A deal is within reach. Crashing out would be an overwhelming failure of statecraft

The two parties must not sacrifice jobs on the altar of distrust, says a former head of the Brexit department

December 11, 2020
 Aaron Chown/PA Wire/PA Images
Aaron Chown/PA Wire/PA Images

The saga drags on. Another deadline has come and gone, a new deadline has been set. Sunday 13th December is primed to be the decisive moment. But don’t bet on it. As the two sides continue to wrangle, neither wants to be the first to step out of the ring. Negotiations might grind on right up to Christmas. All we know for certain is that, come what may, the UK leaves the transition period at the end of the year. The world changes on 1st January, with a deal or without.

It is extraordinary that we have reached this point. Over four years since the UK voted to leave the EU, we still don’t know what our relationship will be with our most important trading partner. With literally days to go, thousands of businesses in the UK and the EU cannot plan ahead with any certainty on whether tariffs will apply or on the wider rules for trade in both goods and services.

It’s not just about trade. Those tasked with keeping us safe do not know whether or not we will have even a minimal deal on internal security with the EU. Universities don’t know what the nature of future collaboration on research might or might not be. We don’t know whether we will have deals on civil nuclear cooperation, on energy and carbon trading, on transport or on professional qualifications. Businesses don’t know whether the EU will reach a decision on data adequacy to allow data to flow freely between the EU and the UK; nor whether the EU will grant an equivalence decision for financial services.

Details of the deal that is on the table are not all clear, though the broad outline has been apparent for a while. The headline is zero-tariff and zero-quota access to respective markets. This puts the potential UK-EU trade deal ahead of those that the EU has struck with countries like Canada, which still include some tariffs and quotas, but in most other aspects it is not ambitious. Goods will be subject to a new range of non-tariff barriers, including the requirement for customs declarations, security declarations, regulatory clearance, rules of origin checks and, for certain agri-food products, export health certificates. Much of trade in services will fall back on home state rules—those set by each member state, which vary across the 27.

So this will be a thin deal, certainly compared with what the UK has had as part of the single market. But no deal would be much worse, for both sides. Tariffs would hurt important sectors like agri-food, automotive and, ironically, fisheries. The risk of disruption at the border as the new frictions kick in would increase markedly. All other aspects of the EU-UK relationship, other than what is set out in the Withdrawal Agreement, would be reset to zero. This is not an Australian deal; even Australia has agreements with the EU, on things like mutual recognition, passenger name records and scientific cooperation.

Economically, no deal is bad news for both the UK and the EU. Many point to the substantial surplus in goods trade that the EU has with the UK. No deal will certainly hurt the sectors and regions that drive those exports. But overall this would hit the UK harder. UK exports of goods and services to the EU account for around 13 per cent of UK GDP; EU exports to the UK between 3 and 4 per cent of EU27 GDP. In other words, the EU will be better placed to absorb the shock of a no-deal Brexit.

No deal would also impact on the UK domestic political situation in unpredictable ways. Any government wanting to move on from Brexit might think it worth pushing the extra mile to get this sorted. Not doing so will mean that Brexit-related issues continue to dominate the headlines well into next year as the fallout of no deal ricochets around trading and wider relationships. In the aftermath of a failure to agree a deal, the inevitable blame game will further sour relations; it might take months before both sides are prepared to swallow political pride and get back to the table.

Moreover, no deal will interact with the increasingly volatile political situation within the UK. It will provide a springboard for the SNP to redouble its efforts to persuade voters who voted “No” to independence in 2014 and “Remain” in 2016 to throw in their lot with the nationalists. It will add further uncertainty to an already complex and fragile post-Brexit situation in Northern Ireland.

With a deal that is probably 95 per cent done, politicians on both sides are going to have look hard in the mirror over the next few days to work out whether the remaining issues are really worth the risks of no deal. On fisheries, an industry that would be clobbered by no deal in both the UK and the EU, there is surely a compromise that gives some certainty of access to UK waters for EU boats, at least for a generous transition period, alongside an increased share of catch for the UK fleet.

On the level playing field, the argument seems to have boiled down to how to deal with a hypothetical situation in which UK standards have diverged so markedly, on state aid in particular, as to pose a practical competitive threat to the EU. With political will, it should not be beyond the wit of the negotiators to devise a solution that gives the EU the assurance it needs that it would not be exposed long-term to unfair trading terms and the UK the assurance it needs that it will not have to blindly follow changes in EU rules or be exposed to an arbitrary and unilateral imposition of new tariffs.

But will they get there? Right now, this all looks horribly like a trade of distrust and stubbornness for jobs and livelihoods. There is still time to do a deal. Letting this slip away in extra time would represent an overwhelming failure of statecraft.