Several ongoing crises, including a breakdown in talks between British Brexit negotiator David Frost and his EU counterpart, Michel Barnier, have spiked levels of uncertainty in Britain’s post-Brexit ambitions.
The ongoing coronavirus pandemic has further blocked efforts on both sides of the English Channel as government allocate resources to battle with the second wave of infections and lockdown measures impacting large and small enterprises.
With just over six weeks before the transition period ends, the UK is now left at an impasse and analysts expect Downing Street to ‘crash out’ of the EU without a trade agreement.
Sputnik takes a closer look at three key concerns in the UK’s Brexit preparedness plan.
The Northern Irish Protocol (Backstop)
One of the most contentious issues in the UK’s Brexit preparedness is the Irish backstop, which maintains EU regulations in Northern Ireland, including customs and single market regulations on goods, an Institute for Government report said.
Such measures will enter force on 1 July next year and businesses trading across the Irish sea will need to comply. But according to the report, preparations for essential infrastructure were “off track”.
The Joint Committee was also tasked with deciding how to enforce the backstop but “significant” uncertainty on key details of operations remained, including good exemptions in the fisheries industry, determining which goods are ‘not at risk’ and applicable tariffs on goods, among others.
The UK Internal Markets Bill would also ‘unilaterally’ define such products despite breaching international law, causing further uncertainty for Northern Irish businesses, the report said.
“The UK’s apparent willingness to disregard what it signed up to just a year ago has reopened previously closed questions about the possibility of a land border on the island of Ireland, with potentially serious implications for peace and security in Northern Ireland. It also puts businesses, who do not want to break the law, in a difficult position – caught between applicable EU law and the UK’s non-application of it,” it said.
Johnson’s refusal to extend the Brexit transition period after 31 December this year and the ongoing coronavirus crisis in the UK and EU would prevent both Downing Street and British businesses from fully preparing to leave the EU.
Further problems are expected after media projected Joe Biden to win the November elections, which could see Democratic party opposition to a post-Brexit trade deal with London over violations of the Good Friday Agreement.
Further concerns over the backstop were echoed by European Commission vice-president Maroš Šefčovič at the fourth EU-UK Joint Committee meeting in London on 19 October.
“Given the limited time left before the transition period ends, Vice-President Šefčovič underlined the need to concentrate all efforts on both sides on bridging existing implementation gaps and delivering results so that the Withdrawal Agreement is fully operational as of 1 January 2021. This requires moving beyond a business-as-usual approach”, and EU statement said.
Brexit and the COVID-19 Crisis
COVID-19 woes had further delayed preparedness responses for many businesses than prior to the health crisis, and PM Johnson’s failure to extend talks with Brussels was a “high-risk bet”, a further report said.
Companies were “in a worse position” than before COVID-19 and risked becoming “unviable” in a no deal Brexit, it said.
“Coronavirus has starved firms of cash and left many struggling to stay afloat. This has derailed their Brexit preparations, preventing them from investing in new customs processes or stockpiling to protect themselves against disruption to supply chains. Smaller businesses have been particularly badly affected,” it said.
The government should clearly show the effects of leaving the Single Market and Customs Union, including increased levels of bureaucracy for traders, despite reaching a deal, as well as identify support for affected firms amid COVID-19, it read.
As of 7 August, COVID-19 efforts have cost the UK government an estimated £210bn, including £70bn in confirmed expenses, the National Audit Office reported, but the figures do not include further measures amid the second wave.
According to UK media, the UK and EU would need to begin trade continuity agreements after the transition period ends.
Agreements would aim to reduce trade tariffs in both the goods and services markets after ending the 11-month transition period. But the Prime Minister has failed to reach an agreement by his proposed 15 October target, the BBC reported.
Despite sharing ‘level playing field rules’ on matters such as environmental policy and workers rights, the EU has demanded the UK stay close to current regulations amid protests from London.
Further disagreements over fishing rights, customs checks and the Irish backstop due to mandated EU regulations on goods would cause further headaches for UK businesses, potentially delaying transit across the English Channel.
Nearly 50 percent of the UK’s total trade, including 40 trade deals the EU had inked with 70 countries, is with the 27 member trade bloc, UK government figures show.
British imports to the EU were £394bn, or 43 percent of total UK trade, and British imports from the EU were £374bn, or 52 percent of total UK imports, government figures show.
To date, the UK has only signed a Comprehensive Economic Partnership Agreement (CEPA) with Japan, valued at £29.1bn or just 2 percent of the UK’s total trade agreements and 0.07 percent of GDP, according to government figures.
The Department for International Trade estimates a post-Brexit deal with the United States – Britain’s closest ally – would only account for 0.16 percent GDP growth in the long-term, or £3.4bn over 15 years.
Further challenges to a US-UK trade deal as noted by a Policy Exchange report include unilateral agricultural liberalisation policies of US exports, drug pricing and National Health Service (NHS) reform demands from Washington, among others.
Washington could also use any free trade deals to “influence the UK’s China policy”, including a ‘China clause’ as previously implemented in the US-Mexico-Canada agreement (USMCA) allowing for parties to walk away if other members sign trade deals with ‘non-market’ economies, the report added.
Roughly 30 continuity trade deals have been reached with countries and regions, including Switzerland, Israel, South Korea, the CARIFORUM trade bloc of Caribbean nations, Iceland and Norway, among many others.
The UK will need to complete continuity trade agreements with partner countries globally to continue trading outside the EU or face terms set by the World Trade Organisation (WTO), the UK government said.