Brexit end game (for the time being) starts next week

Political analysts believe that Taoiseach and Fine Gael leader Leo Varadkar did not help his cause in the general election by going on about Brexit.
Brexit end game (for the time being) starts next week
European Commission President Ursula von der Leyen in the recent European Parliament debate on a proposed mandate for negotiating a new partnership with the UK, watched by the EU’s chief negotiator, Michel Barnier. Picture: AP Photo/Jean-Francois Badias
European Commission President Ursula von der Leyen in the recent European Parliament debate on a proposed mandate for negotiating a new partnership with the UK, watched by the EU’s chief negotiator, Michel Barnier. Picture: AP Photo/Jean-Francois Badias

Political analysts believe that Taoiseach and Fine Gael leader Leo Varadkar did not help his cause in the general election by going on about Brexit.

He might have been better served by a simple message like the “Get Brexit Done” that helped Boris Johnson and the Conservatives to a landslide election win in December.

Maybe “We’ll worry about Brexit later” would have worked?

The time to worry later starts next Monday, February 24, when the European Commission negotiation team will receive its mandate for the negotiations with the UK on a free trade agreement (FTA).

Such trade deals have historically taken several years for the EU to negotiate and ratify, but there are only about 10 months to agree this deal, the deadline (as it stands) is December 31 next.

It seems that the best that can be hoped for by the end of 2020 is a ‘bare bones’ agreement relating to trade in goods only, prioritising those areas where failure to reach an agreement this year would result in an economically damaging cliff-edge situation.

That would leave many issues in the EU-UK relationship unresolved into 2021.

Additional temporary deals and negotiation of further agreements would have to follow.

All that did not concern the electorate in our recent general election.

In an exit poll, just 1% said Brexit was a factor in how they voted.

This is understandable, because it will be business as usual in the transition period until December 31, provided for by the Withdrawal Agreement, intended to give the EU and the UK time to finalise the terms of their divorce.

The only difference currently is that the UK has ceased to participate in EU-decision-making, though it remains aligned with the EU and its regulatory regimes, and still pays into the EU budget.

So voters didn’t worry about Brexit; however, the companies that employ them cannot be so complacent, and have to consider the longer term.

Bord Bia advises its clients doing business with the UK to attend Customs Readiness Training, now that the UK has left the EU.

Their next half-day training programmes with experts from BDO will be in the Bord Bia office in Dublin on March 12 and March 25.

For business, there is still huge Brexit uncertainty, three and a half years after the UK vote to leave the EU.

For example, will the current transition period, in which nothing has changed, be extended beyond December 2020, if necessary to allow FTA negotiations to continue (Article 132 of the Withdrawal Agreement allows for the transition period to be extended by up to two years by mutual agreement at any time up to July 1, 2020)?

There is also uncertainty over how real is the threat of a ‘no-deal’ cliff edge at the end of next December?

One thing that is certain for business people is that, one way or another, the frictionless trading they still enjoy for this year at least between the UK and the EU will cease once the transition period ends, or an FTA is agreed.

Even if both sides wish to remain aligned on regulations, there will have to be customs checks (for example for conformity with rules of origin). Senior UK minister Michael Gove recently confirmed customs procedures and regulatory checks will inevitably follow when the UK is outside the EU single market and customs union.

However, separate measures would apply to trade between the UK and Northern Ireland, and between Northern Ireland and Ireland

Traders in the EU and UK will have to submit customs declarations and be liable to a range of other checks at the border, including SPS and food safety.

Those will all stand, even if an FTA is agreed.

Without an agreement, in a no-deal situation, trade between the EU and UK on World Trade Organisation terms could mean significant tariffs added onto the prices of goods for both sides (unless the UK unilaterally waives customs duties for some goods for a further period), on top of the customs and regulatory checks.

After a no-deal Brexit, either side could request a new, phased transition period, to avoid a regulatory cliff edge.

But the other side might not agree.

For example, EU access to British fishing waters, and vice versa, is likely to be particularly contentious.

Many believe that a no-deal outcome poses a bigger challenge for the UK than for the EU, because the EU already has put more unilateral measures in place to minimise the impact.

A no-deal has been made more likely by the UK turning its face against an extension to the transition period, to allow FTA negotiations to continue.

This is now prohibited in UK legislation.

Any extension would also require agreement on a continuing UK financial contribution to the EU budget.

Hopefully it will not arise; after all, the EU appears to have conceded that some form of FTA should be possible by the end of the year.

The UK says its FTA goal is full access for goods without quotas and on a zero tariff basis.

The EU says that outcome will require the UK maintaining a “level playing field”, by remaining aligned with the EU on environmental protections, regulatory protections, competition, social policy, environment, and state aids.

However, the UK has signalled it plans regulatory divergence.

The EU fears any concessions in these areas would undermine its Single Market.

There has reportedly already been a late surge of EU and other international companies establishing in the UK to take advantage of what they hope will be a more liberalised regulatory environment — exactly what the EU fears, which is why it will demand that any trade deal with the UK include limits on divergence.

The question of the Northern Irish border will also need to be fully resolved.

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