As we all now know, Big Ben did not ring out as the UK left the European Union at 11pm (midnight, Brussels time) on 31 January 2020. Official celebrations were muted and, over in Brussels, the union jack which has flown outside the European Parliament for nearly 50 years was quietly removed and donated to the EU museum. Three years of sound and fury came to an anti-climactic end as Brexit was finally “done”. This was probably a fair reflection of the importance of the moment because despite the significance given to the date by determined Brexiters, it proved to be the day when very little actually changed.
Travel, trade and business have all continued undisturbed and can be expected to do so for the next 11 months. This is because the Withdrawal Agreement, now signed and ratified by both the UK and EU, requires a transition period which is due to last until 31 December 2020. This was put in place in order to allow the two sides to enter into negotiations on their future relationship in areas including trade, fisheries, services and security. During this period, the UK remains a member of the Single Market and the Customs Union and will continue to abide by EU law.
Provision was originally made for that period to be extended by one or even two years, recognising that these negotiations are likely to be difficult, complicated and time-consuming. However, Prime Minister Boris Johnson committed himself during the recent general election to just one year and he insisted on this being written into the European Union (Withdrawal Agreement) Act 2020 (which can be found at
www.legislation.gov.uk/ukpga/2020/1/pdfs/ukpga_20200001_en.pdf for anyone who would like to read through its +100 pages).
So what has changed?
If the UK is still obeying all EU rules and regulations, in what way did 31 January mean that it had left the Union? The most significant change is that it has left that body’s governing institutions: British MEPs have collected their severance pay and will no longer be part of the European Parliament; the UK has given up having a member of the European Commission; and UK Ministers no longer attend EU Council meetings (which means that they no longer have any say in adopting the laws which the UK still has to obey). Rather ironically, given its importance to Brexiters as a symbol of EU “dominance”, the Court of Justice (CJEU) will still rule on matters affecting the UK during the transition period. There have in fact been suggestions from Brussels that it should be the final arbiter in any unreconcilable disputes that arise between the two sides during the trade talks.
The question that has been exercising diplomates and politicians in London and Brussels is simple: can a deal be agreed in such a short time frame? And it is a very restricted period given that there will not even be the 11 months left in the transition phase. This is because both sides have to be given a mandate before they sit down to begin talking and it will be the end of February before the 27 Member States are ready to instruct the European Commission. Whitehall will also need to get its act together, so early March is the likely start date for negotiations.
If they are to be concluded before the December deadline for the UK to finally leave the Union, then agreement will be needed by the Autumn in order to allow both the UK and European Parliaments to debate and agree any putative deal. Experts have suggested that this leaves enough time for no more than seven “negotiating cycles”. Can this really be done?
It all depends
Ever since the referendum there has been a group of MPs and others insisting that this will be “the easiest deal in history”. Their argument is that no two potential partners have ever started from a position where they are in total alignment with each other. The EU can already be assured that the UK matches all its regulations, rules and standards so negotiations should be swift and agreement certain. Indeed yes, the EU has replied: agree to maintain those standards and a deal can certainly be done quickly. It will not, however, have welcomed the recent statement by Chancellor Sajid Javid when he said: “There will not be alignment, we will not be a rule-taker, we will not be in the Single Market and we will not be in the Customs Union — and we will do this by the end of the year.”
Level playing field
This argument looks likely to be the key to the early stages of the negotiations. The UK wants to prove its new freedom by insisting on the right to deviate from EU rules and standards. This will be “taking back control” and, without this right, the Chancellor argues, what is the point of leaving the Union? Alarm bells immediately began ringing in the other Member States as this would be their worst possible outcome: a major economy on their doorstep able to undercut their companies by reducing food, environmental and employment standards — the low tax, low regulation economy that supporters of the idea of “Shanghai on Thames” have long supported.
To the EU, this is going back to Boris Johnson during the referendum saying that he was pro having cake and pro eating it. And, as it insisted then, the UK cannot have the benefits of membership of the Union while accepting none of the responsibilities. Not least, the Commission realises, because, if it did, the queue of Member States wanting a similar arrangement could destroy the Union.
There was also concern on this side of the Channel at the Chancellor’s remarks, given that he conceded that there would be losers as well as winners in the UK economy if it takes a non-aligned approach. The Food and Drink Federation’s chief operating officer Tim Rycroft said that it would represent the death knell for frictionless trade with businesses having to adjust to costly new checks, processes and procedures. Mr Javid was less than sympathetic, arguing that businesses have had since the referendum in 2016 to prepare for change — although even he agreed that the Government’s direction of travel has not always been clear during this time.
With “Brexit day” now behind us, and the word itself apparently banned by a Prime Minister who wants to move on, what can we predict for the year ahead? For the next few weeks we will certainly see both sides talking tough as they stake out their positions. A deal can be done in months, Number 10’s supporters will say: even a relatively simple deal such as that with Canada took years, EU’s chief negotiator, Michel Barnier will point out. The UK will make much of its proposed trade deal with the United States: the EU will threaten to exclude the City of London from participating in financial services across the Union.
Although the emphasis so far has been on the importance to trade of the forthcoming talks it must be remembered that there is much more than ensuring continued exchange of goods at stake. A number of Member States will for example be keen to maintain access to what will become, after 1 January 2021, British fishing waters and that is likely to be a pre-condition set by the EU for agreeing to enter into talks. It is also likely to want guarantees with regard to maintaining environmental and labour standards and to abiding by state aid rules. As to what will happen over the next few months, it is hard to argue with the view of a senior research fellow at the Centre for European Reform who said that a basic trade deal is possible this year with a compromise eventually being struck. But it will mean that “the EU will have to move a little and the UK will have to move a lot”.
Welcome to 2021
The threat of a no-deal Brexit has not gone away: it remains possible that neither side will want to compromise and that the talks will collapse. They will not want this total failure of course so the possibility of a basic deal remains high. However, a Canada-style agreement which simply removes tariffs and quotas on goods, without tackling the problem of no-tariff barriers such as standards, could still present problems on 1 January 2021. If the UK goes into the new year moving away from a position of alignment with the EU, then traders and hauliers will be faced with day one paperwork issues at the border. There may be another implementation period, or we may see the flood of email guides and warnings that we saw towards the end of 2019 as government departments rushed to alert everyone to the what would happen “after Brexit”. All in all, it looks like being another very interesting year.