BY JAMIE FOSTER
It is hard to say at this stage if we are headed for a ‘no deal’ Brexit. The EU’s negotiating position is that the talks must be dealt with in two halves. Firstly the ‘divorce issues’ must be negotiated. These are Britain’s financial commitments, the rights of EU and UK citizens after Brexit and the issue of the Irish border. Only when these issues are resolved is the EU prepared to talk about future trade relationships between Britain and the EU. From a UK government point of view this approach is inflexible and means that serious talks on the ‘divorce issues’ cannot take place. It is impossible, as far as the UK is concerned, to discuss the shape of a future Irish border without having an idea what customs arrangements that border is likely to be subject to.
From an EU point of view the Irish border is important because of the likelihood of smuggling items that are banned in the EU or subject to high tariffs. From the UK point of view the border is important because of the effect on the Northern Irish economy. The UK position is that a soft border should remain in place following Brexit. It will be for the EU to decide if it wishes to police a hard border. In the event that no deal is reached the EU will have to make this decision itself as the UK is unlikely to agree to a hard border under any circumstances.
The result of a ‘no deal’ Brexit is hard to predict. Doom-mongers suggest that planes would no longer be able to fly into Europe, data sharing would end and the city would lose the ability to conduct financial transactions with our European neighbours. This seems unlikely as a realistic scenario. Heathrow is Europe’s largest airport and much of the traffic into Europe is dependent on Heathrow as a hub. Massive amounts of money come in through this arrangement. The EU would be cutting off its nose to spite its face if air travel was disrupted in this way. Similarly, data is the lifeblood of business, and halting data flows would affect EU business as harshly as it would affect British business. Regarding the City, there is no financial centre in Europe set up to cope with the business done in the City and it is unlikely EU economies could cope with the City being arbitrarily cut out.
One effect of a ‘no deal’ Brexit would be that the UK would trade with the EU as a third country and would be subject to tariffs. There is no certainty, however, that the EU would decide to impose such tariffs. It is often said that 40% of the UK’s trade is with the EU but it should be remembered that we are a net importer from the EU. Tariffs would affect EU exporters in the same way as they would affect UK exporters and it is hard to see how it would benefit the EU to put those exports at risk.
It should be remembered that most EU negotiations end with a deal being reached at the eleventh or even the thirteenth hour. It may be that, as the deadline for talks approaches, progress is made. It is imperative that both sides remain realistic about the challenges of a ‘no deal’ Brexit. From the UK government’s perspective, it is important to remember that the referendum result was for us to leave the EU and regain sovereignty. From the EU’s perspective, it should be remembered that the UK is a major trading partner whose trade supports EU business.
In a sense, this negotiation is a test of the EU’s fitness for purpose. If it takes a political stance that punishing the UK for leaving is the only criteria, it risks damaging EU interests. Those interests are the reason for the EU’s existence, so it would be going against its own raison d’être if it prioritised punishing the UK over safeguarding EU interests. Let’s hope that this reality keeps both sides in a position where a deal in the interests of both the UK and Europe is achievable. Only time will tell.