[Therese Raphael] Now we know how Boris Johnson’s movie ends
By BloombergPublished : Dec. 29, 2020 - 05:31
Set against the perils of breaking up with no trade deal, having an agreement at all merits celebration. Apart from the economic costs and reputational damage, a no-deal exit would have put terrible strain on the already fraught union with Scotland and poisoned relations with the European Union -- still Britain’s largest trading partner and the world’s largest single market.
Relief, expressed repeatedly in the EU’s press conference to announce the breakthrough on Thursday, is a low bar for a free trade deal. Put in the context of the last four-plus decades, this is the most regressive trade settlement seen between modern democratic nations. Instead of enhancing cooperation and lowering barriers, it gums up most areas where business and consumers transact.
It also makes Johnson the most consequential British prime minister since Margaret Thatcher, acting as a radical rather than a conservative. He campaigned in Britain’s 2019 general election by promising to “get Brexit done” in a way that reclaimed “sovereignty” over British laws, courts, borders and money. He has delivered that control.
It was ultimately a bigger break -- or a harder Brexit -- than the one sought by his predecessor May. The UK managed to leverage its weaker negotiating position by threatening to abandon the provisions in last year’s Withdrawal Agreement to maintain a soft border in Ireland and to walk away over EU access to UK fishing waters. Unlike May’s similar threat to embrace no deal, the arch-Brexiter Johnson’s warning was credible. And, unlike her, he had a united, Brexit-supporting Cabinet and an 80-seat majority to back it up.
Though only a summary of the deal has been published, the main contours have been known for months. The EU has offered -- as it did from the start -- tariff- and quota-free access for British goods. That’s significant. Even the EU’s trade deal with Canada doesn’t get rid of all tariffs on goods trade. But it was not right to claim, as Johnson did initially in Thursday’s triumphal press conference, that “there will be no non-tariff barriers to trade.”
On the contrary, while one of the biggest euroskeptic grievances against Brussels was its red tape, Britain had better get used to quite a lot of extra rules and regulations. Businesses exporting across the English Channel will need to fill out customs declarations and certify the origin of their products for export; they’ll have to submit animal products for health checks and comply with regulations. Companies will have to pay for certifications in both the UK and the EU, increasing the cost of doing business.
While large companies have been preparing for a while -- moving staff to the continent or hiring customs brokers and third-party consultants to help with new trade complications -- most businesses have made only some preparations. Many were simply too focused on surviving lockdowns and lacked the information to prepare for Brexit anyway. The two sides haven’t agreed on any grace period for companies to adjust.
In exchange for tariff- and quota-free access, the UK has agreed not to regress from the current standards on environmental, labor-market and other areas of the so-called “level playing field” with the EU, as well as state aid. If Britain opts to diverge in a way that clearly impacts trade, tariffs can be imposed, with a new arbitration mechanism, separate from the European Court of Justice.
London has the option to go its own way, but there are penalties if it hurts EU businesses by doing so. While the city of London’s finance industry has been insulated from the threat of cross-retaliation (where one sector is penalized for a breach by another), the EU still has the right to withdraw equal treatment (equivalency) for Britain’s financiers.
All of this is a long way from Johnson’s original “friends with benefits” vision of the relationship. “British people will still be able to go and work in the EU; to live; to travel; to study; to buy homes and to settle down,” he wrote in his first column for the Telegraph after the Brexit vote, citing the German business federation, the BDI, in saying “there will continue to be free trade, and access to the single market.”
For Brits who do want to travel, work, live or study in the EU, there are new hoops to jump through, all costs that Johnson downplayed in his deal announcement. A Brexit-weary Britain no doubt hopes to stop talking about the topic entirely, but there are many ways in which this agreement foreshadows years of negotiations to come.
While the hotly contested area of European access to British fishing waters was resolved for now with an agreement that sees the EU reduce its share by 25 percent over 5 1/2 years, there will be annual negotiations after that. The deal gives both sides the flexibility to initiate a formal review of its provisions, an open door that Brexit hard-liners in Johnson’s party will be tempted to push on.
Opposition leader Keir Starmer’s promise to vote for the treaty, but to “build on” the relationship it establishes in the future suggests the battle lines over Europe may not so much disappear as be redrawn.
Donald Tusk, the former European Council president, once lamented that Johnson and his cohort led the campaign to leave the EU without even a “sketch of a plan” for how to do it. He wasn’t wrong. “You were only supposed to blow the bloody doors off,” the journalist Sarah Vine told her husband, Michael Gove, the morning after the vote, quoting Michael Caine’s character in “The Italian Job.”
Instead, the Brexiters took off the roof and the walls too. But eventually they converged on a plan that accepted the limits of the access the EU would allow within Britain’s demands for total control. The new agreement sets a floor on EU-UK relations. It will be a long, painstaking process to build a new and properly robust surrounding structure.
“It’s one thing to get freedom,” Johnson said on Christmas Eve, “but it’s how we use it, make the most of it; that’s what’s going to matter now.” That’s also how he will be judged.
Therese Raphael is a columnist for Bloomberg Opinion. -- Ed.
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