Will there be a Brexit deal this year?

Summary of my argument: with only four months of negotiating time left a Brexit deal remains in reach but is far from certain. The UK-EU negotiations are held up on three key issues: level playing field rules for economic and trade relations, governance, and fish. Both sides will have to compromise on each of these to reach a deal that, despite being thin, remains more desirable than a no deal Brexit

Current state of play  

Four years since the Brexit referendum, the UK has formally left the EU but remains in the single market & customs union until 31 December. The future relationship beyond that is still unknown. What are the chances of reaching a deal on this before the deadline?  

Negotiators have just four months left. It will take two more after that for a deal to be ratified and implemented. If there is a deal its scope will be narrow, aiming for tariff-free and quota-free trade in goods. There will be little on services, never mind non-trade issues, amounting to a hard version of Brexit. 

The UK insists a deal must not limit “sovereignty” or leave jurisdiction with the European Court of Justice (ECJ). It has proposed a series of deals built around a Free Trade Agreement (FTA) that would involve widespread removal of traditional trade barriers, but far short of the promised “frictionless trade”. 

The EU remain bemused by what they see as UK economic self-harm. They are focused on Covid recovery, and other issues like the EU budget and migration. They still want a deal but there seems to be less urgency this time than there was for the Withdrawal Agreement last year. 

Sticking points 

There are three main blockages to reaching a deal: the so-called level playing field rules for economic and trade relations, the legal governance of the agreement, and fish. On all three, both sides will need to make concessions. 

On level playing field both sides are taking a maximalist position. The UK knows the EU will need binding commitments not to back-track on current competition rules, state aid, and labour rights. The EU knows its demand for ongoing UK alignment with future EU regulations will not fly. 

On governance, the UK wants maximum freedom and minimum intrusion, with no ECJ. The EU wants a single agreement that allows cross retaliation if there is a breach. The architecture may be fixed (overarching Association Agreement) but compliance and dispute settlement are tough nuts. 

Fish is economically irrelevant but politically totemic. The UK asserts its right as a “coastal state” to negotiate quotas each year outside an FTA, whilst the EU claims existing quotas must be retained within an FTA. In the end, the EU should show flex here, but only as part of a wider deal. 

Conclusion 

The deal in view is thin, but no deal is worse. The argument that it is all irrelevant given Covid damage is false. With no deal, the EU may enforce border controls from January. Sectors hit hard by no deal will differ from those worst affected by Covid. No deal also means uncertainty for services. 

The obstacles are great, but the odds still narrowly favour a deal by 55 to 45. The landing zone is visible if political will exists. Both sides prefer a deal and consequences of failure are serious. Can the British Prime Minister face down the no-dealers in his own party? As always with Brexit, it will go down to the wire. 

Follow me on twitter @SimonFraser00

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