Settling for the least bad option
The defining image of Britain’s Christmas Eve trade deal with the European Union was a beaming Boris Johnson with thumbs up in the air. There were no celebratory pictures from any of his continental counterparts.
An end to Brexit’s drama should let the Brits reenter amore breathable political atmosphere after almost five years talking about nothing else – other than Covid-19.
The EU, with comparatively less to lose, has less cause to rejoice. The costs of no deal for the bloc would have been relatively manageable, at about 0.5 per cent of potential output. It’s also hard to sell the departure of a big member state as a victory, however rocky the historical relationship. European Commission boss Ursula von der Leyen expressed ‘‘relief’’ and ‘‘quiet satisfaction’’ when announcing the treaty, while her top negotiator, Michel Barnier, reiterated his view of Brexit as a ‘‘lose-lose’’.
Yet as officials in Paris, Berlin and elsewhere comb through the fine print of the trade agreement’s 1250 pages, the EU’s capitals should feel they’ve been handed the least bad way to bring Brexit’s opening chapter to a close.
The deal enshrines tariff-free, quota-free trade in goods, which will make a big difference to severalmember nations. New agricultural levies would hit Ireland hard, given that 40 per cent of its agri-food exports go to the UK. Tariffs would cost Germany 8.2 billion euros (NZ$14.1b) of its exports to Britain, and France 3.6b euros, according to Euler Hermes.
While the level of access being offered to the EU’s single market of 450 million people is unprecedented for a non-member, the bloc has hardly opened the floodgates.
The deal doesn’t cover services, meaning financial trade and data flows are in the gift of Brussels. France’s Emmanuel Macron, for whom fish became a symbolic Brexit red line, will be happy UK fleets will take only 25 per cent of the current EU catch in British waters, rather than the 80 per cent first demanded by Johnson.
Ensuring the deal has teeth will now be the priority for von der Leyen. Protecting the single market was key for the EU, and a rallying point for its 27 members against the British threat to compete head-on with a ‘‘Singapore-on-Thames’’ deregulatory drive.
An analysis of the provisional treaty outlines how the UK and EU have agreed to uphold their environmental, social, labour and tax transparency standards to make sure they don’t undercut each other. The punishment is tariffs, subject to arbitration by an independent panel. This sounds rather like being nibbled to death by ducks but if upheld it does offer a sensible deterrent.
Tough geopolitical and strategic questions lie ahead for Brussels and the member states. Brexit redraws the map of European power, halving the number of permanent EU seats on the UN Security Council and cutting 40 per cent of the bloc’s military capability. It removes 14 per cent of the EU’s GDP, making it smaller as a single market.
But the departure of one of the EU’s least enthusiastic integrators is an opportunity to create amore ambitious and assertive bloc, one deserving of a seat at the superpower table alongside the US and China.
It’s not just Johnson and his fellow Brexiters who want to ‘‘take back control’’. The EU wants to create amore ‘‘sovereign’’ bloc less dependent on others (namely the US) for its security and prosperity. How it asserts itself with its UK neighbour, whose own vision of sovereignty seems to be the freedom to escape pesky EU rules, will be an important test. Having a trade deal in place won’t restore trust overnight, but it helps.
Nobody expects a sudden new dawn in EU-UK relations. But the 11th-hour agreement avoids a messier outcome, while allowing the bloc to monitor and limit unfair competition from the Brits and providing a path to more co-operation. Sometimes the least bad option is all there is.