Some good, some bad, some ugly
The United Kingdom (UK), if it still justifies this name, has concluded an exit agreement with the European Union (EU), if it still justifies this name. This Brexit settlement removes much of the uncertainty that has haunted all parties involved for years. On this basis alone, it constitutes a positive economic step for those on both sides of the Channel. It will of course hurt the EU to lose its second largest economy. And even with this deal, Britain still has a long and difficult road to travel.
As in any successful negotiation, neither side got everything they were looking for, although the EU seems to have done better than Britain. London wanted three things from these negotiations: two were to free itself from EU regulatory rules and London’s right to determine its own immigration policy. The third objective was to maintain favorable trade agreements with Europe, which absorbs roughly half of British exports. The EU wanted to keep trade open, but not at the expense of its regulatory regime, which it says helps its residents. Anyone can walk away pretending they have achieved most of their goals, but of course the devil is in the details.
The most rewarding part of the deal (for both sides) is that trade will continue without tariffs or quotas for goods and some services. This arrangement alone will alleviate much of the pain of separation. Trade between Britain and the rest of Europe is equivalent to some $ 900 billion a year. This is suitable for producers on both sides of the Channel and will allow Britain to keep the many production facilities located there by third parties, mainly Japanese companies, to gain duty-free access to the entire European market. . In addition, the deal allows Britain to free itself from EU product and labor rules as well as environmental regulations it had to comply with as a member. This provision also benefits both parties. This not only allows London to write its own regulations, but it also allows Britain to enter into new trade deals with other countries, such as the United States and Japan, without having to insist on them. EU rules. This EU concession also gives Brussels greater flexibility than it previously allowed in negotiating trade agreements with third parties. The deal also allows Britain to restrict immigration from EU countries, something Brexit supporters have been keen to do, although it will do little to solve the country’s more general immigration problems, because they involve migrants from other parts of the world.
Behind these general measures lie warnings that significantly reduce London’s latitude to chart its own course. According to the agreement, the EU has the right to end the tariff exemption agreements if, in Brussels’ opinion, Britain has started to use “unfair” trade strategies. Since tax and regulatory policies are all subject to such judgments, London ultimately has much less freedom to formulate policies or craft trade agreements than it first appears. It is undoubtedly a disappointment for London, but not as big as the plight of British finance. Financial services occupy an important place in the UK economy. The deal does not, as London wanted, give British finance the free access to EU members it had when Britain was a member. In anticipation of this disappointment, many UK financial firms had already established independent operations on the continent and shifted their jobs and income accordingly. This question being now clear, many others will follow. It is an economic hole that will take a long time for Britain to close.
The arrangements for Ireland are probably the biggest setback for London, less in economics than in sovereignty, which, after all, was a big part of the motivation behind the exit vote in the first place. The border between the Republic of Ireland and the British province of Northern Ireland has been a sensitive issue throughout these negotiations. The agreements that ended Irish terrorism had stipulated that the border should remain open to the passage of goods and services as well as people. Before the release, this was not a problem, as the UK and the Republic were both members of the EU. With the exit, however, even under this blanket deal, there would be border controls. To avoid this, this agreement makes an Irish exception. The province of Northern Ireland will remain in the EU customs zone and thus avoid any border controls, but for this to work the deal also insists that Northern Ireland must also meet regulatory standards. general EU policies. In fact, part of the UK will be governed by the laws of a foreign entity. This constitutes what can only be described as a spectacular loss of sovereignty. It is also a big step towards Irish unification, which will delight some and irritate others.
The Irish component of the deal was why the opening of this article asked if the UK more justified the name. Northern Ireland’s link to London is, after all, the difference between Britain and the UK. Such points of pride – or sovereignty – will take a long time to establish. Likewise, it will take a long time for Great Britain to understand the constraints and the economic and regulatory questions raised by these arrangements, and more particularly the fate of British finance. For the period to come, however, the regulation will provide an economic boost simply by removing many of the uncertainties that have hung over economic decision-making since the exit vote in 2016. With the entry into service of vaccines to ease the burden Even more oppressive economy to fight the pandemic, the combination should give Britain and the EU a big boost in the short term.