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Coronavirus and a no-deal Brexit?

June 4, 2020

June is a critical month for EU-UK talks on a trade deal. If no progress is made this month, a no-deal Brexit looks inevitable. Is it possible that's because of, rather than in spite of, the coronavirus crisis?

Union Jacks being waved
Image: Getty Images/AFP/D. Leal-Olivas

On June 23, four years will have passed since the momentous Brexit vote. For more than three of those years, a "no-deal Brexit" perpetually loomed as a distinct and disastrous possibility.

The sting was seemingly taken out of that doomsday scenario last October when British Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar struck a deal of sorts on arrangements regarding the British border on the island of Ireland.

That paved the way to the Withdrawal Agreement and on January 31, the UK finally left the European Union.

A one-year transition period up until December 31 meant that 2020 was to be the year in which the truly hard yards were finally walked. The EU and the UK would thrash out the bones of their future relationship and edge towards some kind of normality.

Then, as if by the design of some demonic deity, almost as soon as Brexit finally happened, the worst global pandemic in a century struck. It has hit the EU and Britain especially hard. Leaving mass death and economic calamity in its wake, COVID-19 has understandably dominated every agenda this year.

Yet Brexit trundles on. And despite that apparent new dawn late last year, the no-deal scenario is back, except this time in a more permanent form.

Pandemic blues

The pandemic has greatly disrupted the first few months of EU-UK negotiations. Even before it hit, optimism was extremely low on the EU side that anything substantial could be agreed with the UK in such a short timeframe.

This week, negotiators began their final scheduled round of talks. June is a crucial month. If the British don't request an extension to the transition period by the end of this month — and, if as appears to be inevitable at this point, no free trade agreement is in place by the end of the year — then on December 31, 2020, the UK will no longer have any formal trading relationship with the EU. Under WTO rules, it will become a so-called "third country."

That is the new "no-deal" Brexit. And for several reasons, it remains a real possibility.

The EU-UK talks have gotten bogged down in all the expected complications so far:fishing rights, workers' rights, environmental regulations and state aid. There is still major uncertainty over how the so-called Irish protocol will work. Even in a smooth, openended negotiating environment, these would be difficult issues to resolve.

Added to this, COVID-19 has restricted the negotiations in terms of physical movement but also mental movement. The crisis has commanded vast amounts of attention and resources that otherwise might have been directed towards the EU-UK talks.

UK Cabinet meeting
Both the UK government and the EU have been criticized for their handling of the pandemic.Image: picture-alliance/Photoshot

Chaos is a ladder

But has the pandemic created another even more fatal consequence for a deal?Some have argued that hardline Brexiteers in the UK government will use the economic disaster wrought by the pandemic as a kind of fog in which the economic consequences of a no-deal Brexit might be more easily cloaked than they would in "normal" times. To borrow the dictum of a Machiavellian character from the hit TV show Game Of Thrones: "Chaos is a ladder."

"Post-pandemic, it appears a fatalistic logic has taken hold in London: given the extraordinary economic hardship from COVID-19, could citizens really distinguish between that and the economic pain of defaulting to WTO tariff schedules with a no-deal or near-no-deal trading relationship with the European Union?" wrote Heather Conley at the start of May in a paper for the Center For Strategic and International Studies, a think tank based in Washington DC.

Yet she believes that the Johnson government, both because of its handling of the pandemic and the Dominic Cummings scandal, is becoming increasingly wary of a no-deal Brexit.

"I believe this is, in part, motivating the UK government to not cut off negotiations with the EU at the end of June and to keep even stalled negotiations going. It won't change the negotiations dynamics, but it is a nod to the pressure Number 10 feels to not open a second unpopular political front at the moment," she told DW.

Jacob Rees-Mogg in Parliamnent
Many in the Conservative Party, such as Jacob Rees-Mogg, pictured here inappropriately lounging on the House of Commons benches, want a no-deal Brexit.Image: picture-alliance/dpa/House of Commons

Cynical times

Andrew Goodwin, chief UK economist with Oxford Economics, says it would be "deeply cynical" for the UK government to use the COVID-19 crisis as an opportunity to allow a no-deal Brexit to happen.

However, he pointed out that the idea has some appeal to hard-liners.

"You can see some kind of logic to their argument in that we're expecting GDP to fall by more than 8% this year and then to rise by about 8% next year. We see the impact of a no-deal Brexit as knocking about 1.75% off GDP over two years to the end of 2022," he told DW.

However he believes such a scenario would have major ramifications "politically and morally".

High-level deals

The serious economic consequences of a no-deal Brexit are well-known at this stage. Yet if the British government is to avoid it becoming part of a surreal backdrop to the already surreal reality of the pandemic, it needs to act fast.

According to the Withdrawal Agreement, it can request a two-year extension, which would give the sides until December 2022 to negotiate a deal. However, it must make that request within the next four weeks. Johnson and his colleagues have repeatedly said they will not do that but he and his government have consistently gone against their word in various areas, both in terms of Brexit and elsewhere.

Ursula von der Leyen, Boris Johnson
European Commission President Ursula von der Leyen and British Prime Minister Boris Johnson are to meet in June.Image: picture-alliance/Photoshot

Goodwin thinks an extension would be the "pragmatic" thing to do from the UK side but Conley cautions that pragmatism has been a rare commodity during the process so far.

"A no-deal Brexit would deepen and further exacerbate the UK's current economic challenges for which it is not prepared," she said. "Brexit has always been about emotion overriding reason, however. Fisheries are the perfect example — 0.1% of the UK economy but a very important national issue. I do not see evidence that reason will overcome this emotion any time soon."

With the clock ticking and the talks apparently going nowhere, all eyes are now on whether a key political meeting between Johnson and European Commission President Ursula von der Leyen will take place later this month. While an EU Commission spokesperson referred DW to the fact that the EU-UK Political Declaration "makes reference to a high level meeting that is to be held in June", he did not confirm a date or format.

Like the now famous breakthrough meeting between Johnson and Varadkar on the Wirral, Brexit watchers are left to wonder if another "high-level" pow wow will break the latest impasse.

Arthur Sullivan
Arthur Sullivan Reporter and senior editor focused on global economic stories with a geopolitical angle.@drumloman86