Can Britain really do the trade deal it wants with the EU? | Business| Economy and finance news from a German perspective | DW | 09.01.2020
  1. Inhalt
  2. Navigation
  3. Weitere Inhalte
  4. Metanavigation
  5. Suche
  6. Choose from 30 Languages
Advertisement

Business

Can Britain really do the trade deal it wants with the EU?

We are on the brink of Brexit finally happening — meaning more EU-UK negotiations are around the corner. For the first time in years, Britain is clear about what it wants from the EU. But what is that and can it be done?

What Britain wants. It sounds like a bad romantic comedy and in some ways, maybe that's what this whole Brexit business is. During the torturous days of Theresa May's premiership (and the early days of Boris Johnson's), it was next to impossible to say with any certainty what exactly Britain wanted with regards to Brexit, the EU and everything in between.

Practically nothing could get through the House of Commons. Everything ranging from the softest of Brexits to the hardest was apparently unpalatable to a majority. "Britain must tell us what it wants!" was a pleading refrain of eurocrats this time last year.

But times have changed dramatically. Johnson now has a thumping majority and the British parliament is apparently at his mercy.When he met new European Commission President Ursula von der Leyen for the first time on Wednesday, he was able to talk with far more certainty about British desires than May ever could when she met with Jean-Claude Juncker.

Over the next eight weeks, the EU will get its negotiating ducks in a row and from March, negotiations on the future UK-EU relationship will begin, with the primary focus being on trade and how UK-EU commerce will look in the future.

For the first time since the entire Brexit process began, there is a degree of consensus on the British side as to what it wants. So what exactly is that and is it achievable?

Watch video 01:54

Great Britain on course to leave EU on January 31, 2020

I'll tell you what I want, what I really, really want

Following the meeting with von der Leyen, Johnson's Downing Street office released a statement. It said the prime minister had "reiterated that we wanted a broad free trade agreement covering goods and services".

It said Johnson had emphasized that any future relationship could not involve any kind of regulatory alignment or European Court of Justice jurisdiction.

It said the UK would retain control over immigration and its fishing waters, and once again, it included Johnson's vow not to extend the transitional period beyond December 2020. In other words, no trade deal by then, then no extention of the talks and the UK-EU relationship proceeds on World Trade Organization terms.

The key line came at the very end. "The PM said the UK was ready to start negotiations on the future partnership and Canada-style FTA as soon as possible after January 31."

Ardent Brexiteers have spoken often of the "sunlit uplands" that await a post-EU Britain, garlanded in trade deals. CETA (Comprehensive Economic and Trade Agreement), the official name of the EU-Canada trade deal, is where the sun shines brightest in Johnson's world.

That's the trade relationship he has most consistently spoken of, in colorful terms. "Super Canada-plus" is the dramatic name he tends to give it.

O Canada!

CETA has removed around 98% of tariffs on goods traded between the EU and Canada, making it much cheaper to sell each other's goods in the other jurisdiction. It also sees "cooperation" on standards, limiting the need for safety and quality checks.

But significant trade barriers still exist in the EU-Canada relationship. It is not a customs union or single market, meaning it does not remove border controls. There are also signficant restrictions on financial services  — a key plank of the British economy.

Tariffs and quotas also apply across the agricultural sector. And any agricultural products coming from Canada into the EU must comply with the EU's standards.

It's important to note that modelling a future EU-UK deal along the lines of CETA comes with a major caveat, namely the massive difference in the volume of trade between the jurisdictions. Only about 10% of Canadian trade is with the EU compared to around 45% of UK trade.

It's not just the volume of trade that is different. The nature of trade is vastly different too. Canadian-EU trade falls along quite specific lines, whereas UK-EU trade is extremely wide-ranging, encompassing a far wider variety of business and commerce.

As a result, a CETA-style EU-UK deal would require agreements on many areas not even broached in the Canada deal.

Critics of those advocating a Canada-style deal say such a negotiation would essentially involve an unprecedented erection of trade barriers, considering the fact that for the last 47 years, the EU and UK have been, in trade terms, one and the same.

"In the words of one well-placed trade analyst," wrote former UK Deputy Prime Minister Nick Clegg in 2017, "this would be "the largest programme of re-regulation and re-protection" of trade since the disastrous introduction of the Smoot-Hawley tariffs in 1930. Far from being a free-trade agreement, it would be a trade restriction agreement — an act of protectionism by the UK."

Infografik Abkommen die neu verhandelt werden müssen nach Brexit EN

11 months? Try nine

The Downing Street statement's ruling out of "any kind of alignment" with EU regulations was a nod towards Johnson's long-stated intention for the post-EU UK to establish itself as a low-regulation competitor to the EU.

It's on this point that the EU is steeling itself for most. Ahead of her meeting with Johnson, von der Leyen made a speech at the London School of Economics in which she laid the ground for the EU's position.

"Without a level playing field on environment, labor, taxation and state aid, you cannot have the highest quality access to the world's largest single market," she said. "With every choice comes a consequence. With every decision comes a trade-off."

So, what can be done before the end of 2020?

Negotiations began for CETA in May 2009 and were concluded in August 2014. It took another three years before it was ratified and came into legal effect. In terms of complexity, those negotiations would have nothing on an EU-UK negotiation along similar lines.

Contrasting von der Leyen's warning with Johnson's vow not to allow talks go beyond December 31, 2020 and the fact of how long it took the Canada deal to be done means there is only one logical conclusion as to where things will stand next Christmas: no deal will be done, and the UK will leave on the terms of the Withdrawal Agreement alone.

Such a conclusion assumes the politicians will do what they say. A foolish position to take perhaps, given some of the characters involved. But if Britain truly wants what it says  — one of the most complex trade agreements of all time done in the space of nine months — then that's the only sensible conclusion to make.

DW recommends

WWW links

Audios and videos on the topic