unity and firmness has paid off. The agreement with the United Kingdom is essential to protect our citizen, our fisherman, our producers. We will make sure this is the case. Europe moving forward and can look to the future, united, sovereign and strong".

President of the European Commission Ursula Von der Leyen, however, was more conciliatory and accommodative and said, "It is time to leave Brexit behind and continue to move forward". But the European Commission Website was far more precise on the deal so as not to leave behind any ambiguity about the deal that "provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin". It also says both EU and UK politicians have "committed to ensuring a robust level playing field" in the next few years. Both sides have agreed on a minimum level of environmental, social and labour standards below which neither would go. There would be a review after four years to ensure the level playing field has been working. Also, there will be an overarching joint governance committee to implement and enforce the treaty.

However, Spanish Foreign Minister Arancha Gonzales Laya in a press interview some time ago possibly provided a more balanced view on the whole issue of Brexit. In highlighting the core of the issue surrounding Brexit was the "illusion of independence and the need to manage interdependence". All trade agreements at the end of the day are always designed to achieve the latter, not to assert the former.

The Brexit deal is no exception to that and Boris Johnson's claim to regaining British sovereignty is not only hollow but also reveals the dubious nature of his assertions on the deal. In fact, after reaching the cliff edge, he decided not to jump off and opted to face a rocky path. His Brexit premised on that the UK would derive all the economic benefits by casting off the EU politically were a false premise.

The Brexit trade and security deal agreed on Christmas Eve, runs 2000 pages including annexes. It will enter into force once approved by both sides. The new deal will preserve tariff and quota-free EU-UK trade for goods and is the biggest bilateral trade deal signed by either party, covering trade worth around  668 billion in 2019. The deal goes beyond the EU's deals with Canada or Japan.

British Prime Minister Johnson also lost no opportunity to reclaim British sovereignty and making claim that "we left on Jan 31 with that oven ready deal" without telling what were the ingredients of that made up the oven-ready deal and went on to claim that "we have completed the biggest trade deal yet, worth  660 billion".

But the EU has hardly opened the floodgate for UK exports. The fact is, the completed Brexit deal still leaves many loose ends that will require a series of micro deals. Also free trade deal does not preclude extra costs in doing business with the EU in the forms of customs checks and additional paper works and fulfilling other compliance requirements.

Protecting the Single Market remains the key objective of the EU. The Brexit deal also ensures that the UK adheres to a base level of environmental, social and labour standards, below which neither must fall. That will ensure the level playing field, thus forestalling any attempt by the UK to create a "Singapore-on the Thames" using the deregulatory measures.

The most notable absence in the deal is the services sector, meaning financial services and data flows are in the gift of the EU. Financial other services account for 80 per cent of British GDP. As these are not covered by the deal, the EU can unilaterally decide which services it grants equivalence and they will also be able to revoke that unilaterally. Prime Minister Johnson has admitted that the Brexit trade deal failed to meet his expectation on financial services. Brussels, meanwhile, signaled that the UK will have to wait until after January 1 to learn what market access it will have in future.

British Prime Minister Johnson claimed that it as "a deal which will if anything allows our companies and our exporters to do even more business with our European friends". But his Office for Budget Responsibility forecasts a 4 per cent decline in the country's GDP in the medium term resulting from Brexit. The deal will also not go down well in anti-Brexit Scotland. The deal on fishing is likely to decimate the Scottish fishing industry and bring forth the economic argument. The Scottish argument for independence may also get reignited.

Brexit will also profoundly reshape the EU. Michel Barnier reiterated his view of Brexit as a "lose-lose" for both sides. The EU now faces a structural challenge which will profoundly reshape the EU, and above all the remaining 27 member countries are also faced with new challenges resulting from Brexit.

 The UK, the second biggest net contributor to the EU is now leaving, causing a budgetary crunch and that ought to be taken seriously. The EU also now faces fracturing of liberal democracy notwithstanding the democratic deficit within the EU itself. The union has created a very huge division between northern and southern member countries, each becoming very suspicious of the other.

Even before the signing of the Treaty of Rome in 1957, which created what has to become EU, there have been tensions between the classical liberal vision and the social democratic vision. But the EU in reality at its core embraced classical liberal vision with some elements from social democratic vision grafted onto it. The left in general, however, argue that the EU has become the primary European vehicle for neo-liberalism and globalisation. In fact, the EU is facing growing questions over the viability of its social model.

The European Project appears to be failing and so far has failed to build broader resilience into the system. The EU has for all practical reasons become an unreformable institution, something both Left and Right agree on, but for very different reasons.

Germany's economic clout has given it the right to lead but it is not sure which way to go. France bereft of its economic power, therefore political clout clinging on to the coat tail of Germany is to be seen on the centre stage. France now appears to be largely focused on the principal objective of saving the Common Agricultural Policy and to block further enlargement, especially the membership of Turkey. Other than those issues, France also does not seem to have any particular vision of Europe.

The Brexit deal signed on Christmas Eve has been unanimously approved by European Union nations. The heads of the European Commission and Council - Ursula von der Leyen and Charles Michel have signed off the document and next Wednesday the European Parliament is expected to vote for it too.

The House of Commons overwhelmingly endorsed the Brexit deal by 521 votes to 73, later the House of Lords also ratified the deal on last Wednesday. The Queen gave the final approval just hours after the UK parliament voted to back the deal. British Prime Minister Boris Johnson has got his "Brexit done" after 11 months of grueling negotiation marked by brinkmanship on both sides of the Channel. In his moment self congratulatory glory, Johnson sounded a more conciliatory note and said "This is not the end of Britain as an European country. We are in many ways the quintessential European civilisation…and we will continue to be so", notwithstanding the fact that his father Stanley Johnson, is now preparing to apply for French passport.

The UK officially left the EU on last Thursday night after a problematic relationship of 48 years with the EU and now the time has come to forge a new relationship with the EU which will be mutually beneficial. In many ways President of the European Commission Ursula von der Leyen encapsulated the way forward for the UK and the EU when she said, "It is time to leave Brexit behind and continue to move forward". More poignantly, in concluding her speech she drew upon T.S. Eliot, "What we call the beginning is often the end. And to make an end is to make a beginning".

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