On Thursday, the U.K. and E.U. announced that they had reached an agreement to govern their future trade relationship, narrowly averting a no-deal Brexit with just one week to spare before the transition period ends and the country completes its withdrawal from the bloc on December 31.
The essential features of the deal include continued zero-tariff and zero-quota access for the U.K. to the European single market, the end to free movement, and the reintroduction of border controls between the U.K. and E.U. member states — but no hard border in Ireland. Many other aspects of the relationship still remain to be negotiated over the coming months and years, including foreign policy, defense, and development. Nonetheless, the Christmas Eve deal covers the fundamental trade parameters and will prevent the massive disruption of a no-deal outcome, which both sides dreaded.
In the final stretch, the deal was almost derailed by a dispute over fishing rights in British coastal waters, which the U.K. has shared with France and other E.U. member states over the past several decades. The fishing industry accounts for just a fraction of one percent of the British economy and employs only about 12,000 people, but the question took on political resonance far beyond its economic relevance — much as the U.S. coal-mining industry currently employs .0003 percent of the American workforce yet still somehow has an influence on national elections.
Fishing in British waters is a small but significant economic concern for France, the most prominent voice in the negotiations on the European side, and French president Emmanuel Macron is looking at a tough reelection battle in 2022. For the U.K., fishing rights became wrapped up in the philosophical questions of territorial sovereignty for which Brexit stood in the minds of its conservative and nationalist supporters. The British fishing industry was “bitterly disappointed” in the government’s failure to secure a larger exclusive zone for U.K. fishermen.
Another thorny issue in negotiations was Europe’s concern about maintaining a “level playing field.” The E.U. negotiators wanted to ensure that the U.K., no longer bound by E.U. rules, did not give its domestic industries an unfair advantage through massive subsidies or by undercutting European countries on environmental or labor policies. The deal will see the U.K. continuing to adhere closely to many E.U. regulations and provides for an arbitration process for settling disputes, keeping the European Court of Justice (which Brexiteers despise) out of it.
A bare-bones agreement reached at the 11th hour is nothing to brag about, but of course that did not stop U.K. prime minister Boris Johnson from bragging about it. He described it as a win for Britain, a “Canada-style” free-trade agreement worth £660 billion (or about $895 billion), referring to the megadeal the E.U. reached with Canada in 2014. “We’ve taken back control of our laws and our destiny,” Johnson said Thursday. “For the first time since 1973, we will be an independent coastal nation with full control of our own waters.” (The reference to “waters” seemed like an effort to smooth over the concessions he had made on fisheries, as did the fish-patterned tie he wore while making the announcement.)
European leaders expressed satisfaction with the deal and relief at having made it, but mostly sounded ready to finalize the divorce and get on with their lives. “Finally we can leave Brexit behind us and look to the future,” European Commission president Ursula von der Leyen told reporters on Thursday. “Europe is now moving on.”
In the end, however, the continued presence of French fishing boats will be the least of Brexit’s economic consequences for the U.K. While the deal allows goods to cross the English Channel without quotas or tariffs, it does not apply to services, which represent 80 percent of the U.K.’s economy. The massive British financial services sector will still have access to the E.U. market, but it will no longer be unfettered. Many U.K. firms will need to open affiliates in the E.U. to continue doing business there.
For British businesses, already devastated by the pandemic, the deal comes as some relief, providing a little more certainty about the future and averting the chaos of a no-deal Brexit. Yet there was little enthusiasm emanating from the business community on Thursday, as the last-minute deal still leaves them little time to prepare for the reintroduction of border controls. Even with a relatively favorable trade agreement in place, the U.K.’s GDP is still expected to decline early next year and to grow more slowly over the coming decade as a result of Brexit.
The impact will also be felt in other ways. British students will no longer get to participate in the Europe-wide Erasmus exchange program. British pensioners will no longer be able to retire in Spain without applying for residency. Farmers in the U.K. will hire temporary migrant laborers from South Asia rather than Eastern Europe.
The longer-term political consequences also remain to be seen. Scotland’s first minister, Nicola Sturgeon, noted Thursday that “Brexit is happening against Scotland’s will” and leveraged the occasion to renew her call for Scottish independence. Whether or not Sturgeon gets her way on a second “Scotch Eggsit” referendum in the coming few years, Scottish nationalists are hoping to have a stronger case for secession once the reality of Brexit kicks in.
Northern Ireland, like Scotland, voted overwhelmingly against Brexit, and the negotiations have been disappointing to the Northern Irish unionists who back Johnson’s Conservative government. The Irish border problem was one of the intractable issues that derailed former prime minister Theresa May’s attempts at a Brexit deal. Johnson solved it in the preliminary withdrawal agreement announced last year by keeping Northern Ireland in the E.U. single market for goods and having it apply E.U. customs regulations at its ports. His Northern Irish allies were furious at what they saw as the prime minister throwing Northern Ireland under the bus, by making it the only constituent nation of the U.K. that would still have to follow E.U. rules.
Johnson also faces a very different international political reality thanks to the impending change of administrations in Washington. President Donald Trump was an enthusiastic supporter of Brexit and had backed Johnson by promising to more than make up for its economic impact with a massive new British-American trade deal. President-elect Joe Biden, on the other hand, has been critical of Brexit and is reluctant to embark on new trade deals while the U.S. economy is on life support. Biden, an Irish American with a noted affinity for his ancestral home, has warned Johnson against undermining the Good Friday Agreement, which settled the sectarian conflict in Northern Ireland in 1998. Biden’s victory put additional pressure on Johnson to make a deal in the final weeks, by raising the economic and diplomatic stakes of a no-deal outcome.
The deal must still be approved by the U.K. and European legislatures and by the E.U. member states. European ambassadors were set to begin discussing it on Friday, while the U.K. Parliament will debate and vote on the deal on December 30. With the imminent Brexit deadline hanging over their heads, it seems unlikely that any of these parties will block the deal: European countries are relatively united on Brexit, while the Conservative majority in the House of Commons is large enough to pass the deal even if the party’s most ardent burn-it-down Brexiteers revolt.
On the other hand, a final, destabilizing plot twist in this long, convoluted story would be extremely on brand for 2020.