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EU and UK Clinch Narrow Brexit Deal, Just Days Before Transition Period Expires

2020-12-24 16:12:45
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LONDON / BRUSSELS – Britain struck a narrow Brexit trade deal with the European Union on Thursday, just seven days before leaving one of the world's largest trading blocs in its most significant global shift since the empire's loss.

The deal means it has moved from a chaotic finale to a painstaking divorce that has shaken the 70-year project to forge European unity from the ruins of World War II.

Ursula von der Leyen, President of the European Commission, told reporters: “It was a long and winding road. But we have a good deal to show for it. It's fair, it's a balanced deal and it's the right and responsible thing for both parties. "

British Prime Minister Boris Johnson tweeted a photo of himself on Downing Street, raising both arms in a triumphant thumbs-up gesture. "We have taken back control of our destiny," he told reporters. "People said it was impossible, but we took back control."

"We will be an independent coastal state," he said. "We will be able to decide how and where to promote new jobs."

EU chief negotiator Michel Barnier was able to say for the first time in four long years: "The clock has stopped ticking."

While the last-minute deal prevents the saga's most bitter ending on January 1, the UK is poised for a much more distant relationship with its largest trading partner than almost anyone expected at the time of the 2016 referendum.

A deal seemed imminent for almost a day, until haggling over how much fish EU boats should be able to catch in UK waters delayed the announcement of one of the most important trade deals in recent European history.

The UK formally left the EU on January 31, but has since entered a transition period where trade, travel and business rules remained unchanged until the end of this year.

The details of the deal have yet to be made public, but if the parties have a zero-rate and zero-quota deal, that will help stem the trade in goods, which accounts for half of their $ 900 billion in annual trade. ease.

It will also support peace in Northern Ireland – a priority for US President-elect Joe Biden, who had warned Johnson to uphold the 1998 Good Friday peace agreement.

Even with a deal, some disruption is certain from January 1, when Britain ends its often-fraught 48-year relationship with a Franco-German-led project that sought to unite the ravaged nations of post-WWII Europe into a world power . .

Tony Danker, Director General of the Confederation of British Industry, reluctantly welcomed the deal:

"As it comes so late in the day, it is vital that both parties take immediate action to keep trade and services moving."

After months of talks sometimes undermined by both COVID-19 and rhetoric from London and Paris, leaders in the EU's 27 member states have reached an agreement as a way to avoid the nightmare of a no-deal exit.

But Europe's second-largest economy will both leave the EU's internal market of 450 million consumers, which the late British Prime Minister Margaret Thatcher helped create, and leave the customs union.

The British pound gained more, reaching as high as $ 1.3620. It was last 0.7% higher at USD 1.3591, with potential to climb to a 2-1 / 2-year high above USD 1.3625.

Brexit

When the UK shocked the world in 2016 by voting to leave the EU, many in Europe hoped it would stay closely aligned. But it wouldn't be. Von der Leyen said that "parting is such a sweet sorrow."

Johnson, the face of the pro-Brexit campaign, had claimed that since 52% had voted to "take back control" of the EU, he was not interested in accepting the rules of the internal market or customs. -union.

The EU did not want to give unfettered privileges to a free-running, deregulated British economy outside the bloc, and if possible encourage others to leave.

The result was a laborious negotiation of a "level playing field" in competition – which the EU demanded in return for access to its market.

The trade pact does not cover services, which make up 80% of the UK economy, including a banking sector that positions London as the only financial capital to rival New York.

Access to the EU market for UK-based banks, insurers and asset managers will become patchy at best.

JPMorgan said the EU had struck a deal that would allow it to keep almost all of its benefits from trading with the UK, but with the ability to use regulations to use cherry picking in sectors where the UK had advantages – such as services.

Brexit campaigner Nigel Farage said the deal would keep the UK way too closely aligned with the EU, adding that he hoped this would be the start of the bloc's end.

Even with a deal, the commodity trade will have more rules, more red tape and more costs. There will be some disruption at ports. Everything from food safety and export regulations to product certification will change.

The UK, which annually imports about $ 107 billion more from the EU than it exports there, had been bickering over fish to the end – a totem problem, but worth less than 0.1% of GDP.

Essentially, the most ambivalent member of the EU is leaving the job of the bloc on New Year's Eve for an uncertain future with a trade relationship that, on paper at least, is far away.

At the stroke of midnight in Brussels, both sides will decline.

The EU is losing its main military and intelligence power, 15% of GDP, one of the world's two main financial capitals and a champion of free markets that had served as a major brake on the ambitions of Germany and France.

Without the collective power of the EU, the United Kingdom will be largely alone – and much more dependent on the United States – in negotiations with China, Russia and India. It will have more autonomy, but will get worse, at least in the short term.

With an economy only one-fifth the size of the remaining EU, Johnson needed a trade deal to minimize the Brexit disruption, as the new coronavirus has hurt the UK economy more other major industrial powers.

The Bank of England has said that, even with a trade deal, Britain's gross domestic product is likely to be hit 1% by Brexit in the first quarter of 2021. And UK budget forecasters have said the economy will be 4% smaller than 15 years. years than it would have been if Britain had stayed in the bloc.

(Reporting by Gabriela Baczynska, Guy Faulconbridge, Elizabeth Piper, Conor Humphries, Kate Holton, John Chalmers, William Schomberg, Paul Sandle, and Michael Holden; Written by Guy Faulconbridge and John Chalmers; edited by Alison Williams and Philippa Fletcher)

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