London – Negotiators in recent days have felt close to harassing the post-Brexit deal between Britain and the European Union. The time is coming to an end with just two weeks to go until the December 31 deadline as Britain withdraws from the European Union’s economic sector, single market and customs union.
This could mean heavy taxes on merchandise, gridlock ports and certain types of food could disappear from British supermarket shelves, as well as conflicts over fishing rights.
The trade arrangement between the two parties will default to the rules of the World Trade Organization and will have a huge impact on businesses on both sides of the English Channel, but especially in Britain. Here’s why the interlocutors talk about the “moment of truth” in an effort to avoid the chaotic final chapter of the Brexit saga.
How bad can a ‘no deal’ be?
Quite bad. Britain has spent decades integrating its economy with continental Europe and companies are free to import and export goods without paying taxes – known as tariffs. If a trade deal does not arrive it will change, tariffs will be imposed on a range of goods crossing the border. The car, for example, will attract a 10 percent tariff. Farmers could also be hit. The average tariff on lamb is 48 per cent – some exporters are at risk of extinction and dairy items will be subject to about 35 per cent tariff.
The other big risk is the extra bureaucratic clogged ports. Some of this is mandatory on January 1 – with or without trade deals – as investigations will increase, and traders will have to complete millions of custom declarations that they did not have before. But no deal will make this any worse, and if the ports on one side of the English Channel get jammed, the truck gets stuck on both. Under what the government calls a “reasonably bad situation,” 20,000,000 vehicles can be put on the motorway with a delay of up to two days. In Kent, in the south of England, a 27-acre site is being built to operate streamlined trucks, and other contingency plans include deploying portable toilets for stranded drivers.
Okay, so that’s bad news if you’re a farmer, automaker or truck driver, but what about others?
About a quarter of the food eaten in Britain is produced in the European Union and the disruption comes at a time when it is winter, and imports of fruits and vegetables are high. Food prices are expected to rise and a supermarket chain estimates that tariffs could increase British food bills by up to two per cent. There may also be a shortage of some, mostly destroyed, products. The supply of others, including some drugs, could also be hit, although the government says it has contingency plans to use a variety of ports and fly supplies, including the Covid-19 vaccine.
Surely all this will hurt Europeans too?
That’s right, and Britain will raise money in tariffs because it imports more goods than it exports to the European Union (in 2019, it could post a gross trade deficit with trade billion billion dollars or about 105 billion dollars). The problem is that the European Union is Britain’s largest trading partner and accounts for 43 per cent of its exports. No European nation would be harmed so badly by a deal other than Ireland. An official estimate suggests that the lack of trade deals will boost Britain’s economic output by 2 per cent and increase inflation, unemployment and public borrowing.
Will the planes keep flying?
Basic agreement is possible to keep the planes flying and run the Channel Tunnel train. The European Commission has announced contingency plans to maintain air safety measures to avoid grounding aircraft, and to keep road fares and passenger transport links open for six months. However, this must be reciprocal, and the European route freight rules come with some “fair competition” conditions that Britain will not accept. The European Union has also proposed keeping fishing rights the same for a year, allowing European boats to continue to fill British waters, although Britain has rejected the idea.
Speaking of fishing, what would the situation be there?
A big mess. Without an agreement, French, Dutch and Belgian boats would lose access to British waters, where they have had fishing for decades (or in some cases centuries). That could lead to a confrontation at sea and Britain has put four ships on standby to save its waters. But there could be major difficulties for British fish exporters to sell on the profitable continents market and French fishing boats could disrupt trade by blocking ports.
Any other problems?
Plenty. There will be less collaboration on security and data sharing and Britain will lose its current rapid access to European databases on criminal records and fingerprints. Nor is Britain likely to get more co-operation under rules that would allow its financial services to trade on the industry continent. And Britain is unlikely to have free health care in the European Union or enjoy student exchange programs. But the right (and ultimately) of European citizens already living in Britain is guaranteed under the Brexit withdrawal agreement. There are also rules in Ireland and to avoid strict borders Britain has threatened to scrap parts of the treaty.
After keeping an eye on the non-deal abyss, can anyone negotiate a deal?
Although most of the issues have been resolved, there is no certainty that any premature settlement will be reached. But with the issues at stake, analysts see no deal as a lasting solution. Britain is a small party in these trade negotiations, but its economy is large and it is on the doorstep of the European Union. At some point, both parties will only have to agree on trade But on everything from fisheries to financial services. The question is whether this New Year’s Brexit crisis will happen before or after.
