This article was published in Ceylon Today on January 1 2021
There has been much bluster from Boris Johnson about an ‘oven-ready deal’ for the UK to leave the EU. There was much anxiety that there would be no deal at all or that it would be a Christmas turkey. In the end, a deal was struck on Christmas Eve and there was much relief and a fatigued kind of feeling that it might have been worse. Repent at leisure. It could be that the UK’s goose is well and truly cooked not just oven-ready.
Carry on trading
A positive aspect of the deal is that there will be no tariffs on goods exported and imported between the UK and the EU. This should allow the UK and the EU to carry on trading much as they do now. This should limit price increases and prevent stocks of goods in shops from running out. Tariff-free and quota-free access to one of the world’s biggest markets goes beyond the EU’s deals with Canada or Japan. Chris Johns in the Irish Times explains what a Canada-style deal means: “The relationship between the US and Canada offers a template for what will happen next: A dominant power that periodically delivers an economic kicking to its smaller neighbour. “
There will be mutual recognition of trusted trader programmes. This means UK producers will have to comply with both UK and EU standards. However, there will be more red tape, which is bound to mean delays and extra costs. According to the Cold Chain Federation, The UK’s food chain could well be “slower, more complex and more expensive for months if not years”.
It will make it much harder for Britain to sell services to EU countries, where they once had an advantage. The financial industry, lawyers, architects, consultants and others – was largely left out of the 1,246-page deal, despite the sector accounting for 80 per cent of British economic activity. Britain sells $40 billion of financial services to the European Union each year, profiting from an integrated market that makes it easier in some cases to sell services from one member country to another than it is to sell services from one American State to another. That will end.
Restricted freedom of movement
UK nationals no longer have the freedom to work, study, start a business or live in the EU. Visas will be required for stays over 90 days. Coordination of some social security benefits such as old-age pensions and healthcare will make it easier to work abroad and not lose any pre-existing buildup of contributions to national insurance. UK citizens wishing to travel to Europe should have at least six months left on their passport before they travel. From 2022, they will have to pay for a visa-waiver scheme to visit many EU countries. The European Commission says the choice to end free movement “inevitably means that business travel between the EU and the UK will no longer be as easy as it currently is”. People are advised to check with the member state they are travelling to.
There will be no more automatic recognition for doctors, nurses, architects, dentists, pharmacists, vets, engineers.
They will now have to seek recognition in each member state in which they wish to practise. A framework is being drawn up to facilitate some form of mutual recognition in the future. It may well be that each UK qualification body will have to negotiate a bilateral agreement with its counterpart in each respective EU member state.
Britain’s thriving TV and video-on-demand service providers will no longer be able to offer pan-European services to European viewers unless they relocate part of their business to an EU member state.
Exile from useful institutions
Britain will no longer be a member of the European Investment Bank, which lent billions to depressed regions of the UK. Inward investment, which boomed under EU membership, and which has already fallen by four fifths since the referendum, will remain depressed. The UK will also be out of the EU Emissions Trading Scheme, crucial to the fight against climate change and essential to the economics of wind farms and new nuclear power stations. The UK loses all automatic access to EU databases.
The UK will no longer be part of the European Arrest Warrant system. Nor will the UK be a full member of Europol or Eurojust. There will be “continued cooperation between the UK, Europol and Eurojust” with “strong cooperation between national Police and judicial authorities”.
Cost of chaos
I used to write regular monthly columns on Europe for two Sri Lankan business magazines. Reading those articles now, I can see that most of them were critical of aspects of the EU. A rational case could have been made for the UK leaving the EU, although it would have made more sense to stay in and reform it, while having a say on the rules.
Chris Johns again: “The British voted for Brexit but whatever they thought they were asking for, this was not it… Before the referendum, few people in the UK had strong views about Europe. Most now just want Brexit to disappear.” Get Brexit done. It will never be done. I doubt if anyone voted in the 2016 referendum for the years of expensive chaos that ensued from the decision to leave or for the deal that will surely bring more years of expensive chaos. According to the think tank the Institute for Government (IfG) the UK Government committed to spend £6.3 billion on Brexit preparations up to April 2020. That is the equivalent of buying two brand new Queen Elizabeth-class aircraft carriers, or the money being spent on extending the Thameslink railway in the south-east of England.
Bloomberg Economics analysed how much the decision to leave the EU cost the economy. Bloomberg economist Dan Hanson said, “As the UK comes to terms with its new trading relationship with the EU and grapples with the productivity challenge that has hindered growth since the financial crisis, the annual cost of Brexit is likely to keep increasing,” Economists believe that, as a result of this, the British economy is still three per cent smaller than it would have been if the UK had voted to remain in the EU in 2016 – even with the slowdown of the global rate of growth taken into account.
Meanwhile, business investments have been held back by Brexit uncertainty, they said, with the annual rate of economic growth halving to one per cent.
An analysis by UK in a Changing Europe, a research organisation funded by the UK Government, estimated that Brexit’s ultimate economic cost to the UK would be larger than that of COVID-19. The UK economy contracted 20 per cent between April and June because of COVID-19. Some forecasters expect the UK economy to recover rapidly now that a vaccine is available, but they predict that less trade and immigration because of Brexit will have deep and prolonged effects. The UK Government’s own estimate suggests a trade deal like the one agreed to this week would leave the country’s output five per cent lower in 15 years than if Brexit hadn’t happened.
The money spent on Brexit would have helped the NHS to cope better with the pandemic. The UK goes into 2021 suffering from the incompetence of its government’s handling of COVID-19. The economy is shattered because of the virus and now there is Brexit to cope with as well. Martin Kettle commented in the Guardian about the circus leading up to the deal: “For probably the first time in human history, these have been trade negotiations that aim to take the trading partners further apart, not closer together.”
Who voted for this?
The breakup of the United Kingdom gets closer. SNP’s Westminster leader Ian Blackford described the deal as a “disaster for Scotland”. He said the agreement was an “unforgiveable act of economic vandalism and gross stupidity”.
Did anyone vote to make their lives worse? As Tom Kibasi, founder of The Institute for Public Policy Research, wrote: “People voted not to terminate our economic cooperation but to put it on a new and different political basis, with sovereignty more explicitly and firmly rooted in Westminster rather than pooled in Brussels. Instead, Britain will have the same trading arrangements as far and distant countries.”
Many people have expressed relief that the annus horribilis of 2020 is over. It is doubtful if 2021 will be an annus mirabilis.