In a significant development, negotiators from the European and the UK have clinched a narrow Brexit trade deal, just seven days before Britain is set to leave the world’s biggest trade bloc.
The deal offers Britain a way out of a cliffhanger Brexit which could have had a major impact on its economy. While the deal preserves Britain’s zero-tariff and zero-quota access to the EU’s single market of 450 million consumers, it will however not prevent economic pains or disruptions for the UK or for EU member states.
It will take years before Britain’s future trade relationship with the EU remains gains clarity.
“We have taken back control of our destiny,” said British Prime Minister Boris Johnson after posting a picture on Twitter of himself raising both arms in a thumbs-up gesture of triumph.
“People said it was impossible, but we have taken back control,” tweeted Johnson.
Johnson has been the face of the pro-Brexit campaign. After the Brexit referendum which got 52% votes to leave the EU, Johnson said he did not want to accept the rules of EU’s single market bloc or its customs union after January 1, 2021.
On its part, the European Union did not want to give unfettered privileges to Britain outside the bloc, which could potentially encourage others countries to leave the union as well, leading to a tortuous negotiation.
“It was a long and winding road,” said European Commission President Ursula von der Leyen to reporters, quoting the Paul McCartney song. “But we have got a good deal to show for it… Finally we can leave Brexit behind us and look to the future. Europe is now moving on.”
Johnson described the agreement which was hammered out at the last minute as a “jumbo” free trade deal along the lines of that done between the European Union and Canada, while urging Britain to move on from the divisions caused by the 2016 Brexit referendum.
Significantly, the deal also lends support to the Northern Ireland peace process, which was a priority for U.S. President-elect Joe Biden, who had warned Johnson that he must uphold the 1998 Good Friday Agreement.
Following the deal, Ireland, a member of the European Union, said it protected its interests as well as could possibly have been hoped. It said it would put out a statement on its website soon.
Although a deal has been clinched, much of the details have still to be worked out.
Case in point, the pact does not cover services, which make up 80% of the British economy, including its banking industry that positions London as the only financial capital to rival New York.
For UK-based financial institutions, access to EU’s single market bloc will be patchy as best.
While the deal does not contain as much as he would have liked on regulatory equivalence for financial services, it nevertheless contains some “good language”, said Johnson.
According to JPMorgan, the EU had secured a deal that allowed it to retain nearly all its advantages from trade with the UK but with the ability to use regulations to “cherry pick” among sectors where the UK had advantages – such as services.
“The unity and strength of Europe paid off,” said French President Emmanuel Macron. “The agreement with the United Kingdom is essential to protect our citizens, our fishermen, our producers. We will make sure that this is the case.”
In a statement, Brexit campaigner Nigel Farage said, the deal keeps the UK far too closely aligned with the EU.
Although a deal has been done, it is likely to introduce more rules, and red tapism leading to more costs. Some disruption at ports is expected. Regulations will see a sea change impacting everything from food safety, export rules to product certifications.
For the EU, the deal represents a loss of its principal military and intelligence power, 15% of GDP, one of the world’s top two financial capitals and a champion of free markets that had acted as an important check on the ambitions of Germany and France.
The UK now stands alone without the collective might of the EU. It will become significantly more reliant on the United States, especially negotiating with India, Russia and China.
“After four long years of uncertainty and upheaval, and just days before the end of transition, businesses will be able to muster little more than a muted and weary cheer,” said Adam Marshall, director general of the British Chambers of Commerce.
According to Tony Danker, director general of the Confederation of British Industry, time is now critically short.
“Coming so late in the day, it is vital that both sides take instant steps to keep trade moving and services flowing,” said Danker.
The deal will now have to be approved by both the European Parliament as well as the EU’s 27 member states. Ambassadors from EU countries are scheduled to meet on December 25 to start the reviewing process for the deal.
On Thursday, the European Parliament had said, it would analyse the deal in detail before deciding whether to approve the agreement in the new year.
The British parliament is scheduled to debate and vote on the deal on December 30.