Brexit trade deal talks go down to the wire

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Global Trade

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Among all the hullabaloo of COVID-19 infection rates and surging deaths, we may all be forgiven for having forgotten that a small but relatively important part of the European Union, Britain, formally leaves the bloc — that is, Brexit — in just over two weeks time with no formal separation agreement or coherent working plan for how the U.K. will trade with the EU from January onwards.

Public sentiment is resigned to the constant buildup and letdowns of every previous “deadline” that came and went in what has been a colossal failure of statehood on both sides.

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Brexit deal or no deal

No new deadlines have been set save the obvious one of Dec. 31, after which the two sides will have to start applying tariffs to each other’s imports and exports by reverting to WTO rules.

But even a Brexit “deal” is a pale shadow of the close cooperation that previous Prime Minster Theresa May’s government negotiated with Brussels, only to have it thrown out by Tory backbenchers and dysfunctional opposition parties who used the opportunity to bring the government down rather than try to secure the deal they said they wanted.

The remaining sticking points to a deal may seem bizarre to an outsider.

The E.U. was insisting that Europe retains the legal right to penalize the U.K. if it diverges from the E.U.’s state aid rules. It’s a bizarre principle for a conservative government to be fighting over, as conservatives by tradition are deeply averse to state aid for anything.

But the principle here for MPs is an even deeper aversion to the U.K. being subject to diktat from Brussels. Such control undermines the very principle of being a sovereign nation.

The fudge both sides may be moving towards is to agree any such sanction is not automatic. Furthermore, there would be an arbitration system, allowing both sides to agree on some success in the negotiations.

Fisheries hangup

Another sticking point is fisheries.

Under current E.U. rules, other E.U. fishing fleets — particularly French, Dutch, Norwegian and Spanish trawlers — have access to U.K. waters.

In fact, according to the BBC, more than 60% of the tonnage caught from English waters is caught by foreign boats.

Although this represents a tiny percentage of U.K. GDP, it has immense significance in terms of “foreign access” to U.K. resources. As such, the issue has also become a political football.

Meanwhile, in Europe, employment and investment in fishing fleets is more politically significant. and the farming sector in France has huge political clout, combining to make respective positions intractable from a negotiated settlement position.

France appears to be the sticking point here.

The U.K. has already offered a lengthy transition period to allow both countries’ fleets and markets to adjust. However, just this month the French appeared to up the ante. Some on the U.K. side suspect the latest demand for 10-year access is designed to deliberately torpedo the process. Others suggest it is no more than a negotiating tactic.

What’s next in Brexit talks?

Britain has already all but conceded what was previously a red line over Northern Ireland. That is, that there would be no hard border between the north and south. Furthermore, customs checks would take place “somewhere in the Irish sea” between the mainland and Northern Ireland in order to protect the prosperity of both parts of Ireland and the Good Friday Agreement, which includes a provision for no hard borders.

Will the two sides reach a deal?

It is by no means certain.

The pound has fluctuated these last few weeks as deadlines have passed. Agreements have failed to materialize. Positive and negative news have vied for prominence.

In practice, it is in both parties’ interests to reach a deal of some description. At the very least, a deal would minimize disruption at respective borders and keep trade flowing.

But since when has politics succumbed to economic good reason?

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