A year ago I argued that the EU and the UK should mutually agree not to enter into a trade deal and instead opt for minimal trade facilitation with transition periods, and then start from scratch.
The passage from the Northern Ireland Protocol states that certain provisions of the agreement can be annulled if they can avoid “serious economic, social or environmental hardship”.
The risk of tripping has been around for a while. Theoretically, the EU could react to the mechanisms provided for in the Withdrawal Agreement or choose the nuclear option by denouncing the EU-UK Trade and Cooperation Agreement (ATT). The notification period is one year. This would mean the introduction of tariffs between the UK and the EU from early 2023.
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This would undoubtedly create a significant amount of friction. It is trivially true that the smallest country has more to lose than the largest country, but this macro panoramic view hides the fact that there is also a lot of friction from the EU.
If the EU cancels the ATT, the fishing rights granted to EU members, including France, will also be canceled. The EU has a very large trade surplus with the UK. The imposition of tariffs would therefore be a tax on EU exports and a flow of funds from the EU to the UK.
It’s not an easy way back
I find it difficult to side with either party in this dispute. Former British Prime Minister Theresa May negotiated in good faith, but came to a standstill because her parliament did not support her strategy. Prime Minister Boris Johnson found stalemate by accepting the current Northern Ireland deals in the full expectation that they would not be sustainable.
The EU has made a big mistake in allying itself with MPs against May’s government. Johnson is the result of a political miscalculation by the EU.
The EU has abused the possibility of a technical extension of the Brexit deadline for political purposes in hopes of extending the process beyond a hypothetical second referendum. It was then that there was no turning back in relations between the EU and the UK.
Now it is not easy to go back. I think the least bad outcome would be to end both agreements: the Northern Ireland Protocol and the ATT.
So we should let things rest for a couple of years, and once Johnson’s term ends and a new commission unrelated to this debacle has been established, we should start over, whenever that is.
Johnson obviously wants to run again on the Brexit issue in the next election. That also makes sense. In 2019, the focus was on completing Brexit. In 2024 it will be a matter of creating Brexit. The Labor opposition is divided on Brexit and determined to continue. If the EU cancels the ATT, it would offer Johnson the best possible campaign platform.
The EU should be aware that by canceling the ATT, the UK will choose a more disruptive regulatory environment for goods and services. And it should prepare for a debate on fish in the European Council. There will be losers demanding compensation.
That is why I am not ruling out a compromise. There are interests at stake that are not currently heard in information wars. Around this time last year, there was ample information from both sides that a no-deal Brexit was likely.
Dismantling border controls: an attempt at compromise?
Then they agreed to a deal at the last minute. Back then, however, the gap was easier to bridge than it is today. There are no obvious technical solutions in sight to the Northern Ireland problem.
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 this will make little difference on the ground. Regarding the content of the debate, we go in circles. Not much can be done to keep a region in two separate customs unions.
Activating Article 16 is therefore a very plausible scenario. The same applies to the termination of the ATT by the EU. As bad as it sounds, it may not be the worst result.
Wolfgang Münchau is the managing director of www.eurointelligence.com
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