On Thursday, in a significant development, the European Union and Britain are on the cusp of striking a trade deal potentially overcoming a cliffhanger Brexit.
Britain’s Brexit has dealt a blow to pioneering efforts to bring together a unity among European nations after the second world war. While the last minute deal is likely to result in a significantly reduced chaotic exit from the bloc, the UK is headed for a more distant relationship with the EU – its biggest trade partner.
According to sources, a deal was within striking distance with British Prime Minister Boris Johnson holding a late-night conference call with his Cabinet of senior ministers along with EU negotiators.
“Work will continue throughout the night,” said Eric Mamer, spokesman for European Commission President Ursula von der Leyen. “Grabbing some sleep is recommended to all Brexit-watchers at this point. It will hopefully be an early start tomorrow morning”.
While there has been no official communication of a breakthrough in negotiations resulting in a deal, a news conference is expected to take place later today in London. On December 31, 2300 GMT the UK will be leaving the bloc. The UK has formally left the bloc on January 31, but it has been going through a transition period under which rules on trade, travel and business continued to remain unchanged. From the end 2020, Brussels will treat the UK as as separate country.
If both sides managed to iron out burrs and struck a zero-tariff and zero-quota deal, it would safeguard around $1 trillion in annual trade, and support peace in Northern Ireland. Incidentally, U.S. President-elect Joe Biden had warned Johnson that he must uphold the 1998 Good Friday peace agreement.
However, it would be prudent to expect some disruption in trade even if there was a trade agreement between the EU and the UK.
In essence, what both sides may have agreed upon is a narrow free trade deal supported by other agreements on energy, cooperation on law enforcement, and fisheries.
Interestingly, the UK, which imports nearly $107 billion more a year from the EU than it exports there, bickered over fishing rights, worth less than 0.1% of its GDP.
For British banks, insurers, and asset managers, access to the EU market from January 1, 2021 will be patchy at best. Access to the bloc’s financial services is being handled outside the deal.