End of an Era/Error?

27 January 2020

“We are inextricably part of Europe. Neither Mr Foot nor Mr Benn nor anyone else will ever be able to take us out of Europe.” So spoke future Prime Minister, Margaret Thatcher on 16 April 1975, campaigning for a Yes Vote in the first referendum on European membership. In just over four days’ time, her fellow Conservative Boris Johnson will have achieved what neither Michael Foot nor Tony Benn, nor indeed, Mrs Thatcher herself, despite later doubts, ever did. It will be a momentous occasion whatever your views on Brexit.

At midnight, European time on 31 January 2020, 11pm GMT, the Union flag will be lowered at the European Union buildings in Brussels. It will then be taken to the House of European History museum and put on display, an artifact of history, no longer part of the dynamic politics of the EU. The UK will have become the first nation state to have left the European Union and its forefathers (Greenland, French Algeria and Saint Bathélemy having left previously, but they were all territories not states themselves).

For some, it will be a cause of much rejoicing. The bongs of Big Ben will not ring out, but Downing Street will be laying on a light show and we will soon all be able to enjoy our newly-minted 50p Brexit coins, as the country gets to celebrate what the Prime Minister described last week as a “fantastic moment” that would allow us to “cross the finishing line”.

Not so fast, Mr Johnson! In many ways, 31 January will feel like the starting gun, not the finishing line, as from that point onward the UK will be able to start negotiations with the EU, and third countries like the US, on future trade arrangements, the real crux of Brexit. Trouble lies ahead on both fronts.

The PM wants to start negotiations with the EU at breakneck speed as he has boxed himself in by setting a “die in the ditch” 31 December 2020 deadline – now written into law which cannot be extended without an amendment to override said law – to complete a deal. The EU, however, is not so keen to play ball.

What it recognises, wisely, is that the Johnson’s self-imposed deadline has consequently transferred even more power in the forthcoming trade negotiations to the EU. Sensibly, it has no such deadline and can play for time, so the UK is likely to offer further concessions in the hope of “getting Brexit done” or face no-deal (or a very limited deal) by the end of the year that could send the economy spiraling further downwards and years of tough negotiations ahead. As such, the Europeans have languidly suggested that talks could begin around March but not sooner, to the annoyance of the Brits.

But will President Trump be Boris’ trump card? It’s possible, but unlikely. The UK has set much store by the fact that although little visibly will have changed for the remainder of this year in its relationship with the EU, by formally leaving, the UK can begin trade discussions with third parties that were forbidden by EU law when we were members of the bloc. The US is front of the queue, as we see it, but the UK may not be front of the line, as they see it.

The US has far bigger trade fish to fry, not least with China where there have been steady improvements in relations over recent weeks. Conversely, UK relations with the US have cooled as strong differences emerge over the UK potentially defying the US and allowing Huawei to supply 5G equipment in the UK, and the US refusal to extradite Anne Sarcoolas over the death of Harry Dunn. More fundamentally on trade, the so-called GAFA (Google, Apple, Facebook, Amazon) tax due in April and could lead to US retaliation by imposing tariffs on UK car exports. This is hardly likely to go down well in the Conservatives new industrial ‘Blue Wall’ seats that had been promised a ‘Brexit dividend.’

And this is exactly the PM’s problem. Boris gambled, and won, on his bet at the General Election to get the UK out of the EU on 31 January. But now the second part of his double needs to come in, and it has much, much longer odds. If he does not succeed in securing these trade deals on sensible, if not favourable, terms to the UK, then this will cast a long shadow over his re-election hopes in 2024 and his stated desire for the UK “to move forward as one country.” Only time will tell if his gamble does pay off to achieve that remarkable feat.

Pete Bowyer is a Partner at DRD Partnership in London, UK.

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