Covid-19 May Encourage a No-Deal Brexit
May 7, 2020
The coronavirus pandemic has dramatically altered nearly every aspect of life in Europe, with one exception: the difficult negotiations between the United Kingdom and the European Union. If anything, the pandemic and the massive fiscal stimulus and monetary easing necessary to address the extraordinary economic strain have only hardened London’s position. They have also likely provided it with new talking points to prepare for a no-deal Brexit at the end of 2020.
It was not the pandemic, however, but the decisive outcome of the December 2019 election that changed London’s political calculus about its future relationship with Brussels. Prime Minister Boris Johnson’s 80-seat majority—the largest Conservative victory since Margaret Thatcher—was elected to “Get Brexit Done.” There is no longer a need to reach a compromise with the European Union to secure the UK Parliament’s backing. Accordingly, after the election, events have occurred at speed: the EU-UK Withdrawal Agreement became law on January 23, 2020, and on January 31, the United Kingdom was no longer a member of the European Union (although it retains associate status until the end of 2020, meaning it must abide by all EU rules and requirements, pay into the EU budget, but lose its political representation within the bloc).
The pre-pandemic negotiating plan for 2020 was ambitious: a new trading arrangement between the United Kingdom and the European Union was to be negotiated and agreed to by July 2020 (after a review at the end of June) in order to get the necessary approvals from the European and UK parliaments for the agreement to come into force in January 2021. This timing would also fit neatly with the European Union’s own budget cycle, with the new seven-year budget set to begin on January 1, 2021. But it is clear that “getting Brexit done” does not mean asking for additional negotiating time. The Withdrawal Agreement passed by the UK Parliament legally bars the government from seeking an extension of negotiations past 2020 (though amending the law is possible).
It was originally hoped that the EU-UK political declaration, a roadmap for the future trading relationship that accompanied the Withdrawal Agreement, would guide and hasten the negotiating process. But this has not been the case. In fact, there are already signs that the UK government it is not actively pursuing resolution on key areas of the political declaration and the related implementation of the special protocol on the border between Northern Ireland and the Republic of Ireland.
And then the pandemic tragically arrived in the United Kingdom in late February 2020, causing a national lockdown imposed on March 23. As of this writing, there have been over 30,000 confirmed deaths in the country, and it is very likely the United Kingdom will continue to have the highest death toll in Europe. Prime Minister Johnson contracted the coronavirus, as did his lead Brexit negotiator, David Frost. The coronavirus also struck the European Union’s chief negotiator, Michel Barnier, but both he and Frost have recovered and returned to the now-virtual negotiating table.
The talks, conducted via videoconferencing calls, have returned to the same pre-pandemic issues. The European Union accuses the United Kingdom of dragging its feet on commitments to maintain minimum standards related to the environment, workers’ rights, and the protection of personal data. London accuses Brussels of treating it less favorably than other third countries with EU free trade agreements, such as Canada. EU negotiators insist that the United Kingdom should embed the European Convention of Human Rights into domestic law and that the Court of Justice of the European Union (CJEU) should oversee dispute resolution. London refuses to accept a role for “foreign courts” (e.g., CJEU) in its sovereign affairs and regards agreement on minimum standards as unnecessary. Britain also shows no sign of moving on one of the most contentious areas: allowing the European Union access to its fishing stocks.
In other words, nothing has changed except the sharpness of the debate and the ticking hands of the clock.
The United Kingdom has argued that it is necessary to leave the European Union by the end of the year to be free from any regulations that could inhibit its long-term coronavirus response (although the government has not cited a single regulation that has hindered the response to date). The government wishes to offer state aid to its troubled firms, but Brussels has already relaxed these rules due to Covid-19. And the UK government does not wish to contribute to the next EU budget beginning in 2021.
Pre-pandemic, the political necessity of “getting Brexit done” and the fast-paced timeline likely had to do with the government being able to turn around the potential economic hit of a less-free trading arrangement with the European Union before it faces reelection in May 2024 (assuming the Fixed Term Parliament Act is not changed, thus maintaining the five-year term). It would also allow for other free trade agreements to be concluded and begin to pay economic dividends, such as a U.S.-UK agreement.
But post-pandemic, it appears a fatalistic logic has taken hold in London: given the extraordinary economic hardship from Covid-19, could citizens really distinguish between that and the economic pain of defaulting to World Trade Organization tariff schedules with a no-deal or near-no-deal trading relationship with the European Union? Likely not. With EU intransigence and Covid-19 as equal parts scourge and scapegoat, this Vote Leave UK government can more easily “remain calm and Brexit on” as their monetary printing presses hum along. In fact, what more could the UK government do to ease economic pain? It may be the worst possible humanitarian and economic moment for the United Kingdom—but it also presents an ideal departure environment.
Assuming the UK government’s negotiation position is immovable, what will the European Union’s response be? The bloc may believe it is necessary to penalize London over its perceived failure to fully deliver on the political declaration’s customs checks provision for Northern Ireland. But it is unclear if the European Union would concede anything; Brussels may try to be flexible in some limited areas to show goodwill to its future trading partner, but if London continues to be inflexible, it is unlikely the European Union will give in on issues essential to the single market. The latter would also get limited returns from the United Kingdom: while European jobs would suffer from looser ties with the United Kingdom, the numbers at stake are a relatively small proportion of the European economy.
Ironically, EU member states may also accept the same fatalistic logic as London: as they are already providing maximum economic support to EU companies, they will be better prepared for any economic blowback and can underscore the essential nature of the single market’s integrity. Moreover, by the end of 2020, the European Union may have more serious challenges to address should Italy and Spain continue to struggle with the health and economic ramifications of Covid-19, and may decide it is more important to support current members than expend too much capital on former ones.
Simply put, while the rationale behind the deadlock in the negotiations was established well before the pandemic, the extraordinary economic measures taken by EU institutions, individual EU members, and the United Kingdom due to the pandemic may perversely encourage London and Brussels to accept the barest minimum of a trade agreement—but both can maximize their political talking points.
Heather A. Conley is a senior vice president for Europe, Eurasia, and the Arctic and director of the Europe Program at the Center for Strategic and International Studies in Washington, D.C.
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