Some 54 months after the UK voted to leave the EU, a deal is finally done on future trade relations between the two. The overwhelming emotion is relief; a deal, to coin a phrase, is certainly better than no deal. The return of trading terms to something akin to the days before the EU single market was born in 1993 will cause disruption. But the UK will avoid adding the chaos of no deal — a flavour of which was provided this week by the French ban on cross-Channel freight — to the economic scourge of the pandemic. This was, however, long destined to be a very thin agreement. It represents a much harder Brexit than even many Leave supporters thought they were voting for in 2016.
A deal often referred to as “Canada-style” in fact amounts to “Canada-plus”. By providing for zero tariffs and quotas on all goods, including agriculture and fish, along with some other trade facilitation measures, it goes further than other free trade pacts the EU has sealed with third parties.
But services, where the UK has a large surplus with the EU, are largely excluded. With the UK out of the single market and customs union, moreover, the new arrangements will make it harder and more expensive to trade and invest across the Channel, on both sides. It is the first free trade deal in memory that has consciously raised new barriers, rather than reduced them. Britain will begin its “independence” facing unsatisfactory frictions in the roughly half of its trade that is with the EU, especially in services.
The economic impact is sizeable. Government estimates have suggested UK national income per head will end up about 5 per cent smaller in the long run compared with remaining in the EU, due mostly to additional non-tariff barriers on trade. The cost of the immediate loss of access has been estimated at about 1 per cent of national income.
Those costs reflect Mr Johnson’s strategy of focusing on regaining sovereignty — “taking back control” — at the expense of EU market access. The extent to which he has succeeded in that goal — when it comes to control of fishing waters and fair competition provisions — will become clearer once the dust settles around the deal.
Mr Johnson’s capacity to use what sovereignty he has secured will be constrained by the realities of an interdependent world. We must hope the prime minister will respect the demands of economics, geography and politics and forge a durable relationship, as a non-member, with the EU. The real importance of the deal is that it provides for an amicable divorce and leaves the door open to future co-operation, including on issues such as security and counter-terrorism. It would be sensible, too, for a first priority of Britain’s independent trade policy to be reducing, over time, the new frictions with the EU by seeking further deals on facilitation and market access, notably for finance.
So far, the government has given little indication of its plans. A vision for post-Brexit Britain, its economy, and its place in the world, have yet to be spelt out. It is far from clear, moreover, that a government that has mishandled much of its response to coronavirus is capable of steering a traumatised country through the extraordinary period of change ahead.
The early months of next year will be taken up with managing mass vaccinations as Britain confronts a more contagious form of coronavirus. But Mr Johnson should make time for the relaunch of his government made possible by last month’s departure of Vote Leave officials from Downing Street. He should assemble a “government of all the talents”, based on competence rather than blind loyalty and Brexiter zeal. Brexit is done. His government has reset relations with the country’s biggest trading partner, opening a new chapter in UK history after its 47-year membership of the EU. Now it must reset itself.
