Editorial

Brexit’s done; now comes the hard part

| Updated on February 03, 2020 Published on February 03, 2020

Boris Johnson’s tough talk on exit terms has revived fears of a ‘hard Brexit’ involving a no deal and a massive hit to the UK’s economy

“Get Brexit Done” was UK Prime Minister Boris Johnson’s punchy slogan, that won him an unexpectedly big election sweep; and at 11pm on January 31, he finally took Britain out of the EU. The awkward hour was another reminder of the difficulties ahead.The EU sets its clocks one hour ahead of Britain, and Brussels insisted the divorce should take place at midnight their time. Britain’s out of the EU, but agreeing on exit terms will involve tortuous negotiations that must finish by December 31. During the 11-month transition, Britain won’t be at the EU decision-making high table but will be bound by its provisions on everything from travel to trade. Britain must decide by June whether it wants an extension of the transition period, to which Johnson’s already declaring, “Definitely no.”

For now, Johnson’s following a maximalist negotiating strategy and demanding huge EU concessions. His endgame is zero tariffs and zero quotas on British goods entering the EU. Simultaneously, he’s insisting the UK must be free from EU regulations. That’s a red line Brussels won’t cross. The EU fears Britain will introduce a low-cost regime, watering down rules in areas like the environment, workers’ rights and food safety. Britain wants a “Canada-style” free-trade pact with the EU, but Brussels notes Canada only got the deal by aligning its rules with the EU. All this tough talk has revived fears of a ‘hard Brexit’ involving a no deal and a massive hit to the UK’s economy — and that’s sent the British pound tumbling. Getting a trade deal done is vital for key industries like automobiles, where there’s two-way traffic of vehicles that sell all over Europe and components that go in both directions. Jaguar Land Rover, owned by the Tatas, is Britain’s largest auto company. Fisheries are emerging as a key sticking point, with countries like France determined to have access to British waters.

Simultaneously, the UK also aims to strike trade deals with countries globally, which UK Foreign Secretary Dominic Raab optimistically expects to be sewn up by mid-2021. While US President Donald Trump promised a “massive” trade deal, better than any EU pact, that’s looking less certain as Americans now are enraged by Johnson’s green light to Chinese telecom giant Huawei. The US also wants sizeable concessions, especially on farm exports like ‘chlorinated chicken’ (chlorine-washed chicken), which will be hard for Britons to swallow. The US pharma industry will pile on pressure for sweeter deals from Britain’s cherished National Health Service, which would mean higher drug prices and would elicit huge protests. For Indian companies, Brexit’s been a huge uncertainty factor for their British and EU operations. TCS, for instance, does 15 per cent of its business in the UK and has 15,000 employees there. The company’s CEO says it might transfer 1,000 employees who deal with European customers from Britain. Other companies, too, must wait longer for clarity. In other words, Johnson’s got Brexit done, but there’s still an enormous amount of detailed work left undone.

Published on February 03, 2020
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