The United Kingdom and European Union were on the cusp of striking a narrowly focused trade deal on Thursday, swerving away from a chaotic finale to the Brexit split that has dealt a blow to the 70-year attempt to forge European unity from the ruins of World War II.
While a last-minute deal would avoid the most acrimonious ending to the Brexit divorce, the UK is heading for a much more distant relationship with its biggest trade partner than almost anyone expected at the time of the 2016 Brexit vote.
Sources in London and Brussels told the Reuters news agency that a deal was close as British Prime Minister Boris Johnson held a late-night conference call with his cabinet of senior ministers and negotiators in Brussels pored over reams of legal trade texts.
“Work will continue throughout the night,” said European Commission President Ursula von der Leyen’s spokesman, Eric Mamer.
“Grabbing some sleep is recommended to all Brexit-watchers at this point. It will hopefully be an early start tomorrow morning,” Mamer said.
The British pound rose 1 percent to $1.3498, the biggest jump in almost seven weeks.
There was no official confirmation of a deal but a news conference was expected in London on Thursday morning – just seven days before the UK turns its back on the EU’s single market and customs union at 23:00 GMT on December 31.
The UK formally left the EU on January 31 but has since been in a transition period under which rules on trade, travel and business remained unchanged. But from the end of this year, it will be treated by Brussels as a third country.
‘A big win’
A commentator on British issues says the UK appears to have succeeded in winning some important concessions from the EU.
“This deal will certainly be seen as a big win for Boris Johnson,” Nile Gardiner, director of The Heritage Foundation’s Margaret Thatcher Center for Freedom in Washington, DC, told Al Jazeera.
“After all I think the EU, according to the latest reports that we have, have made some significant concessions here. And this deal will result in the United Kingdom being given full access to the EU single market, zero tariffs in place and the UK, of course, will retain full control of its borders, its laws, and also its own trade as well,” Gardiner said.
But other analysts have said that Brexit is likely to have a net negative effect on the British economy and would add to the pressure created by the COVID-19 pandemic.
If negotiators have struck a zero-tariff and zero-quota deal, it would safeguard nearly $1 trillion in annual trade and support the peace in Northern Ireland – a priority for United States President-elect Joe Biden, who had warned Johnson that he must uphold the 1998 Good Friday peace agreement.
Even with an accord, some disruption is certain from January 1 when the UK ends its often fraught 48-year relationship with a Franco-German-led project that sought to bind the ruined nations of post-World War II Europe together as a global power.
After months of talks that were at times derailed by COVID-19 and Brexit fireworks from London and Paris, leaders across the EU’s 27 member states have cast an agreement as a way to avoid the nightmare of a “no-deal” exit.
But Europe’s second-largest economy will exit the EU’s Single Market, which former British Prime Minister Margaret Thatcher helped create, and its customs union.
As the Brexit endgame was drawing to a close, hundreds of trucks backed up around the southern English port of Dover earlier this week had offered a sobering reminder of the potential consequences of ending Britain’s transition period on December 31 without a deal.
A key sticking point in the negotiations has been fishing.
The UK, which imports about $107bn more a year from the EU than it exports there, bickered until the end over fish – important for the UK’s small fishing fleet but worth less than 0.1 percent of gross domestic product (GDP).
Both sides have made an agreement on fishing a precondition for any wider deal over their future relationship, even if the 650 million euros ($790m) of fish European boats catch in UK waters each year is a fraction of the 512 billion euros ($625bn) of goods traded annually between Britain and the EU.
The EU has also compromised on fishing: It has gone from accepting no reduction at the start of the negotiations to 18 percent a few weeks ago, then to 25 percent in the last few days. The bloc had refused to accept a reduction of more than 25 percent in the value of fish caught, saying even that was hard for countries such as France and Denmark to accept, officials with knowledge of the discussions told the Bloomberg news agency.
But it is not as simple as just the raw numbers. Alongside the percentage value of the catch, the two sides were haggling over how long a period of time fishermen will be given to adjust to the rules. The EU had initially called for a 10-year transition period, before reducing that to seven. The UK has demanded the EU accept a five-year transition period after previously suggesting three years.
When the UK shocked the world by voting to leave the EU, many in Europe hoped that it could stay closely aligned. But that was not to be.
Johnson, the face of the 2016 Brexit campaign, made clear that since 52 percent had voted to “take back control” from the EU, he was not interested in accepting the rules of either the single market or the customs union.
But the EU is equally determined to protect its lucrative single market and wants to prevent London from securing what it considers to be the best of both worlds – preferential market access with the advantage of setting its own rules.
The EU does not want to allow a freewheeling, deregulated British economy that might encourage others to leave.
Level playing field
The result has apparently been a tortuous negotiation on a so-called level playing field in competition – which the EU demanded for access to its market.
The “level playing field” is trade jargon for ensuring fair competition. EU leaders have long feared that after Brexit, the UK could ease regulation to undercut competitors and thus gouge EU market share. Enforcement is a key issue.
At one point, EU chief negotiator Michel Barnier even posted a picture of himself in London staring at a playing field.
If there is to be a deal, it covers goods but not the financial services that make London the only financial capital to rival New York. Services make up 80 percent of the British economy.
Goods trade will have more rules, more red tape and more cost. There will be some disruption at ports. Everything from food safety regulation and exporting rules to product certification will change.
In essence, what they appear to have agreed is a narrowly focused free trade deal surrounded by other agreements on fisheries, law enforcement cooperation, transport and energy.
EU market admittance for London-based banks, insurers and asset managers is being handled outside the deal and from January 1, access will be patchy at best.