The Brexit referendum was on 23rd June 2016, now more than 4 years ago. Yet there still is no agreement.
The original exit day was 29th March 2019, but they have solicited several extensions through the time. At this moment the official exit day is 31st December 2020, without any extension possible. Both the United Kingdom and the European Union agreed in September that an agreement must be completed before 15th October 2020, so they have time to ratify before the new agreements before the deadline.
But that day has passed and there is still no agreement. Currently, they are still negotiating significant points like fishing, the UK’s border with the EU and what the trade deal between both sides will look like. One of the most controversial items was the UK’s Internal Market Bill that lead to one of the tensest moments of the negotiations when the EU took legal action against the UK.
What will happen to the current arrangements?
One part of the EU’s trade policy is set to change: the origin of materials, a practice known as cumulation. As a member of the EU, the UK used this policy to sell some car parts that were originally from Turkey and Japan. They were exported to the UK and manufactured as British. This is significant when the final product is sold to other EU countries since it is not subject to extra tariffs. However, this practice is not going to be available anymore for the UK because of the Brexit situation.
The Westminster government asked to maintain this deal after Brexit. However, the European Commission rejected their proposal despite it putting the British car industry and its 800.000 people working in it at risk. This especially affects the development of electric cars, batteries, and bicycles, since a large number of electric car parts are imported. In some cases till 70% of the final product. With these changes, these goods will now have a further application of a 10% tariff, making it difficult to compete with other EU countries.
Is fishing that important to the Brexit agreement?
Right now, European waters are shared. For example, a Swedish fishing boat can fish in Finnish waters, and so all fishermen can compete fairly. This practice is part of the Common Fisheries Policy that “aims to ensure that fishing and aquaculture are environmentally, economically and socially sustainable”. An example of that policy is the recent €5 million investment by the EU to the Maltese government for research, and so they can create new regional policies and sustainable development for the sector.
This is something that the UK wants to end. They want to control their own waters and restrict other EU countries from fishing in British waters. This may seem fair, but it could destroy some of the marine ecosystems, sustainable fishing practices, and the current control measures of species; and so, it could have serious consequences for both parties
The EU wants to continue with its current policy and so both sides could continue to fish in each other’s waters. While the UK’s stance would be to negotiate a yearly fee. The fee would allow European boats to fish in British waters. This part of the agreement is quite controversial and the President of France, Emmanuel Macron, has threatened to reject the trade agreement if the terms overfishing is not clear and does not allow France access to British waters as in the current policy.
What will happen to the borders?
As part of the European Single Market, there is free movement of goods, capital, services, and labour . There is no need to have borders between the European countries. But with the Brexit implies the installation of physical borders in between the UK and any EU countries, like Spain and Ireland.
Besides the four most well-known nations, the UK has 14 British Overseas Territories, 13 of them with no border with the EU and 12 of them are islands. There is one territory that has a European border: Gibraltar and its border with Spain. This territory, located in between the Bay of Algeciras and the Alboran Sea, has a significant history because of its strategic location since it is only 20 kilometres from the North African coast. Before 1713, Gibraltar was a Spanish territory. Since the Peace of Utrecht, a series of peace treaties in the War of the Spanish Succession, it has been a British territory.
Every day thousands of people, cars and trucks cross the border mostly for work reasons but there is also illegal movements of alcohol and tobacco. Although 30.000 people are living in Gibraltar, there are 55,000 firms registered there. Gibraltar has become the epicentre for tax evasion. There are agreements already in place between Spain and the UK to avoid this. However, now with the Brexit situation, the issue has become even more complex.
Spain does not want the problem to get worse so they have added a condition to any agreement between the EU and the UK, that Spain must approve any agreement that involves Gibraltar. Although there is already a physical border, they will have to tighten it and put in place further controls. Spain’s proposal is to co-govern, something that has the support of Gibraltar’s Chief Minister Fabian Picardo. But Boris Johnson does not approve it and said Gibraltar’s British sovereignty will never change “unless and until,” its people say otherwise.
In the past, the Irish border that divides Northern Ireland and the Republic of Ireland has had a turbulent history of violence. During most notably, The Troubles, a conflict that lasted from 1968 to 1988. They do not want to repeat history with any future conflict, they are against a physical border.
While Theresa May was Prime Minister, she negotiated the UK Withdrawal Agreement. As part of the negotiations, May proposed the Irish Backstop. A plan to keep Northern Ireland in the single market whilst avoiding a hard border, in the event of a No Deal. This deal was changed in October 2019 by Boris Johnson, replacing the Irish Backstop with the Northern Irish Protocol. This new protocol made some changes like authorising the Northern Irish Parliament, the control to decide if they wanted the protocol to end in the future.
Right now the UK’s solution is to keep Northern Ireland in the European Single Market, so Northern Ireland will still be under the EU regulation. To comply the requirements, the goods from the EU that enter the British mainland (England, Scotland, Wales) that come through Northern Ireland would have to pass some kind of border and quality control as well as paying additional tariffs as a non-EU and non-member of the Single Market. This will protect the economy for citizens on both sides of the border. It would not change the prices as there will not be any added taxes. This is important since we know that there are around 275 road crossings and some houses, communities and families are part of both territories.
What will the future of the EU and UK’s trade relations look like?
The custom taxes are a big part of the agreement because this could change the price of all goods and make a big impact on the economy for both the UK and EU. One possibility for the UK was to stay in the European Single Market. They would have been required to pay the EU every year for access as well as remain under the jurisdiction of the European Court of Justice which is not what the UK wants. If the UK were to stay in the Customs Union, the borders could stay the same, they could continue to trade freely with the EU.
However, they would not be free to make their own trade agreements with other countries. The UK proposed to make a free trade agreement with the EU that is similar to what Canada has. The Comprehensive Economic and Trade Agreement (CETA) involves a 98% reduction in the customs taxes. It is important to note that the negotiations for that agreement between the EU and Canada were seven years long so it’s not that simple. If they do not make an agreement the UK will have to abide by the trade rules of the World Trade Organisation (WTO).
How will the EU’s economy be affected by Brexit?
Brexit will change the EU as we know it. Some of those changes will be to its overall economy and it will even affect the Gross Domestic Product (GDP) of each member state. The EU is the UK’s biggest trade partner in 2019 43% of the total UK exports were to the EU, and the UK imported 51% of all its imports to the EU. Seeing the data of the trade helpdesk of the European Commission we can see that the exports from the EU to the UK in 2019 was of €319 billion and the imports equalled €193 billion with Germany being the UK’s biggest trading partner from the EU.
All of this certain trading and benefits to each other’s economies are in danger and their future depends on the final Brexit deal, if there is a free trade agreement or if the UK must follow WTO rules because of the no deal. Even though is hard to know exactly how trading will change, these two scenarios, amongst others, can be compared through the “Calculating the Economic Consequences of Brexit” made by RAND Corporation. We can see that in both cases that trading will decrease, by approximately €92 billion even if they have to use WTO rules and by an approximate of €22 billion if they maintain free trade (as a result of changes to the EU’s cumulation policy like in the car industry).
The UK is most likely the one that is going to suffer more with a predicted decrease in its GDP of 10% or even higher. However, some EU countries like Germany will also be affected as they make up nearly 25% of UK’s exports and 20% of their imports of its European trade, The Netherlands and Malta (a former British colony), are also likely to see a decrease in their GDPs.
Why is the EU taking legal action against the UK?
When Theresa May was Prime Minister, she negotiated a Withdrawal Agreement but this changed when Boris Johnson takeover. The aim of this new regulation, the International Market Bill is to “protect jobs and trade” maintaining the integrated market to ensure equal treatment in the four nations, as well as give them financial assistance where necessary. But this new regulation breaks the previous agreement, and doing that, they will break International Law. Something that the Northern Irish Secretary, Brandon Lewis, has confirmed that:
“Yes, this does break international law in a very specific and limited way. We are taking the power to dis-apply the EU concept of direct effect required by Article 4 in certain, very tightly defined circumstances”.
The reason that the Westminister government wants to modify the withdrawal agreement is that they want their domestic law to be prioritised over EU law, so the Internal Market Bill was fashioned to modify certain points like the Northern Ireland protocol. The EU asked Westminister to amend problematic parts of the bill. As this did not happen, Ursula von der Leyen, President of the European Commission, has confirmed that they are taking legal action against the UK and are bringing the case to the Court of Justice.
The UK Minister of State for Crime and Policing, Kit Malthouse, has described this confrontation as normal and has happened with other countries like Canada. However, this could set a precedent for future relations as well as possibly straining those relations too. Nancy Pelosi, speaker of the US House of Representatives has warned that if the UK violates international law, no trade agreements between the UK and US will be passed in Congress. This is relevant, knowing that they have been considered allies post the Brexit and 2016 US Presidential Election. President Trump has been a bit advocate of Brexit and was keen to establish a US trade agreement.
The EU is aware that unless they reach an agreement, more problems and disagreements among the years, including from the likes of the Internal Market Bill amongst other factors. To counteract this and the treat of creating a precedent for breaking International law, the EU is hoping to resolve the disagreement in the Court of Justice of the EU in the first order. However, the UK does not agree with going to the Hague to solves disputes between countries. It demands full autonomy in its regulatory and trade policies. This will mean that if any problem emerges, they will have to solve it democratically through negotiations or going to an international tribunal at the International Court of Justice of the Hague in The Netherlands, one of the six main bodies of the United Nations.
There is still uncertainly across sectors about that is going to happen on January 1st. Airlines, in particular, are suffering under this uncertainty. Flights could be grounded after the transition period if there is no agreement, something that will not only affect the transit of people, but also the transport of goods. The Under Secretary of State at the Department for Transport, Rachel Maclean, said that “It would not be a sensible, rational, pragmatic approach for any EU member state to deliberately stop what little air travel there currently is,”. So the possibility of the fights being grounded after the transition period is just speculation and unprovable.
With the Covid-19 situation, the withdrawal negotiations were delayed inMarch and April. When they resumed in September, both sides have been in intense negotiations. Both parties agreed that ideally, an agreement was to be reached before the 15th October, so that they will have time to ratify all the agreements before the deadline.
That date has been extended to the end of October as they still to reach an agreement. The clock is ticking, and in the past, the UK’s conservative government has said that “no deal is better than a bad deal”. A statement that they have been repeating that in the past weeks as the government has suggested that they will need to prepare for a No Deal Brexit. The EU has been more optimistic and has said that it is hoping to get, at least, a basic agreement, and until they are reached, negotiations in London will continue.