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News, World
By Gontran de Quillacq
On December 29, 2020

The many unsolved issues of the Christmas Brexit deal

"It ain't over till it's over", said the baseball legend Yogi Berra. And Brexit is surely not over with this Christmas deal. Many issues remain unsolved.

“It ain’t over till it’s over”, said the baseball legend Yogi Berra. And Brexit is surely not over with this Christmas deal.

The 27 European governments have just validated the 11th hour Brexit agreement, and the British Parliament is expected to quickly ratify the treaty, hence avoiding a hard brexit on January 1st, 2021. This Brexit deal covers many topics, of which data, energy, transport, movement of people, law and justice, fisheries, educational programmes, Europol and Eurojust. The pro-Brexit Daily Mail may rank Boris Johnson among history’s greatests, but the Brexit indigestion is far from over. Here are the issues currently pointed out by the press and the analysts so far:

– The deal garantees a quota-free and tariff-free trade for manufactured goods. It is a breath of fresh air for many UK industries and UK jobs. Unfortunately, manufacturing sees a trade imbalance in favor of the EU by £79 bn or €86 bn per year. In other words, that free trade agreement allows continental Europe to keep on flooding the UK with its products (German car, anybody?).

– Worse, Europe represents 43% of the UK’s exports, but manufacturing represents only ~10% of the country’s GDP. Services represent 80% of the GDP, and they are not covered by the agreement. Actually, services will require licenses. In particular, financial services have lost their economic avantage and their EU-passport, and Brussell has clearly stated its intent and its muscle in delivering a hard bargain in financial services, and derivatives in particular.

– The UK car manufacturing may have avoided a widespread exodus, despite some departures (Nissan, Ineos) in an overall slumbering market, but the rules of origin specifies that no more than 55% of the value of the cars must come from outisde UK, a lower percentage than the car makers were hoping for. This will force manufactures to re-engineer their production chains, increase costs and challenge the business sense of manufacturing cars in the UK (Bloomberg article).

– The UK will still have to fully respect EU regulations for its exports, on top of its future UK regulations, so hardly a reliefe for its industries and ts independence-proud Brexiters. The importation red tape will actually cost a lasting damage to the UK.

British citizens have lost their right to live, work and retire abroad. Brits will soon need visas, UK-health insurance, driving licenses, and pet vaccinations. Worse, British students and academics are losing the widely-recognized benefits of the Erasmus program. An Australian point-based immigration policy may give the country a better control of its future immigration flows, but surely not of its current immigrant population, which is essentially entitled to stay. Some say that the goal of reducing the immigration into the UK will be hard. UKIP will not be happy.

– The UK now needs to negotiate new trade agreements with the rest of the world, and it will not enjoy the economic weight of a 450 million population in such negotiations. Trump’s negotiators had no intention of giving the UK a fair trade. Joe Biden’s will “definitely not” prioritize a US-UK deal over American domestic issues. Many topics of discussion remain, notably food standard, which are high in the British demand, and the likelyhood of a fast trade is low.

– The biggest long-term risk is a breakup of the United Kingdom. Boris Johnson has never hidden his opposition to devolution and sees the UK as ruled from Westminster. Scotland barely voted to stay in the UK, and the independence referendum was before Brexit. The Europhile Scots didn’t expect that staying in the UK would mean leaving Europe. Brexit now pushes them towards independence and Europe (excellent LSE article). The Economic impact of Brexit will not help. Nicola Sturgeon has much better managed COVID than Boris Johnson did (health is devolved), bringing the SNP popularity to a new high. A new referendum could spell disaster for the Union. Northen Ireland is already in Europe and moving away from England & Wales through Brexit.

– The British population remains divided about Brexit, and remainers are said to have the majority

 

Credits to the Editorial Board of The Washington Post.

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