A Brexit Trade Deal Has Been Sealed. What Next?

by and

Saturday, December 26, 2020

In an era that feels like a lifetime ago, the United Kingdom finally left the European Union on January 31st, 2020, after years of uncertainty. Since then, the UK entered a transition period wherein Britain would accept most EU rules and regulations in return for complete market access, whilst negotiating a post-Brexit trade agreement with the now 27-member bloc. The transition period is due to end on December 31st this year.

A Rocky Road

As early as mid-December, apprehensions of the UK crashing out sent jitters across financial markets. Then one locked-down Christmas Eve, British Prime Minister Boris Johnson and EU Commission President Ursula von Der Leyen announced an historic trade agreement that would govern the future relationship between both sides. Truly, a Christmas miracle.

The trade deal marks the end of what has become a years-long saga of uncertainty surrounding the UK’s future relationship with Europe. In a press conference announcing the agreement, von der Leyen described herself as above all else “relieved.” This is also a profoundly personal victory for Johnson. Having inherited a minority government from his predecessor, Theresa May, he quickly called for a general election last December in the hopes of picking up more seats. His gamble paid off in spades, winning a landslide majority that allowed him to quickly pass a successfully renegotiated withdrawal agreement shortly after the election.

Expectations of reaching a trade deal by the end of 2020 were low. A “no-deal” Brexit was regarded as the most likely outcome as talks proceeded, since there were “serious differences” between the key demands on both sides. These included, but were not limited to, demands for a “level playing field” on key areas of regulation, access to fishing waters, and dispute resolution. With both sides constantly accusing the other of intransigence, the clock was running out for Britain to avoid an economically disastrous no-deal scenario.

Success at Last

And yet, after all that, here we stand: the United Kingdom has left the European Union with a deal, and has agreed to a zero-tariff trade agreement with Brussels.

While not perfect, this trade deal delivers on nearly every previously stated goal Brexit sought to achieve during the 2016 referendum campaign. Beginning on January 1, 2021, Britain will be free to negotiate its own free trade agreements with non-EU member states for the first time since 1973. This is no small feat—the UK has already negotiated such agreements with 61 other states.

The Future

As the economic consequences of Brexit coincide with the recession induced by the Coronavirus pandemic, the challenge for the British Government would be to use the opportunities afforded by Brexit to kickstart economic recovery instead of stifling it further. 

A post-Brexit trade deal with the United States has been touted as one of the key benefits of Brexit. Unfortunately, after months of negotiations, the UK has failed to reach a free trade agreement with Washington, its largest trading partner. Since joining the European Economic Community in 1973, the US and the UK have traded with each other on some of the harshest terms possible, powerless to negotiate better terms without the approval of an ever-growing number of EU member states. Deeper ties with the United States are in Britain’s national interest, and championing a free trade agreement between these two allies should be a priority on both sides of the Atlantic.

Another victory that Britain is taking away from this deal is the ability to diverge from EU regulations on goods and services, albeit with the prospect of increased tariffs if the divergence is too extreme. This has long been a sticking point in negotiations, and continental European politicians have frequently cited fears of massive post-Brexit deregulation as a threat to the continent’s economic stability. Market-oriented Brexiteers have enthusiastically welcomed such prospects—comparing the UK to a sort of “Singapore on Thames.” The authors of this article fully endorse such goals while noting the importance of avoiding the imposition of new tariffs from Brussels.

Johnson would be keen to revert to his “levelling up” agenda to reduce regional equalities, thanks to the positive news on vaccines. However, massive tax increases must not be the way to pay for increased spending. A report published by the UK-based Centre for Policy Studies and the US-based Tax Foundation argues that Britain should overhaul its tax system instead, with the aim of increasing investment and boosting the jobs market. For Britain to prosper, heeding this advice would serve the Tories well.

Finally, with a new Cold War and a rising China testing the Transatlantic Alliance, Britain must envision a new foreign policy role to combat the geopolitical challenges of the new decade. None of that can happen without forging closer alliances with both the United States and Europe. After all, “Global Britain” should not signify a British retreat from the world stage.

The views expressed in this article are the opinion of the author and do not necessarily reflect those of Lone Conservative staff.

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