To Concede or Not to Concede, That is The Question

Etienne Ansotte – EC – Audiovisual Service

In our latest piece on Brexit, we discussed the developments in the Brexit saga up until the second half of October. Since then, a lot has happened, so with this next piece we would like to update you on what you might have missed and on how things may proceed from here.

Across the Pond

The first and probably most important development comes from across the pond. You may not have heard but the US will soon have a new president – this time one who doesn’t share the philosophy of Johnson and his government. Instead, soon-to-be President Biden is a strong advocate for multilateralism, which essentially means international cooperation, and in favour of European integration. In fact, he takes pride in his Irish heritage and because of this he takes the Irish border problem very seriously.

In Donald Trump, Johnson’s government had an ally who disliked the EU and who might even have realised the US-UK trade deal that many Brexiteers dreamed of. Under Joe Biden, however, the US is set to continue where it left off four years ago and will not accept any trade deal with the UK if it jeopardises the peace in Northern Ireland. In short, Biden’s election means that the UK will soon be diplomatically isolated on the world stage.

The negotiating table

In the meantime, despite Johnson’s threats to walk away from the negotiating table (‘for real this time’), the negotiations between the UK and EU have continued and have even been intensified. Yet, a deal still has not been reached and time is in short supply because the transition period is coming to an end on January 1st 2020. What makes things even more complicated is that much of the time that is left will not be spent on the negotiations themselves, but on the political and legal difficulties that will follow the conclusion of a deal, if one is struck at all.

If so, both sides will have to implement the trade agreement into their respective legal systems. For the UK, this can be done rather easily, as the deal will merely need to be approved by the UK Parliament. The real difficulty here lies with the EU and its complicated decision-making procedures, as the trade deal is likely to be a so-called ‘mixed agreement’. Under EU law, this basically means that the deal covers some of the EU’s core competences (such as trade and the customs union), as well as those of the individual Member States (such as investment and foreign policy cooperation). This would mean that, not only the EU’s Council of Ministers and the European Parliament need to give the agreement their consent, but every single national parliament as well. In addition, some Member States, by their constitutional makeup, require regional parliaments to give their approval as well. Thus, if a deal is indeed struck, a situation may arise in which more than 30 (!) parliaments need to approve of it – one would almost think that EU Member States are sovereign countries.

The UK Government is likely to be very well aware of this weakness and is probably trying to exploit it by dragging on the negotiations in order to force the EU to make concessions. Fortunately for the EU, ‘mixed agreements’ can be applied provisionally to the extent that it covers core EU competences (again, think of trade). The national parliaments could then ratify the deal later, as happened with the EU-Canada trade agreement (called CETA) in 2016 when a regional parliament in Belgium refused to give it its approval. Still, this will undoubtedly make things very cumbersome and time consuming – just ask the Belgians.

Deal or No Deal

So, with a new US-President who is unsympathetic to his cause and the EU not budging to his threats, what options does Boris Johnson have left? Well, academics and journalists largely distinguish between two main options: a ‘thin’ free trade deal and a no-deal.

Concerning the first, that of a free trade deal between the UK and the EU, it must be said that this will not be as deep and comprehensive as many may expect. Since time was limited, only a small number of goods could be exempted from tariffs and quotas under the Free Trade Agreement that is currently being negotiated. Furthermore, taking into account that the UK will have left the internal market and the customs union, there will have to be border checks to make sure that products meet the requirements set by both sides and that the necessary paperwork has been done by the traders in question. Simply put, even with a free trade deal, there will be significant trade disruption and economic damage because there will no longer be ‘frictionless trade’ between the UK and the EU. 

Many believe that Boris Johnson will agree to such a deal for the simple reason that he needs one because that is what he promised his voters – even if that trade deal is economically worse than the status quo. Yet, if he does so, he will also bear the responsibility for the trade disruption and for the economic damage.

This brings us to the second option: that of a no-deal. Simply put, economically this would be even worse than a thin trade deal. For Boris Johnson, however, it would have the political advantage that he could shift the blame for the absence of a deal to the EU: ‘We were prepared to compromise but the evil EU didn’t want to make concessions!’.

But what if there were a third option?

Maybe, just maybe, both sides could agree that the status quo (i.e. frictionless trade in return for the UK’s presence in the customs union and single market) is better than both a thin free trade deal and a no-deal. Of course, the time to extend the transition period has long since passed. With the UK’s refusal to do so before the first of June of this year, the transition period is to end on January 1st of the next. Legally, it would therefore be very difficult to make this work. And yet, EU lawyers agree that with a new treaty, it could still be possible. This of course is provided that it is in the political interest of the UK Government, and Boris Johnson in particular.

If he does agree to such a deal, that would essentially keep the UK in the EU, which would not make himself popular with his backbenchers and other Brexiteers. Still, polls suggest that many who voted for Brexit in 2016 now regret that choice and realise that many of the promises that were made simply don’t match up with reality. Furthermore, pressure from the UK trade lobby (including the fisheries industry!) is mounting on Boris Johnson, as they know that Brexit, and a no-deal in particular, would be devastating for the UK economy, especially during the worst pandemic in over a century.

At the core of the choice for a deal or a no-deal lies a conflict between the economic interests of the UK on the one hand, and the political interests of Boris Johnson on the other. It is only a matter of time before we know which one has come out on top.