Global Daily – Can a Brexit deal still be done in time?

by: Bill Diviney

UK Politics: Early ratification is probably impossible, but a deal can be provisionally applied – With a little over two weeks left until the UK leaves the EU’s single market and customs union, negotiations on a post-Brexit trade deal are continuing, even at this eleventh hour. The risk of a no deal scenario is now very high, but as we discussed in a previous Daily (see here), Brexit will be very damaging to the UK and (to a much smaller extent) EU economies even with a deal. Even if a deal is not struck in time, we expect one to be concluded in the course of 2021. What if a deal is struck before 31 December? Parliamentary timetables and the need for proper scrutiny make it now virtually impossible for a deal to be formally ratified before the end of the transition period. Instead, if a deal is struck, it will likely be provisionally applied by the European Council (i.e. the EU member states) and the UK while it awaits formal approval by the UK and European parliaments (and potentially, EU national and regional parliaments).

Level playing field provisions still the biggest barrier to a deal – There are presently three main sticking points that need to be overcome for a deal to be agreed: 1. Fish quotas, 2. ‘Level playing field’ provisions, and 3. Governance of the deal. Of these, the most contentious is the level playing field. This aspect of the deal has been proposed by the EU to guard against one side gaining competitive advantage over the other in case one side does not keep up in terms of regulatory standards. The proposal is that tariffs could be imposed in order to ‘re-level’ the playing field and maintain fair competition. The UK disagrees with the automatic nature that this would apply, and the government has said it infringes on the UK’s sovereignty. However, the UK seems to accept the principle of the level playing field provisions, and so the negotiation is really about how the provision is governed – for instance, whether unfair competition can be judged independently through an arbitration body, rather than one side unilaterally (and potentially arbitrarily) deciding that competition has become unfair.

It remains to be seen if a deal can be agreed in time even to apply provisionally. However, there are signs of movement on the EU side, and following a flurry of high level talks over the past week, Commission President Ursula von der Leyen has pledged to ‘go the extra mile’ in order to secure an agreement.