A Post-Brexit Trade Deal Now Looks Likely

Mish

Forget some of the headlines. Significant progress towards a deal happened yesterday.

Tale of Headlines

The New York Times reports Boris Johnson Fails to Break Brexit Deadlock in Brussels Talks

A meeting over dinner between Prime Minister Boris Johnson of Britain and Ursula von der Leyen, the president of the European Commission, the bloc’s executive body, ended without significant progress, with large gaps left remaining between the two sides, and no clear path to bridging them.  

Wednesday’s three-hour meeting had been set up with the goal of ending months of deadlock in trade negotiations, talks that remained stalled just three weeks before Britain completes the final stage of Brexit, by leaving the European Union’s economic area at the month’s end. 

But in a statement Ms. von der Leyen said that despite “a lively and interesting discussion” the two sides’ positions “remain far apart.”

But the lack of progress at Wednesday’s dinner is another setback to a negotiation that has been stuck for months.

The above story is mostly rear view silliness. A key breakthrough happened yesterday when out of the blue Boris Johnson dropped a threat to break the Withdrawal Agreement.

There was zero chance of a deal until that happened. No one expected a deal with Ursula von der Leyen over dinner.

The Eurointelligence headline this morning has things correct:

"How a Deal is Done"

The EU and the UK yesterday wiped away the controversy around the internal market bill in one fell swoop. The agreement between Maroš Šefcovic and Michael Gove is a reminder of how quickly and unexpectedly a breakthrough can happen. It’s best to regard this as a necessary but insufficient precursor to a trade agreement.

For that, we need a lot more. Tonight, Boris Johnson and Ursula von der Leyen will meet for a dinner. We do not expect an agreement tonight. Johnson and von der Leyen are not trade negotiators. 

For the EU the issue is the preservation of the single market. For Johnson it will be the appearance of sovereignty. We are fairly certain that he wants a deal but not at any cost, very much as he says. We confidently rule out the two corner options. We don't believe that he has already decided against a deal and is running down the clock. Likewise we don’t believe that he will sign up to any deal. For a deal to happen, both sides will need to compromise. Only when that happens will the two sides enter the final phase of negotiation and start making the trade-offs.

The separate agreement between Šefcovic and Gove at a meeting of the EU-UK joint committee resolves most of the uncertainties regarding the status of Northern Ireland after the end of the transition period: on border controls and entry points, export declarations, and the supply of medicines and food products. There will be lists of criteria for goods deemed not to be at risk, exemptions from state aid rules for agricultural and fish subsidies, a dispute settlement system. EU officials will have access to Northern Ireland, but the EU agrees not to have a permanent office in the province.

In turn the UK drops from its internal market bill the three contentious chapters that breach international law. And it won’t become a repeat offender. The agreement is provisional, and due to be finalised at the next meeting of the joint committee before the end of the year.

Deal on December 31

Eurointelligence reports hearing the deadline is now December 31. 

This is amusing because we saw deadlines of June, September, Halloween, and mid-December come and go. 

The actual deadline was December 31 all along. 

Bluffs Cancelled 

Earlier this year, the EU demanded complete fishing rights and for the UK to agree to a level playing field as decided by the European Court of Justice.

Boris Johnson responded with a bluff of his own, to break the Withdrawal Agreement in regards to Ireland. 

Yesterday, Šefcovic and Gove worked out an agreement acceptable to both sides. 

Bad Deal on Fish or No Deal on Fish?

I discussed this setup on November 25 in Bad Deal on Fish or No Deal on Fish?

It was pure silliness to expect any deal before now. It was also silly to believe any soft (non-legal) deadlines mattered.  The post-brexit actual deadline is December 31. The true deadline might be a bit before Dec 31 given the need for UK parliamentary approval and EU parliamentary approval.

What I Expect

  1. Johnson will offer some fish tails.
  2. The EU will demand the whole fish.
  3. Johnson will offer fish heads and tails and if necessary, fish livers.
  4. Nigel Farage will complain no matter what part of the fish the EU gets.

Heads and tails aside, as long as Johnson does not allow the European Court of Justice (ECJ) to be the final arbiter of any disputes, not just fish, the deal is likely to be a fair one.

Room to Go Fishing

With Ireland out of the way, there is room to go fishing. 

Since a deal makes sense for both sides, it is far more likely than not there will be a deal. 

But please note that it's only December 9. 

There is plenty of time for more threats and more bluffs before a deal is reached. 

Even then it will not be the "final deal". It will be a bare bones WTO agreement of some sort with provisions to haggle for years to come. 

This is the only way the EU works, using the word "works" loosely.

Mish

Comments (18)
No. 1-11
PecuniaNonOlet
PecuniaNonOlet

The damage is already done and short term looks like it hurts UK more than it helps but that could change. Banks and auto manufacturing already moving out of UK to Eu and the. read this gem...

Scooot
Scooot

Good to read a non-biased take on proceedings.

Scooot
Scooot

Supposedly, the EU are demanding, that if they pass a law in the future, and the UK doesn’t comply or follow suit, they’ll have the automatic right to punish the UK.

Perhaps this is just part of tough negotiating but they’ll need to drop it, no leader could agree to gifting unlimited power to another body. It does seem as if they’re arguing in the detail about protection for eventualities that are never like to come about. In which case you would indeed hope they could resolve these differences.

SpeedyGeezer
SpeedyGeezer

The negotiators need to revisit Melville. "Fast Fish and Loose Fish"

caradoc-again
caradoc-again

Highly unlikely to be any deal & if there is the "Spartans" on the UK side will agitate against it as only a clean hard break will enable a total re-jig of the UK economy.

njbr
njbr

The UK has still not reconciled to the idea that their standards will have to conform to the standards of their largest market. They have not grapsed the idea that the restrictions on visits and stays of EU citizens to the UK will be matched by restrictions on visits and stays by UK citizen in the EU. There has been little or no preparation for the customs and immigration checks that will be encountered as a country outside of the EU. The financial centers in the UK will have to find a new home for the Eurodollar market (no "pound" in "eurodollar").

In other words, the Brexit people have not recognized that "leave means leave". Or that leave will mean an extended period of chaos, change, disruption and disconnection.

There is a long , hard road to travel, and whether there is an agreement by Sunday, or by the end of the month, that is not the end of the endless negotiatons to be done over the next decade or so where the UK attempts to be become the "most favored neighbor" of the EU.

For an excellent take on Brexit, I read the Turbulent Times blog by Peter North--a long term brexiteer.

....Precisely what the UK master plan is remains a mystery but that, for the EU, was part of the problem. You can’t really have a partnership when the other party doesn’t keep you informed and signals it has no intention of abiding by what it signs up to.

Had the UK taken a more collaborative approach, with a view to building a comprehensive treaty without the acritical deadline, we would no doubt have seen an EU more willing and able to compromise, perhaps even willing to go further than what is generally included in an FTA. Trust is the key – and there was no basis upon which to trust Johnson or his party.

Driving all this was a belief that an EU trade agreement could be cobbled together in no time, keeping it minimal to allow maximum flexibility in negotiations with the USA. Trump failing to win a second term did not feature in their risk assessment.

From the Tories we have seen a slapdash approach based on half-understood notions, tainted by a completely inappropriate attitude to our allies, failing to note that Michel Barnier was the UK’s greatest ally in these talks. Say what you like about the man but he has shown extraordinary patience.

In particular, this is why I chose not to get too caught up in the soap opera of these talks. Primary source information has been thin on the ground throughout, leaving us to cobble together our own estimations and guesses, especially since our media is of no use. But either way, deal or no-deal, the stage was set a long time ago for crash and burn Brexit.

More to the point, there is no such thing as no-deal per se. The one point that has eluded Brexiteers throughout is that no deal cannot stay no deal. Either we conclude a deal now, or we move into a limbo state preceding fresh talks which may resume early in the new year or much later on. No-deal is no basis for trade relations between two advanced economies. If no agreement is reached this year we haven’t heard the last of level playing field provisions etc.

AnotherJoe
AnotherJoe

My take on Brexit is that it will be bad for regular people and will be good for the wealthy and politicians that push for it. Politicians because they now will have a free hand without the EU looking over their shoulders. The wealthy because borders don't exist for the wealthy. They never had

njbr
njbr

Boris says probably no agreement:

Boris Johnson says there is a "strong possibility" the UK will fail to strike a post-Brexit trade agreement with the EU.

The prime minister said "now is the time" for businesses and the public to prepare for that outcome, although talks would continue.

He added that negotiations were "not yet there at all"....

....It comes after Mr Johnson's meeting in Brussels on Wednesday with European Commission President Ursula von der Leyen failed to make a breakthrough....

....In his first public comments since Wednesday's meeting, Mr Johnson said British negotiators were going to "go the extra mile," and he was prepared to travel to Paris or Berlin for talks if necessary....

njbr
njbr

Boris..."Now is the time for business and public to prepare"

Any idea how that will be done 3 weeks before the roll-over date? With major international holidays on the calendar?

Now? How about 6 months ago?

If the decision was to cut loose from the EU 4 years ago, when supposedly "leave meant leave", WTF happened in the intervening years?

njbr
njbr

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