Hard Brexit: UK on the brink of a new crisis

Author : Georgiy Kuhaleyshvili

Source : 112 Ukraine

London formally ended EU membership after January 2020, but the transitional period during which the British have access to the EU common market ends on December 31st
10:17, 7 December 2020


UK-EU negotiations on a trade agreement have stalled as the parties cannot bridge their differences on some issues. London formally ended EU membership after January 2020, but the transitional period during which the British have access to the EU common market ends on December 31st. Negotiators – Michelle Barnier and David Frost – planed to agree on the terms of creating a free trade zone between the EU and the UK without duties and quotas even before October 15.

It is highly likely that British businesses, which have faced negative economic consequences due to the quarantine and the coronavirus pandemic, face new challenges. The problem of separatism in Northern Ireland and Scotland, which are not interested in Brexit, remains relevant. The government of the leader of the Conservative Party, a supporter of sanctions against Russia and a champion of the territorial integrity of Ukraine, Boris Johnson, is on the verge of a new political crisis.

Something is better than nothing

The stumbling block in relations between London and Brussels is the issue of fish resources distribution. After the UK joined the European Community in 1973, its 200-mile economic zone became the subject of common use by other EU member states under the Common Fisheries Policy. Even then, opponents of European integration argued that London was making a mistake since British waters are one of the most attractive places in Europe for fishing. EU fishing vessels annually catch 650,000-700,000 tons of fish in the exclusive economic zone of the UK (60% of the catch). The catch of British fishermen is much more modest – 88,000 tons per year (the share is 16%).

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EU member states have quotas for catching certain species of fish in British waters. For example, in the English Channel, the French quota for catching cod is 84%, while in the UK it is 9%. Irish fishermen catch 60% of mackerel in British waters. In 2012 and 2018. there were clashes off the coast of Normandy between French and British fishermen who specialize in catching shellfish. The French surrounded the British fishing boats and tried to disable the engines. The French accused the British of fishing in their territorial waters – 12 miles offshore, which are not covered by the General Fisheries Policy.

The British claim 80% of the catch in their waters. Fishing and processing of fish and shellfish is not considered a very profitable industry, as it accounts for only 0.1% of the British economy and is estimated at 784 million pounds, which is not comparable to the financial sector, which is estimated at 132 billion pounds. Given that most of the catch of British fishermen is exported, they will be able to increase the volume of fishing and profit after the abolition of quotas for Europeans. The desire to drive European competitors out of its waters has become one of the symbols of Brexit and the restoration of British sovereignty, which it sacrificed 47 years ago. Even fishermen from Scotland, the British region, where the vast majority of residents voted against Brexit in a referendum in 2016, support leaving the EU.

Europeans do not agree with this position of the British. As a compromise, EU Brexit negotiator Michelle Barnier proposed that the UK increase the fishing quota by 15-18%. Ireland, France, Spain, Belgium, Netherlands, Sweden, Denmark, and Germany, where fishing is developed, perceive the exclusive economic zone of Great Britain as a gold mine. The Irish are of particular concern. Ireland's Agriculture, Food and Fisheries Minister Charlie McConalog is pushing for a catch quota system in the UK-EU free trade zone to avoid harm to Irish fishermen Finn Gale Party member Paul Kehoe believes the UK stance is a concern for small rural Irish settlements that depend on the fishing industry.

At first glance, the situation might seem absurd, since the bargaining is for what rightfully belongs to the British – for the fish resources within their exclusive economic zone. On the other hand, without free, duty-free access to the EU common market, British exporters will suffer losses. In particular, one third of the fish exported from the UK is supplied to the EU market.

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Different understanding of the rules of the game

In November 2020, President of the European Commission Ursula von der Leyen said that there are still disagreements between the EU and the UK on legislation regulating workers' rights, environmental protection, and the provision of state financial assistance, which allows adhering to uniform rules of the game.

Maintaining free access to the UK labor market for European citizens meets the interests of Brussels. The United Kingdom is home to 3.5 million Europeans. However, on January 1, 2021, a new migration system comes into effect. To obtain a work permit, a foreigner must confirm his level of qualifications, knowledge of the English language, and the salary for which he applies must be at least 25,600 pounds per year. For filing an application, you need to pay up to 1,500 pounds sterling as confirmation of your financial solvency. EU nationals who are already employed in the UK must complete this procedure by 30 June 2021. If they fail, they will receive unemployment benefits.

Europeans who want to move to the UK in 2021 won't be able to do it if they fail the test. An exception is provided by Irish citizens who do not need to go through this procedure, since the republic is a party to an agreement on a common space of movement with the UK. The Johnson government borrowed Australia's migration system to restrict the flow of foreigners to permanent residence and only accept professionals.

The Guardian

The EU is keen to see the UK continue to adhere to European environmental, agricultural and food standards. Prior to EU membership, the United Kingdom was called "Europe's dirtiest man." The country's participation in the organization has improved the state of affairs in the field of environmental protection. However, UK Environment Secretary George Eustis has announced a revision of existing environmental impact assessment rules. However, Prime Minister Boris Johnson is in favor of a "green industrial revolution," including the creation of jobs in the field of alternative and nuclear energy, the introduction of a ban on the sale in the UK of new cars with gasoline and diesel engines after 2030, which will cost the British economy about 4 billion pounds.

The EU is pushing the UK to continue to adhere to European competition rules. In the EU, there are restrictions on the provision of government subsidies to companies in order to avoid infringing on the interests of their competitors in other EU member states. Competition disputes are resolved in the EU Court of Justice. The UK has developed its own subsidy regulation standards, but Brussels criticized them for being different from European rules.

Related: EU and UK to hold new Brexit talks

Deep crisis

France and a number of European countries have given Britain an ultimatum: if within the next few days it does not make concessions in the interests of the EU, they will agree to Brexit without a trade agreement. Paris opposes the continuation of trade negotiations with London in 2021. German Chancellor Angela Merkel, commenting on the negotiations between Barnier and Frost on a trade agreement, stressed that the EU is not going to seek a deal with the UK at any cost since it must take into account the interests of all parties. London was ready for such an outcome of the negotiations because Johnson had previously admitted a hard Brexit. In this case, from 1 January 2021, trade between the UK and the EU will be regulated by WTO rules, and British products will be subject to customs duties on the EU market.

The British economy is experiencing the negative effects of quarantines and lockdowns due to the coronavirus pandemic. The Johnson government has spent £ 200bn on financial assistance to businesses, workers and their families, GDP is expected to decline by 11% by the end of the year, unemployment is projected to rise and economic growth is projected to decline by 1.5% until 2022 (economy will lose £ 40bn)... In the event of a Brexit without a trade agreement, the UK faces more serious economic losses. According to a study by the London School of Economics, in the long term, the UK GDP will contract by 8%, equivalent to a loss of £ 160 billion.

According to UNCTAD, UK exports to the EU will decline by 14% if the parties fail to conclude a trade agreement. It will be more difficult and more expensive for British companies to sell their products on the EU market, which accounts for 40% of the UK's foreign trade turnover. Due to the introduction of 10% duties on the EU market, British cars will rise in price by more than 1.900 pounds. Ireland fears rising prices for imported British potatoes. Prices for dairy products imported from the EU will rise by 30%, other food products – by 18%. About 40% of food and agricultural products consumed by the British come from the EU. Due to customs checks, the duration of cargo transportation from Europe to the UK and vice versa will increase.

Related: Brexit: UK urges businesses to prepare for end of transition

The UK's free trade agreements with countries outside of Europe do not compensate in the short term for restricting access to the European market. Of the 40 EU agreements with 70 countries outside the bloc, in which London took part, 20 managed to be re-signed with 50 countries, which account for 8% of foreign trade. In October, a free trade agreement was signed with Japan, which removes duties on 99% of British exports. Negotiations are underway for trade agreements with the United States, Australia, and New Zealand.

Johnson did not manage to close a trade deal with US President Donald Trump, who is a supporter of Brexit. Next year he will have to deal with Irish-born Democrat Joe Biden, who has no plans to sign new trade deals until the American economy becomes competitive. He is skeptical of Brexit and advocates the preservation of freedom of movement and the absence of customs barriers between the state of Ireland and the British region of Northern Ireland, which are located on the same island.

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Negative economic consequences can provoke social tension and political crisis, intensification of centrifugal sentiments in Northern Ireland and Scotland, where the majority of residents oppose leaving the EU. Sinn Fein Party Leader Mary Mac Donald is in favor of a referendum on the unification of Northern Ireland with Ireland in order to preserve EU membership. Irish Prime Minister Michelle Martin does not consider it advisable to hold such a referendum in the next five years after Brexit, so as not to spoil relations with Northern Irish Protestants who do not want to secede from Britain. Dublin plans to invest 500 million euros in the development of cross-border infrastructure. Scotland's First Minister Nicola Sturgeon is in favor of a new referendum on the region's independence.

Johnson will have to simultaneously contain the separatist sentiments of the Irish and Scots and confront the moderate wing in the Conservative party opposing a hard Brexit, opposition forces in the person of the Labor Party, the Liberal Democratic Party, the Greens, whose popularity is growing. A separate challenge may be the protests of the British, who are dissatisfied with the worsening socio-economic situation in the country.

Related: Post-Brexit trade: Another London-Brussels negotiation failed

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