January 18, 2021

A no-deal Brexit is far more likely than anyone is prepared to admit – Telegraph.co.uk

https://www.telegraph.co.uk/news/2020/11/30/no-deal-brexit-far-likely-anyone-prepared-admit/

It has been a widespread assumption in recent months that there is bound to be agreement on free trade between the UK and the European Union before the transition period ends and Brexit takes full effect one month from now. The great majority of MPs believe that will happen, as do the financial markets that have remained unperturbed by the stops and starts of the negotiations. Hopefully, even as you read these words, Lord Frost and Michel Barnier are reaching a breakthrough, smiling through their face masks and doing a celebratory elbow bump to confirm the belief that they will come to an agreed conclusion.

Yet it seems more likely that such a happy outcome will require something additional, in the form of talks at the highest level between Boris Johnson and EU leaders, and that some fresh decisions will be required to make a deal attainable. Otherwise, it is still possible that January 1 will come round with no framework for cooperation and trade in place at all.

The reason most people assume an agreement can be reached is that the arguments in favour of arriving at one are so overwhelming. This is true for both sides, and since it is so obviously the case, reasonable people must surely be able to do a deal. Even keen Brexiteers in the 2016 referendum were clear that free trade with the EU would be possible and desirable. Leading figures in Brussels have repeatedly called for a comprehensive deal, and Europe’s most influential leader, Angela Merkel, has said “where there is a will there is a way”.

The EU has free trade agreements with countries as varied as Albania, Lebanon, Tunisia and Vietnam. The UK has just concluded its own with Japan and Canada. In the Asia Pacific region last week, a new trade deal was announced encompassing several historic foes, such as China, Japan and South Korea. Yet the UK and the EU nations, after 47 years of close partnership and while being military and political allies, are finding it extraordinarily difficult to come to terms. An unsuccessful end to the talks in the coming days would represent a historic failure, with potentially deep damage to future relations and to millions of citizens on both sides.

The economic damage of a failure would be serious. The Bank of England has said that the long-term consequences of no deal being made would be more serious than those of the Covid pandemic. In certain industries that would be subject to high tariffs, such as the automotive and agricultural sectors, there would be very serious problems. That applies in both directions – German carmakers would be hard hit as well as factories in Britain, and agriculture in Ireland, Denmark and the Netherlands would suffer just like sheep farmers in Britain. In countries already suffering their sharpest downturn in 300 years, this would represent additional and completely unnecessary hardship.

These problems would be measured in lost jobs and output. But there is a further great danger that cannot be quantified, which is the risk of a downward spiral in relations between London and other capitals that makes the damage that would accumulate steadily harder to repair.

A no-deal outcome would make the Northern Ireland Protocol far more complex and controversial to implement, as the furore over preparations by Downing Street to break international law has shown. With no agreement on fishing rights, there could easily be confrontation at sea as UK waters were closed to EU boats. The absence of agreement on sharing data or treating financial rules as equivalent would quickly mean the adoption of new national rules in Britain, which Brussels would regard as a threat. Meanwhile, the incoming Biden administration would take a dim view of all concerned.

With time running out, the next few days are the most important for the Brexit process since the referendum itself. The problem is that while both sides genuinely want a deal, they each believe the other side needs one so much that they will offer the crucial concessions at the last minute. They are clearly far apart on fishing rights, and at the time of writing are apparently making only slow and “incremental” progress on the “level playing field” issues of fair competition.

For national leaders not to assert themselves and force a solution later this week – if none is forthcoming from the talks – would be a failure of statesmanship. The British Government has been good at playing hardball in the talks but not so good at getting its position and arguments understood around Europe. Control of the negotiations has been so tightly held that the Foreign Office has not been fully utilised to put the case around EU capitals and to European media. The flirtation with breaching international law and a rigid opposition to state aid rules has diverted attention from the UK’s completely reasonable case on the outstanding issues.

Fisheries are the most intractable issue, and one on which the British side has very strong arguments. The UK will become what is known as an independent coastal state, entitled to control of its own sovereign waters. Its boats are currently restricted to a tiny proportion of the fishing catch in certain products, such as 7 per cent of cod in the Celtic Sea, while it is thought 40 per cent of the cod in that region are in UK waters. Seen in that light, EU offers to increase the British share of the catch by small percentages do not amount to very much.

Furthermore, it is a perfectly normal arrangement for close neighbours to conduct annual negotiations on fish quotas. This approach, which the EU already follows with Norway, respects national sovereignty but allows flexibility all round. Compromises have been suggested of a transitional phase to maintain existing catches for several years before a new approach in keeping with the new situation kicks in. But the EU delegation is held back by a hardline stance from France and other coastal states.

President Macron and others might easily misjudge how much room Boris Johnson has for manoeuvre on this issue. History will not judge them kindly if there is no agreement over an insistence that fishing rights in another country’s seas can barely ever be changed. It is surely time for the Prime Minister and his EU counterparts to talk, and to resolve the remaining differences in a way their people are entitled to expect.