Sunday, 13 December 2020

No Deal Brexit

With the prime minister Boris Johnson and the European commission president, Ursula von der Leyen, due to decide today whether to halt stalled talks and make the momentous decision to accept no deal, an outcome that would lead to tariffs and quotas on UK-EU trade and rising prices.

The use of gunboats to patrol UK fishing waters in the event of no deal was backed by Admiral Lord West, a former chief of naval staff. “It is absolutely appropriate that the Royal Navy should protect our waters if the position is we’re a sovereign state and our government has said we don’t want other nations there,”.

Greg Clark, the former business secretary and current chair of the Commons science committee, said: “It is clearly unacceptable for the UK to be expected to agree to be unilaterally punished if we declined to follow future EU policy.”

So what would change? [probably]

Prices could go up for the goods the UK buys and sells from and to the EU. That is because the UK and EU would trade on WTO [World Trade Organization] terms, the basic rules for countries without trade deals. The EU would impose taxes [known as tariffs] on goods coming from the UK. The average is about 2.8% for non-agricultural products, but 10% for cars and more than 35% for dairy products. That would put some industries under pressure.

Co-operation on security and data-sharing will become more difficult, causing problems for cross-border investigations. The UK would immediately lose access to databases of things like fingerprints, criminal records and wanted persons. There are big questions about services. The UK has been waiting for a decision about whether the EU will recognise UK rules for financial services. Without that it will be difficult for UK firms to operate in the EU. Some banks have already moved offices and staff to EU countries.

If the UK gets to the end of the year without a trade deal with the EU, that does not mean there will never be one. It has been suggested all the problems it would cause for both sides would focus minds on reaching a deal as soon as possible in the new year. But there are those on both sides who say it could be many months into 2021 before talks were to resume in this scenario.

With the 31st December 2020, deadline for a trade agreement between the European Union and United Kingdom approaching, the risk of a "no-deal Brexit" is mounting. When the U.K. initiated Brexit [its exit from the EU] on 31st January 2020, the Withdrawal Agreement provided 11 months for negotiating a new trade relationship and extended U.K. participation in the EU single market and customs union during the transition. If no deal is reached by the deadline it will trigger what is called a no-deal Brexit. In this case the U.K.-EU trade relationship will be governed, by default, by the trading rules of the World Trade Organization.

The sudden switch to WTO rules would greatly increase tariffs and other trade restrictions, raise the cost of goods, and complicate regulations, greatly increasing financial and administrative burdens for companies. A no-deal Brexit will greatly impact the U.K., causing an estimated 8.1% reduction in its GDP [gross domestic product] after 10 years.

Outstanding issues include the allocation of British North Sea fishing rights to EU countries. Although fishing is minor part of the EU economy, this issue is politically significant in Denmark, Belgium, the Netherlands, Ireland, Germany, and especially France. Also unresolved is the extent of permissible government subsidies for business for which the U.K. has sought expansive latitude. For a time the prospect of an agreement was severely threatened by the Prime Minister submitting to Parliament a proposal to disregard the Irish Protocol. The U.K. proposal would re-establish a border between the areas of Ireland. Faced with strong opposition by EU members, and especially by the United States, whose politicians threatened that violating the Irish Protocol would bar any U.S.-U.K. trade agreement, the Prime Minister announced that the U.K. would comply with the Irish Protocol.

On Thursday 23 June the referendum took place and the talks have so far lasted four years.

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