• M74 Editorial Team

What’s the Hold up on Brexit?

Updated: Jan 17

By Lulwa Taqi

Talks between the United Kingdom (UK) and European Union (EU) have been at a stalemate since the beginning of March. The two parties are struggling to a consensus on their future relations for when the UK’s Brexit transition period ends on December 31st, 2020. Both sides insist that they still want a deal, however critical disagreements remain over fishing, and level-playing field rules.

Boris Johnson and his loyal followers are branding Brexit as a symbol of sovereignty that will now be regained and protected once the UK abandons the EU. Fishing carries a lot of political weight because the UK says that any new agreement on fisheries must be based on the understanding that British fishing grounds are exclusive to British boats. On the other hand, the EU wants the UK to grant access to its boats and sees fishing as a precondition for a free trade agreement with no tariffs or taxes on goods crossing borders (which is what Johnson has been pushing for).

Although the UK formally left the EU on January 31st, 2020, it is still bound by the EU’s rules including the Common Fisheries Policy (CFP), until the end of the year. The CFP allows fishing fleets of every Member state to have full access to each other’s water, apart from a few zones. Every year EU ministries meet to review national quotas which were divided up using historical data from the 1970s, back when the UK fishing industry says it got a bad deal. That’s why the British government wants to increase the British quota share significantly. By renegotiating certain terms in the CFP, it is ensured that British fishing grounds are first and foremost for British boats. So you might be asking yourself, why is such an economically irrelevant industry causing so much political division? After all, the fishing industry accounts for only 0.1% of the UK’s economy across all sectors. The UK is pressing for a change in the rules because the whole reason they went through with Brexit in the first place is to regain back pure sovereignty. More than 60% of the tonnage landed from English waters is caught by foreign boats so ideologically, Johnson can’t compromise on this issue.

Another point of contention remains when it comes to the setting of common rules and standards that prevent businesses in one country from gaining a competitive advantage over those operating in another. The level playing field aspect of the trade talks is so critical because it’s essentially about fair and open competition, which is an integral part of the EU Single Market where member countries allow the free movement of people. The contradiction lies in goods, services, and capital. The EU as a trading bloc has always emphasized fair competition, however, the UK is insisting on sovereignty. This tension gets to the heart of what Brexit is all about, and why a deal hasn’t been reached yet.

The EU, through its chief negotiator Michel Barnier, is insisting that the level playing field provisions should be maintained even after the UK leaves the union. The EU wants to maintain regulations involving workers’ rights, environmental protection, taxation, and government subsidies for businesses. The UK however, wants the EU to grant it the best access to the Single Market with no tariffs or taxes on exported and imported goods.

All trade deals involve level playing field provisions because all parties want to ensure their businesses aren’t operating at a commercial disadvantage. The UK is one of the world’s largest and most sophisticated economies and is already deeply integrated with European markets and policies. The UK and its chief negotiator, David Frost, are pushing for a trade deal that includes no tariffs and quotas. To agree on those terms the EU expects that the UK will adhere to stricter rules than those set out in EU trade agreements with Canada and Japan.

The UK wants a zero-tariff, zero-quota deal with the right to move away from EU rules and regulations. The UK wants to cherry-pick to its own advantage which EU rules to follow and which to diverge from and when. For the EU, freedom comes at a price, which means negotiating the strictest level playing field as possible. It will be interesting to see how talks progress over the coming weeks and how a deal vs no-deal outcome will shape and affect the global trade arena. Brexit and its awkward implementation also raise important questions on the future of trading blocs. Designing efficient and effective trade blocs is paramount and that means we need to focus on disintegration clauses as much as integration policies, something the EU has failed to do. Non-regression clauses and shared rules are hard to negotiate and agree on. Finding a baseline of standards in areas such as labor law, environmental regulations, state aid will always be complicated.

Lulwa Taqi is an intern at M74 from Kuwait. She is a recent graduate of Pace University in New York City, where she earned a bachelor’s degree in International Management and Economics. Her interests include the European Union’s integration policies, the Middle East’s geopolitical climate, and international trade.

The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.