UK and EU Prolong Negotiations to Avoid Brutal, No-Deal Brexit

December 31 is the deadline to finalize details of the final separation of both parties, but they may not reach a consensus on key issues.
UK and EU Prolong Negotiations to Avoid Brutal, No-Deal Brexit
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Entrepreneur Staff
4 min read
This article was translated from our Spanish edition using AI technologies. Errors may exist due to this process.

In less than three weeks the deadline for the definitive separation of the United Kingdom from the European Union is reached. Although the breakup became official on January 31, 2020, it was agreed that the rest of the year would be a transition period to fine-tune details regarding how their relationship would be after Brexit , especially on trade issues. However, after eleven months of unsuccessful talks, both parties decided to prolong the negotiations to avoid closing the 'divorce' without agreements.

In a joint statement, British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen announced that they instructed their teams, meeting in Brussels, to continue talks.

"Despite the exhaustion after almost a year of negotiations, and despite the fact that the deadlines were broken over and over again, we think it is responsible at this point to go a little further," said both officials.

"Consequently, we have entrusted our negotiators to continue the talks and see if an agreement is possible, even at this last stage," they added.

This was announced by von der Leyen on Twitter, in what he described as "a useful and constructive phone call ."

In an interview for the BBC , Johnson showed a mixture of pessimism and confidence about it. “As things stand, we are still a long way off on some key issues (…) As long as there is life, there is hope. We will continue talking to see what we can do ” , commented the leader.

However, he reiterated that "the most likely now" was a separation without an agreement and that they should prepare to cut ties with the European Union "under the terms of the World Trade Organization."

The UK officially left the EU on January 31, and from March London and Brussels began negotiating a trade agreement that should enter into force on January 1, 2021.

The "key issues" that Johnson mentioned are primarily:

  • Equal conditions or 'level playing field' , which includes matters such as standardized regulations on labor, environmental and social benefits, as well as competition rules for the access of British companies to the European market.
  • Fishing rights, as the United Kingdom wants to participate in the European fish market, but is reluctant to allow the countries of the bloc to fish in its waters.
  • The governance of the agreement , that is, which institutions will mediate or resolve in case of conflicts, and what criteria will be applied.


What if a final agreement on Brexit is not reached?

If the parties do not finalize a resolution, it will be the World Trade Organization (WTO) that regulates the relations between the two. That would mean new tariffs, regulatory controls and a lot of paperwork, as well as losing access to 450 million consumers.

The 'no deal' would be more damaging for the UK , because the EU is its biggest trading partner. The UK Office of Budgetary Responsibility (OBR) estimates that a no-deal Brexit would mean a 2% reduction in UK economic output in 2021 , or about 40 billion pounds ($ 53 billion). Additionally, it would leave more than 300,000 people unemployed by the second half of next year.

Even if an agreement is reached, the outlook remains pessimistic for the UK. According to the OBR, their new business relationship is expected to lead to a long-term loss of production of around 4% compared to what would happen if they remained in the European Union.

With or without agreements, January 1, 2021 will bring enormous changes for all the countries involved and for the world economy.

Exporters and importers will face customs declarations, merchandise checks and other obstacles. British authorities admit that a chaotic departure is likely to lead to jams at British ports, temporary product shortages and price hikes. This could cause some nervousness in global markets and new financial turmoil.

Furthermore, EU citizens will no longer be able to live and work in the UK without a visa, although that does not affect the more than 3 million already there. Meanwhile, the British will no longer be able to work or move freely in the European Union.

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