UK, EU Attempt to Salvage a Last Minute Trade Deal

Mish

Both sides are talking again. That makes a deal more likely.

Negotiators Continue Talks

Despite threats from both sides to walk away from a deal, Brexit Talks Continue for Another Week.

Intensive and secretive, the talks are a final bid to seal a new partnership agreement for when Britain’s transition out of the European Union runs its course at the end of this year.

If the sides overcome their differences, the new deal would govern everything from trade and energy to transport and fisheries. If they fail, an estimated $900 billion of annual bilateral trade in goods and services would be damaged from Jan.1 by tariffs and quotas.

An EU diplomatic source and a UK official said negotiations would continue face-to-face in Brussels on Monday following a full weekend of talks. An update on their progress and the chances of a deal was expected on Wednesday or Thursday, they added.

These talks started in January then quickly fell apart when the EU made demands the UK could never accept.

As discussed previously, last minute deals are the norm for the EU. 

Deadlines come and go unless there is a hard reason they cant. 

October 15 Deadlines Comes and Goes

Please recall my September 6 post UK Lays the Brexit Line on the EU: October 15 or 'Move On'

“If we can’t agree by then, then I do not see that there will be a free trade agreement between us, and we should both accept that and move on,” he will say, according to comments released by his office.  

That was a in reaction to ludicrous demand by the EU.

I commented on September 6

Either the EU bends on fishing rights and other rule changes or the UK walks.

There is still time for a deal, but but it will not be the one-sided affair envisioned by the EU.

Kudos to Boris Johnson for his stance.

Drop Dead Date

The actual drop dead date by the Brexit Treaty is in December. 

Bluff Upon Bluff

On September 13 I noted the EU is to Blame for the Latest Brexit Crisis by reiterating ridiculous demand.

In response, Boris Johnson urged Conservative MPs to back his Plan to Override Part of the Brexit Withdrawal Agreement.

German Finance Minister Olaf Scholz then launched another EU bluff: No-Deal Brexit Would Hurt Britain More Than EU.

“Europe would be able to deal with it and there would be no particularly serious consequences after the preparations we have already made,” said Scholz.

My September 13 Comments

If "Europe could deal with this with no serious consequences", then why would it care?

The fact of the matter is German exports to the UK would crash in the absence of a deal.

Forget the EU's Bluff

We are here because the EU demanded fishing rights and interfered in UK internal policies on state aid.

Boris Johnson responded in kind.

Verge of a Huge Tactical Mistake

On October 7, I commented EU on Verge of Huge Tactical Brexit Mistake

Miscalculation or On Purpose?

France may very well want the UK out on a hard deal for reasons we don't fully understand. That said, Germany does get hit harder than France in a No Deal setup.

Possibly it's just a large last-minute bluff.

But perhaps Eurointelligence has this right. The EU has seriously misjudged UK politics.

Let's go back much further, First to January 31 in a Tweet, then to February.

Flashback February 2, 2020

On Feb 2, I made this bold claim In Wake of Brexit, EU Will Cave In to UK Once Again

The smart bet is that the EU caves not that Johnson caves.

Given events in Germany (demise of cars) and France (Macron's problems at home), the EU needs a deal more than the UK.

Expect a deal, just not a comprehensive one. The EU is too pathetically slow to work out a comprehensive deal and that is another reason the UK was wise to leave.

Amazing Feat

1: Supposedly the EU would never remove the backstop

2: Supposedly the EU would never change the political declaration

3: Supposedly the Remainers would tie up the legislation forever

Who was it that changed the Political Declaration and the Withdrawal Agreement. The Easter Bunny?

October 15, has come and gone and there has been shockingly little progress on anything.

EU Mistakes Increase the Odds of No Trade Deal

On October 21, I commented EU Mistakes Increase the Odds of No Trade Deal.

Numerous soft deadlines posed by UK prime minister Boris Johnson and the EU have come gone like rain goes down the gutter.

Failed EU Summit

Last week there was a Failed Summit in which EU leaders called on the UK to "make the necessary moves" towards a deal.

That "deadline" came and went but the sides are still talking.

No Progress Since January

There has been no progress on any of these points since January. 

When dealing with the EU, there never is. Progress only comes at the last second.

This time however, the EU made such absurd demands that the UK is discussing not honoring the withdrawal agreement.

EU stubbornness and arrogance is why we are here now. A basic deal should have been easy but the EU again foolishly thought it held all the cards.

Will Macron bend? Johnson?

Both have to and it is not at all clear if they want to.

Moreover, if the EU makes another mistake, there will not be a deal, even if both sides want one.

If there is no deal, both sides will suffer, with Germany taking the biggest hit to exports.

Dateline November 1 

Here we are, still talking. But that is a good sign. 

Moreover, it appears the EU is willing to make concessions and so is the UK, perhaps even on fishing rights.

But the one thing the UK cannot and will not do is agree to let the European Court of Justice be the sole arbiter in any dispute.

Reflections on Trade Deals

A trade deal is very easy in theory. I can write an excellent trade agreement on a napkin in 30 seconds.

In practice, trade deals are never easy, especially in the EU where 27 nations all have to agree to get anything done.

But in this case, and as a direct result of Brexit, Barnier has considerable leeway in terms of what he can do. That leeway expires in December. 

Macron, Johnson, and Barnier all have to want a deal, and it has to be done in a way where everyone save face. 

But these kinds of face-saving deals happen more often than not in the EU and at the last second, often with meaningless or ambiguous terms that cause further bickering for years.

It's the way of the EU.

Mish

Comments (31)
No. 1-13
Scooot
Scooot

I agree the silence is encouraging. I’m sure everyone would welcome some good news at the moment. If a deal is forthcoming it would be nice if it wasn’t followed by them bragging on who got the better of the other.

Hayseed
Hayseed

Neither side really wants "a trade deal". Both sides bluster about tough action, but neither really wants to do anything. It's all theater. The English leadership didn't believe there was a real chance Brexit would pass. They thought they could go through the motions, and put the issue to rest after a vote failed. Surprise! London is not Great Britain. The continuous negotiations will drag on for years, barring a collapse in the system.

njbr
njbr

Inventing an acceptable alternative to ECJ would take years.

njbr
njbr

The deadline is so close there is no practical difference between the thinnest of all possible agreements and the reality of Brexit means exit. Chaos will ensue.

caradoc-again
caradoc-again

There will be no deal. Start from zero for UK, reset or restart, whatever you might call it. Take a big hit and be sovereign. Boris Johnsson will get a kicking if there is much of a deal.

jon_dlewis
jon_dlewis

Of course there will be a deal or some kind of extension fudge (more likely). Mish - you often cite the German car industry as a loser from this. I'm intrigued which home grown cars UK residents are going to flock to instead? Nissan? I can't see this. I can't see BMW being hit at all. Who is going to setup a new car plant for such a small market as the UK. Surely all the cars that UK people want to buy come from outside the UK and so will hit exactly the same tarrifs - so it just comes down to the normal car buying dceisions - except all of them wil be more expensive - oh except for those lovel Nissans!

Doug78
Doug78

Rowan Atkinson's solution.

Sechel
Sechel

Without a deal U.K. becomes far less important to the U.S. especially if Biden wins. Defense ties will hold but Washington will view the continent as far more important

TonGut
TonGut

“If we can’t agree by then, then I do not see that there will be a free trade agreement"

Bilateral agreements that govern trade cannot possibly be "free trade" by any definition. Only a no-deal Brexit can be, depending...

LewisM
LewisM

Seems to me any trade deal will founder once again over Northern Ireland. Frankly I'm surprised that other EU countries aren't taking the opportunity to squeeze the UK more - for example, Spain over the return of Gibraltar and Greece over the return of the Elgin Marbles.

Mish
Mish

Editor

I had a denial of service attack and had to turn of comments for a while

caradoc-again
caradoc-again

There appears no point in having a deal now. The hit of a hard Brexit is probably a rounding error in the total cost of Covid to the UK and EU.


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