A year ago, I advocated that the EU and UK should mutually agree not to strike a trade deal and, instead, opt for minimal trade facilitation with transitional periods – and then start from scratch.
The article in the Northern Ireland Protocol states that some provisions of the agreement can be bypassed if “serious economic, social or environmental difficulties” can be avoided.
The risk of tripping has been around for a while. The EU could in theory respond to the mechanisms provided in the Withdrawal Agreement or opt for the nuclear option by denouncing the EU-UK Trade and Cooperation Agreement (TCA). The notice period is one year. This could mean the introduction of tariffs between the UK and the EU from early 2023.
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This would undoubtedly create a great deal of friction. It’s quite true that a smaller country has more to lose than a larger country, but this bird’s-eye view of the macro obscures the fact that there is a lot of friction on the part of the EU as well.
If the EU repeals the TCA, fishing rights granted to EU members, including France, will also be rescinded. The European Union has a very large trade surplus with the United Kingdom. The imposition of tariffs would therefore be a tax on EU exports and the flow of money from the EU to the UK.
Not an easy way to go back
I find it difficult to take sides in this conflict. Former British Prime Minister Theresa May negotiated in good faith but reached an impasse because her Parliament did not support her strategy. Prime Minister Boris Johnson found the predicament by accepting the current arrangements for Northern Ireland with the full expectation that they would not be viable.
The European Union made a big mistake by allying itself with MPs against the May government. Johnson is the result of political miscalculation by the European Union.
The European Union has abused the possibility of a technical extension of the Brexit deadline for political purposes in the hope of extending the process beyond a hypothetical second referendum. That was when there was no turning back in EU-UK relations.
Now there is no easy return. I think the least bad outcome would be the termination of both agreements – the Northern Ireland Protocol and the TCA.
Then we must let things rest for a few years, and after Johnson’s term is over and a new committee has been formed that has nothing to do with this disaster, we must start over – whenever that happens.
Implementation of Britain’s exit from the European Union
It is clear that Johnson wants to run again on the issue of Brexit in the upcoming elections. This also makes sense. In 2019, the focus was on completing Brexit. In 2024 it will be the question of Britain leaving the European Union. The Labor opposition is divided over Brexit and is determined to continue. If the EU scraps the TCA, it will offer Johnson the best possible campaign platform.
The EU needs to realize that by repealing the Technical Assistance Act (TCA), the UK will opt for a more disruptive regulatory environment for goods and services. It has to prepare to discuss fish in the European Council. There will be losers claiming compensation.
That’s why I don’t rule out any compromise. There are interests at stake that are not currently being heard in the brief wars. Around this time last year, there was extensive information on both sides that a no-deal Brexit was possible.
Dismantling border controls – trying to compromise?
Then they agreed to a deal at the last minute. Back then, closing the gap was easier than it is today. There are no clear technical solutions to Northern Ireland’s problem in sight.
The recent EU proposal to dismantle border controls between the UK and Northern Ireland was, in my opinion, a real compromise. However, the UK government believes that this will not make much difference on the ground. As for discussion content, we’re in loops. There is not much that can be done to preserve the territory in two separate customs unions.
So the activation of Article 16 is a very reasonable scenario. The same applies to the EU’s termination of the TCA. Although this sounds bad, the result may not be the worst.
Wolfgang Mönchau is Director of www.eurointelligence.com
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