IS THE UK STALLING FOR A VIRTUAL NO DEAL?

Ruling out an extension to the transition when the chances of achieving a comprehensive trade deal with the EU diminish by the day will cut no ice if the barriers to trade go up on 1st January 2021 and we suffer even more hardship and additional economic damage.

If Covid-19 wasn't enough to tip the UK economy into a lengthy recession, the inability of the UK and EU to make progress on a post-Brexit trade deal, not wholly unexpected given this government's antipathy to Europe, is most definitely something that could do so and which should concern us as another Brexit cliff edge date beckons. If no free trade agreement is agreed before the UK leaves the transition period - during which we are treated like an EU member state - the economic damage from the sharp break with Europe is expected to be significant.

The penultimate round of 'virtual' trade talks appear to have stalled with the EU holding firm on its key single market principles, fearing that Britain is wanting to deregulate and only focus on parts of the agreed package and not a comprehensive trade deal. With just one more round of talks scheduled at the beginning of June, the UK will soon have to signal its intentions over extending the transition post December 31st. Boris Johnson has said he will not support an extension under any circumstances, despite negotiating a mechanism to call for one into the withdrawal agreement. The European Commission has said it would be happy to agree an extension in light of the pandemic and pressures on negotiations. The SNP and Lib Dems, have called for the government to request an extension in light of the coronavirus pandemic although new Labour Leader, Keir Starmer has rejected calls for the Brexit transition period to be extended, saying he would rather "the negotiations were completed as quickly as possible.

Given the complexities of nailing down a comprehensive free trade deal in time for the 27 EU countries to ratify in October it is hard to see anything other than a limited and minimal agreement being struck to save face; cobbled together in some 11th hour desperate dash between Brussels by Boris and the EU President.

Currently, whatever UK Cabinet Minister Gove says, there is a real concern in Europe that Britain is moving further away from the jointly agreed political declaration on key issues in the negotiations. German Foreign Minister Heiko Maas said 'there was a growing risk of a hard Brexit in the midst of the coronavirus crisis as negotiations between Britain and the European Union so far on the future trade relationship had yielded hardly any progress' "It's worrying that Britain is moving further away from our jointly agreed political declaration on key issues in the negotiations," Maas told Augsburger Allgemeine newspaper. "It's simply not on, because the negotiations are a complete package as it's laid out in the political declaration," he added. Maas said there was currently neither common ground on how to shape a comprehensive trade deal nor on whether to extend the negotiation period beyond the end of the year.

Meanwhile, Irish Foreign Minister Simon Coveney said " the coronavirus pandemic had made an already difficult timeline for a British-European Union trade deal "virtually impossible" and that it would make sense to seek more time".

Boris Johnson's apparent advice to business to disregard and 'bin' Northern Ireland border documents, only to accept the positioning of three new N.Ireland border ports will have surely reinforced the belief that much of Boris's bluster is for public consumption. Added to this, loudly trumpeted compensatory deals with the US and Japan and others are clearly intended to increase the pressure on the EU to give way even though it is likely that those deals will be put on hold until the EU/UK arrangements are clearer. The Financial Times reported that international trade secretary Liz Truss is preparing a "big concession package" offer to Donald Trump's administration as part of negotiations with Washington with both sides eager to do a deal before the presidential elections in November and raising concerns by British farmers fearful that food import tariffs on US food will be lowered.

Alongside these developments, France and the Netherlands have joined forces to urge the European Union to enforce environmental and labour standards more forcefully with countries the bloc signs trade deals with. According to Paris Reuters, the initiative comes as the EU tries to negotiate a new UK trade deal with Britain, amid concerns that it might seek to undercut EU labour and environmental standards to boost its competitiveness. The Trade Ministers in the two countries say that the EU should link tariff reductions "where relevant" to the effective implementation of trade and sustainable development provisions and be willing to take action when those provisions are breached. The European Commission, which handles trade policy on behalf of EU member states, has yet to give a formal response to the joint proposals,

Meanwhile, new economic figures show the UK economy shrank by 5.8% in March and 2% in the first quarter of the year as a whole. The Bank of England and the Office for Budget Responsibility expect the second quarter of 2020 to deliver a Gross Domestic Product (GDP) contraction so large that the 2 per cent fall seen in the first quarter will seem a mild stumble. Whilst the Government has rightly thrown financial life lines to workers and UK businesses struggling to keep afloat during the pandemic; a continuing partial lock down, fears of further virus peaks and low consumer confidence upon which the UK economy depends means a rapid return to normal is unlikely. The country faces significant levels of unemployment over the short and medium term, business failures and real hardship amongst the poorest and those least able to cope. With supply lines already disrupted globally a growing risk of a hard Brexit in the midst of the coronavirus crisis is something both sides in the negotiations should be trying hard to avoid.

Britain and the rest of the Europe and the global community have been through so much with Covid-19. Hundreds of thousands have died already with millions facing further periods of unemployment and hardship. The economies and finances of nations will take years to recover. The UK and Europe do not need to put their citizens through even more hardship and suffer the additional economic damage that a hard, no deal Brexit will bring. Ruling out an extension to the transition when the chances of achieving a comprehensive trade deal diminish by the day may play well in Britain's Brexit Cabinet and amongst hard-line leavers but will cut no ice if the barriers to trade go up on 1st January 2021 along with the prices of imported goods and industrial supply chains are cut just as businesses start to see some light and emerge from what can only be described as a very dark tunnel.

Article compiled by Jon James

Sources:

The independent Brexit: Farmers fear government might slash tariffs on food imports from US Andrew Woodcock
Political Editor @andywoodcock

The Independent 13/5Keir Starmer has rejected calls for the Brexit transition period to be extended Jon Stone
Policy Correspondent @joncstone

REUTERS (LONDON) French, Dutch join forces to urge EU to show teeth on trade

Michel Rose BUSINESS NEWS MAY 10, 2020

BERLIN (Reuters) -BREXITMAY 9, 2020

Reporting by Michael Nienaber

Metro: metro.co.uk/2020/05/13/chancellor-fears-significant-recession-now-likely-12700303/

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