Deal between London and Brussels struck, but problems remain

Brexit, or no two victories on the same battlefield

Deal between London and Brussels struck, but problems remain
The race for a result in the Brexit negotiations between London and Brussels ended on 24 December with the news that the free trade agreement defining the relationship between Britain and the European Union after the “divorce” has finally been accepted. Both sides are applauding themselves: UK Prime Minister Boris Johnson said: “Everything that was promised to Britons in the 2016 referendum and general election has been realised in this deal… We have regained control of our money, borders, laws, trade and our fishing waters… We have signed the first ever zero-tariff and quota-based agreement with the EU… This is the biggest bilateral deal signed by the parties, it regulates trade, which in 2019 was £668 billion.” In a word, a victory.

In Brussels, European Commission President Ursula von der Leyen is also clapping her hands, spreading thanks to her team, which has been battling with London for four years over how much of a pay-off it should lay out. She said the EU had taken a position of strength in the negotiations because a hard break would hit the 66 million-strong UK harder than the 450 million-strong EU. This, it should be understood, is also a victory.

But no two victories on the same battlefield

It is worth recalling that since April 2017, when the outlines of the EU’s Brexit negotiating strategy were approved in Brussels, the EU offered to pay the UK about €60 billion “to meet financial obligations” and then raised the bill of billions to 113. It was only after this “settling of sins” that it expressed its willingness to discuss Brexit further.
However, the UK government only agreed to pay 45 billion euros. By blocking London’s free access to the European single market, Brussels banned separate negotiations with the UK, declaring that the conditions for maintaining access to the European single economic space are indivisible. However, a trade agreement preserving free access to the European single market for the British has nevertheless been signed.

The hottest negotiating point, discussed until the last day and even the last hour, was quotas on fishing in British waters for EU countries. Brussels was prepared to return 18 per cent of these quotas to London with the right to revise them only after 10 years.
Boris Johnson defiantly deployed warships in the North Sea to protect the fisheries and defended a 25 per cent quota on catches with the right to review after 5.5 years. Then Brussels will have to prove the right to more. And in fact, the British press says, Boris Johnson was left with 28 key points of contention in the deal, while Ursula von der Leyen was left with only 11.

The trade agreement signed is not exactly business as usual, says The Economist. It does not suggest closer trade ties, but instead calls for independent arbitration to oversee that UK-EU trade relations are equal.

Britain has categorically rejected the EU’s demand to follow EU rules in the provision of state subsidies, labour protection, technological and environmental production requirements “to ensure that British firms do not gain an unfair competitive advantage on the continent”. And in the end, European rules were forgotten and a special mechanism was set up whereby parties are given the right to respond with duties on specific goods if their supplier is relieved by subsidies, benefits or reduced requirements for working and production conditions. In doing so, an arbitrator rather than an EU court has to authorise the application of tariffs to compensate for losses.

Zero tariffs and a free trade agreement, visa-free travel, balanced access to markets and maritime resources and no commitments to the European Union in foreign policy and defence cannot fail to be considered a great success for Boris Johnson. However, there is a “but”… All of this concerns trade with the EU in goods, which generate only 20 per cent of UK GDP, while services, especially financial services, account for 80 per cent. This is particularly true of the banking industry. For British banks, insurers and brokers, access to the EU market will be incomplete at best, but that is the subject of the next battle between London and Brussels. The EU has yet to work out the terms for regulating financial services. Equally urgent is a decision on free data transfer, a critical component of modern cross-border business. There is no mention of mutual recognition of professional services qualifications in the adopted agreement. And for Northern Ireland, which remains in the single European market and customs union, the introduction of border and customs controls in the Irish Sea does not solve the problem of maintaining the country’s territorial integrity, but only exacerbates it.

In addition, the 2,000-page trade agreement has yet to be ratified. Boris Johnson may not worry too much after he initiated an early parliamentary election, in which the ruling Conservative Party won with 365 out of 650 MPs in the lower house of parliament. As we recall, Boris Johnson’s main election promise was to get Britain out from under Brussels.

Another thing is the European Parliament, which will no longer meet this year. Besides, in the EU all 27 member states have to approve the agreement. Whether they will do so is difficult to say, and in January there could well be a no deal situation, i.e. “no deal”, which will create border crossing problems and administrative confusion on both sides of the Channel.

One thing is clear so far: on 1 January 2021, there will be a customs border between Britain and the EU, with all the associated bureaucracy, expense and confusion.

Elena Pustovoytova


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