Welcome back. Do you work in an industry that will be affected by leaving the EU single market and customs union? If so, how do you anticipate the change will hurt — or even benefit — you and your business?
Please keep your feedback coming to brexitbrief@ft.com.
It has been an axiom of these four long years of Brexit negotiations that neither side ever wants to walk away from the table, but Wednesday night’s dinner between Boris Johnson and Ursula von der Leyen came pretty close.
If the two sides didn’t actually slam the door shut on each other — EU and UK negotiators are continuing to talk until Sunday when a “firm” decision will be made on the future of the negotiations — there was no attempt by either side to put a positive gloss on the exchanges.
The British entered the talks privately optimistic that some kind of fudge, or can-kick could be engineered to get a deal over the line. This would have at least papered over the philosophical divide that Brexit Briefing has dwelled on at length for the past few months.
But they seem to have left the EU’s Berlaymont headquarters fully apprised of the fact that — as the EU has been saying since 2017 — it will not do a zero-tariff, zero-quota free trade deal with the UK without an effective level playing field agreement.
The EU has been clear it can think creatively on how this might work — using review clauses, for example, and finding mechanisms to compensate for the UK’s refusal to mirror the EU’s state aid regime with an ex-ante state aid regulator — but the net outcome must be the same: an LPF deal.
If Mr Johnson really cannot stomach this, it looks as if there cannot be a deal, even if a climbdown on this fundamental, philosophical point could be sugar-coated by the French and others conceding more on fish to provide Mr Johnson with a fishy figleaf for the deal.
It is still not too late. Old Brexit-watching hands will remember the “Merkel moment” of the 2019 process, when the German chancellor was “brutally frank” on the phone with Mr Johnson about the fact that the EU would not agree to a technological trade border in Ireland — something David Frost, his negotiator, had been promising they would.
At the time, Downing Street initially erupted in fury but then the penny seemed to drop and Mr Johnson had his famous meeting on the Wirral with the-then Irish Taoiseach Leo Varadkar and nine days later a deal was done.
Obviously there are differences this time — that was a discrete issue that had an off-the-shelf fix (the Northern Ireland-only backstop), which was tweaked to become a “frontstop” with a consent mechanism to address the sovereignty/control issue.
This time, we are talking about a much broader future economic partnership agreement that sets long-standing precedents for both sides and cuts across their wider strategic outlooks. For the Brexiters the desire to be autonomous; for the commission the increasing linkage of “level playing field” in all its external trade engagements.
Such is the power of the regulatory hegemon — the “Brussels effect” means that, like it or not, the sheer size and wealth of the EU single market gives it a whip hand when it comes to setting standards and terms of trade.
It is this gravitational reality that Mr Johnson has always rejected, going right back to his resignation after Theresa May’s Chequers plan, which set him on the road to Downing Street with the help of Brexiters who shared those same gut instincts.
Mr Johnson now stands at a fork in the road. Given the firm stand he has taken, there remains space, even at the eleventh hour, to “sell” a deal that contains review clauses and cross-cutting governance mechanisms as leaving the UK “sovereign”.
Doing such a deal (the details of which would not trouble the vast majority of people) would not preclude the UK walking away, or accepting tariffs, at a later date — but in reality exercising such freedoms will come with costs that Mr Johnson’s team fear will always deter divergence.
That itself is an implicit acknowledgment of the EU’s gravitational pull, which as the former chancellor George Osborne pointed out in a merciless piece this week, will inexorably take effect, deal or no deal.
So either Mr Johnson finally acknowledges that reality and buys himself some space, or he decides for perfectly rational political and ideological reasons, to keep tilting at the Brussels windmill.
Even at this late stage, it is not clear which direction the prime minister will choose to take. The two sides talk until Sunday. There is still time to find a way out. The worry is that neither side is showing much political appetite to take it.
Brexit in numbers
One very good reason to do a deal is to maintain the stability of Northern Ireland, which this week breathed a qualified sigh of relief when the EU and the UK agreed on the implementation of the Irish protocol.
The agreement by the joint committee, which was accompanied by the British government giving up on its threat to unilaterally renege on parts of the protocol, was a real step forward — the fear now is that a “no deal” end to the transition period would again destabilise it.
To get the agreement, the EU showed some flexibility by waiving any paperwork for goods going from Northern Ireland to Great Britain and also agreeing to some short-term grace periods to allow businesses to adjust to the new Irish Sea trade border.
And yet a border it will be — with all goods from GB requiring import declarations, all plant and animal products requiring export health certificates — and trade groups are truly concerned about what that means, long term, for NI businesses and consumers.
But it is a platform on which to begin managing the Northern Irish protocol, which many hardline Brexiters opposed when they called this year for the withdrawal agreement to be ripped up as an affront to British sovereignty.
A WTO-terms exit leading to the imposition of full tariffs between EU and GB would undoubtedly strain this week’s agreement. It would deepen the divergence between the rest of the UK and Northern Ireland, which would feel even more left out on a limb.
The arrival of Joe Biden in the White House will give Mr Johnson pause for thought, but it would be naive to think that, with trucks piling up in Kent and disruption mounting as a result of a no deal, there would not be renewed calls to repudiate elements of the divorce deal.
The Brexiters have always chafed against Northern Ireland being a restraint on their actions — the Brexiter in Mr Johnson may well sympathise, but the prime minister responsible for the Union would have to weigh wider constitutional considerations in the balance.
Yet another reason to do a deal.
Source: Economy - ft.com
