Here’s where things stand: The UK formally left the EU on January 31. Since then, it has been in a transition period where it still obeys EU rules in exchange for business as usual in key areas, most notably trade.
The whole point of the transition period was to create a space where both sides could safely negotiate their future relationship without causing disruption to businesses and citizens. However, that transition period ends on December 31 and sources on both sides say that those negotiations are not going very well.
The pandemic hasn’t helped the political deadlock. The negotiating teams have been unable to physically meet, relying on videoconferencing tools instead. The next round of virtual talks begins Tuesday, but sources on both sides have said this has damaged the quality of the negotiations, as individuals are unable to split off for private chats about how to resolve thorny issues. And the scale of the coronavirus crisis has overshadowed the urgency of Brexit talks.
Johnson must now spend June with one eye on complicated and fraught negotiations with the largest trading bloc in the world, while also overseeing the response to the country’s worst public health crisis in decades.
Both sides agreed that June would be used as a period to reflect on if there is a deal in sight, or whether they should respectfully put a bullet in the talks and prepare for a no-deal scenario.
No deal is almost universally accepted as the worst possible outcome. The British economy relies heavily on imports from Europe. Maximum disruption to this trade would affect supply chains — making life hell for businesses, such as car manufacturers, that rely on them and leading to potential shortages on household essentials, like food, for consumers. Numerous studies have predicted that it would be a huge economic hit on both households and the nation at large.
Despite neither the UK or EU claiming to want this outcome, negotiators fear the political deadlock means it’s becoming increasingly likely. “The EU is being unreasonable, demanding that if we want a free trade agreement then it must come at the cost of us continuing to follow EU rules,” according to a UK government official, who was not authorized to speak on the record about ongoing negotiations. “Clearly, they know we cannot accept that. If we did, what would have been the point of Brexit?” the same source said.
The rules they refer to are a particularly thorny part of the negotiations known as the “level playing field.” This is essentially an agreement on certain rules and standards designed to stop businesses on one side undercutting businesses on the other. The EU’s single market is the largest economic bloc on earth. Its level playing field is overseen by EU courts and institutions. And if the UK wants tariff-free access to it after the transition period transpires — as was Johnson’s position last autumn when he struck an initial Brexit deal with the EU — then the EU will need it to sign up to those rules.
The level playing field is not the only area in which Brussels and London don’t see eye-to-eye. There are disagreements on fishing rights, security and governance, and what exactly happens on the island of Ireland. However, negotiators both in London and Brussels are confident that a long overdue crisis caused by the looming cliff edge will drag both sides together. The same cannot be said for the differences on a level playing field.
The UK says it will drop its ambitions for tariff-free trade with the EU if the EU drops its level playing field demands. The EU is not interested in this idea because it believes there isn’t enough time left in the transition period to negotiate on tariffs.
Theoretically, Johnson could buy more time if he wanted to go down this route. He has until June 30 to request an extension to the transition period. However, it would be so politically toxic that doing so currently seems unthinkable to Johnson’s advisors. It’s this toxicity of the Brexit debate that’s making no deal more likely, as any perceived capitulation would land Johnson in trouble with his supporters.
Besides, the pandemic weirdly creates an opportunity to mask the considerable negative impact that a no-deal Brexit might have on the UK’s economy. “There is a certain logic to saying let’s deal with both economic disruptions at once,” says Anand Menon, director of the think tank UK in a Changing Europe.
“From supply chains to the way that all of the economy is run, everything is going to have a change as a result of this virus. So, even though the two things are not really related and might make the other worse, I can see some logic politically in doing it all at the same time.”
Even better, the pandemic creates room for the government to throw money at any major bumps in the road, should the worst happen.
“Certain parts of the economy will be hit by both Brexit and coronavirus,” says Raoul Ruparel, Brexit adviser to Johnson’s predecessor, Theresa May. “If Johnson spent government money to soften the impact in these areas, he might find there is less opposition than if he were simply spending the money to offset the impact of Brexit alone, since there is far greater unity across the political spectrum on the need for such spending to aid the recovery from Covid-19.”
In Brussels, member states came to terms with there being no deal at the end of the year some time ago. “We are not emotionally invested in the UK’s decisions anymore,” said a European diplomat based in Brussels. “It is a country outside the EU, we are focusing on our coronavirus recovery,” said the same source.
This level of insouciance is not uncommon across the EU’s institutions, where an official working on the negotiations said with a shrug that “the UK is free to do whatever it wants” and that Brussels is prepared for a “stalemate” at the end of June.
The EU has for some time believed it will cope with the no-deal shock better than the UK. “The EU knows it is in the stronger position. Yes, no deal is bad for them, but it’s much worse for the UK,” says Thomas Cole, a former EU negotiator. “It’s true that both sides are sovereign equals but they are very aware that they don’t need to make the kind of concessions the UK needs to make.”
And just as it has in the UK, coronavirus might make certain no-deal calculations easier for the EU to swallow in the long run. “Paradoxically, it might make aspects of no deal more manageable for the EU,” says Fabian Zuleeg, chief executive of the European Policy Centre. “Companies that were looking at having to downscale their operations across Europe post-Covid might decide it’s easier to completely shut down UK offices and factories. It actually solves a few problems, in some respects.”
Of course, neither side wants no deal and both still tell reporters that they are committed to breaking this deadlock and arriving at a mutually beneficial solution. However, the political blame currently taking place is likely to get worse as June rumbles on, if Brexit history is anything to by.
If the talks do collapse, both sides will expect that the other will seek to point fingers and play the victim. This might suit Johnson politically in the short-term, as he plays the brave leader who stands up to European bullying. But, as Menon points out, the post-Covid world is already looking to be a messy, unpredictable place.
“Everyone is angry with China, and god knows what will happen in the US election,” he said. “Does the UK really want to be having a spat with Europe as it emerges from the pandemic and into its brave new future?”
So if Boris Johnson is serious about wanting to avoid no deal, the combination of the talks being frozen, both sides being distracted by a pandemic and this pressing June deadline makes for a hellish start to the summer.
This story has been updated to correct the date of the June deadline for the UK to request an extension to the transition period.
