Posted by on December 30, 2020 12:04 pm
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Categories: Geopolicy


By Andy Blom, TES Washington Editor

 

After years of struggle and indecision, Brexit is happening, deal or no deal. In a rare instance of political backbone, British Prime Minister Boris Johnson has said Britain is leaving on January 1, regardless of the state of negotiations. We all should have figured that leaving a bureaucracy would be as complicated and tortuous as being in one.

           

As the  deadline nears a good deal of concern is focused on trade deals…or lack thereof. Of course, fishing rights matter, as does the determination of how to deal with the border with Ireland. But trade, and money, of course, are rising to the top.

           

It is assumed, wrongfully actually, that the EU holds all the cards in this negotiation. Not exactly true. Yes, they do hold some of the cards, but even those are not all aces and face cards. Some in fact may be deuces and treys. How so? Take tariffs. The European Union has grandly announced – ‘No Trade Deal, Then We Hit You With Tariffs.” Oh no! But England will…win that battle. At the projected rate of trade Great Britain would have to pay 5 Billion in tariffs. Ouch. Except the EU would end up paying 12 Billion to the UK. Advantage, England.

 

In fact, the deal the European Union is offering is a rather thin deal. They are putting restrictions on the deal they don’t put on any of their other trading partners such as Canada or Japan. Why? The feeling in the UK is that the EU is more concerned with punishing the United Kingdom for daring to leave than they are in reaching a deal that is mutually beneficial. There is also the European Union concern that too good a deal for the UK will encourage other EU members to leave. So, bureaucratic punishment.

           

But who will truly be the loser here? EU/UK trade is important to the United Kingdom, but not as important as it to the EU and its member countries. Trade with the United Kingdom is critical to individual EU members like Sweden, Germany and Latvia.

 

Another key issue is financial services. London is the financial center of Europe. The second most important financial services hub is Edinburg. 1300 EU companies have moved to London since Brexit began because of financial services. And the UK also has an edge in data.

 

So as the clock ticks down European Union negotiators are feeling increasing pressure from their member countries to find a deal. United Kingdom negotiators are feeling equal pressure to not compromise on sovereignty or to co-opt the UK’s free market policies with the European Union’s slow growth policies.

 

Most analysts on both sides think a deal will probably be reached in the early morning hours of January 1. Failing that, a series of mini deals would probably be hatched, leaving an awkward taste in everybody’s mouth. In the end, if Britain holds firm, the European Union will have to decide if they are more interested in trying to punish the UK, or hurt their own members.

 

Want to hear more in depth? The ECR (European Conservatives and Reformists Party) held and interesting and informative one hour discussion with leading analysts from the United Kingdom and Members of the European Parliament from Sweden and Latvia. You can watch it here: https://www.ecrparty.eu/event/the_brexit_trade_deal.

 


Andresen Blom is a Washington based policy and political analyst and author who has been published in The Wall Street Journal, The Hill, and Politico.