Brexit negotiations during Covid-19

18th May 2020

There are currently crucial negotiations underway over how the United Kingdom (UK) will leave the European Union (EU) at the end of 2020. The UK is currently in a transition period whereby it has to follow EU rules until 31st December 2020, by which time it is hoped both sides will have agreed a trade deal. The main discussion points concern trade in goods, transport, energy supply, access to fishing waters, law enforcement, data sharing and security. While the EU is keen for an extension to the talks the UK seems less so, however, there are consequences for both sides if a deal is not met.

On Thursday 7th May, the EU Trade Commissioner said that the UK was preparing to walk away from talks with the EU and that they were blaming the stalemate on the current Covid-19 pandemic. With only two rounds of talks before the UK Prime Minister is due to meet the European Commission President in June, the EU has become ‘increasingly exasperated’ with the ‘UK’s lack of urgency’.1

Christophe Hansen of the European People’s Party (EPP), the largest political group in the European Parliament, has called for an extension to the transition period saying: “Under these extraordinary circumstances, I cannot see how the UK government would choose to expose itself to the double whammy of the Coronavirus and the exit from the single market…an extension to the transition period is the only responsible thing to do.”2 This puts the ball “clearly in the British court”, according to the chair of the UK Coordination Group in Parliament. The UK government has thus far consistently rejected applying for an extension but other EPP members experienced in negotiations have said that an extension is “virtually inevitable” as “Coronavirus is making everything more difficult.” 3

The reason EU ministers are becoming more frustrated is that a decision on an extension must be made by 30th June. Given the time it takes to do anything during the current Covid-19 pandemic, it is no wonder they are getting apprehensive. Due to social distancing measures and the travel bans currently in place meetings have been taken remotely via screen-to-screen conversations. The UK had originally been reluctant to use video-conferencing, citing security concerns, until both parties were able to agree on a platform which has more robust security than commercial-grade applications.4 This prolonged the discussions by weeks as they set up a system called WebEx from software developer Cisco. However, it has still been difficult to undertake some meetings, with too many people on calls to effectively get anything done.

The EU’s chief negotiator, Michel Barnier, is worried about the pace of the talks, consistently blaming the UK for slowing down the process. UK Prime Minister, Boris Johnson, has point blank refused to consider a further delay to the UK exiting Europe, however, at every point so far throughout the Brexit negotiations the UK has stated they would not extend deadlines before proceeding to at the last minute.5 With the financial services industry unsure of what state it will be in after the Covid-19 pandemic it seems sensible to seek an extension and allow negotiations to go on, not pressured by time and crisis.

There are some real differences of opinion between the two sides on key policies including fishing rights off UK coastal waters, a level playing field for regulations, a role for the European Court of Justice and adherence to the European Convention on Human Rights. With so much focus on the current Covid-19 crisis and the safety of nations, there is not the time or inclination from politicians to deal with weighty European issues. No-one is certain where the economy will be in a couple of months time making current negotiations seem somewhat arbitrary. The UK government has already had to redeploy 47 officials from Brexit duties to Covid-19 duties.6

It would be perfectly reasonable for Boris Johnson to seek an extension to the talks, so the fact that he has not done yet begs the question, why not? He has the space to extend the deadline for up to two years. The UK Prime Minister’s official spokesman said the UK needed “legislative and economic flexibility” to manage its response to this coronavirus pandemic and would not seek more time to secure a trade deal with the EU.7 This is a view supported by the UK’s Chief Negotiator,, David Frost, who says: “Extending would simply prolong negotiations, create even more uncertainty, leave us liable to pay more to the EU in future, and keep us bound by evolving EU laws at a time when we need to control our own affairs. In short, it is not in the UK’s interest to extend.” 8

Boris Johnson has ministers support. Senior MPs for the UK government have come out in defence of keeping the Brexit deadline. Michael Gove said it was “plain prudence” to stick with the current timetable for negotiations despite the pandemic.9 Chancellor of the Exchequer, Rishi Sunak, affirmed that the government was committed to its current timetable for trade talks with the European Union.10 While the health secretary, Matt Hancock, has stated publically that there would not be a need to extend the deadline, as the basis for an agreement was already established and it just needed to be implemented. In contrast, both the Scottish National Party and Liberal Democrats have called for the government to request one, while Sir Keir Starmer, leader of the Labour party, has indicated he doesn’t think it practical that a deal could be reached by the end of the year, but would wait and see if the government could standby its pledge.11

Sam Lowe, a senior research fellow and trade expert at the Centre for European Reform, thinks that the UK government’s strategy is to blame any negative impacts due to Brexit on the current coronavirus pandemic.12 Though he suggests this would be a very bad idea as the effects of Brexit will be very different and so close to the Covid-19 shock it would be detrimental to the economy: “What Brexit does is it creates new barriers and friction on the food supply chains and that will be on top, additional to existing problems.”13

There are serious doubts as to whether the government is simply too busy at the moment, dealing with Covid-19, to effectively manage renegotiating important trade deals in such a short space of time. Even if the UK could manage a deal with the EU could they be ready in time to implement enhanced border procedures, a new immigration system and complex customs and border arrangements in Northern Ireland.14

If the UK and EU fail to agree a deal then both sides would be subject to tariffs on goods traded between the two blocks. Any trade deal must be accomplished by December 31st 2020 if no extension is sought by the end of June.15 In reality, this means formalising an agreement by October so that it can be validated in time, with an agreement on fishing territories needed by the end of July. However, if the UK does extend the date for withdrawal then they will have to pay a “lump sum” contribution to the EU budget.16

Political leaders are justifiably focussed on combatting a global pandemic that is having far-reaching consequences on the nation’s economy. There is increasing uncertainty in how the UK will be able to recover from recession, high levels of unemployment and continued social restrictions. However, the UK government is banking on being independent of the EU in time to be able to combat the effects of Covid-19 in January 2021. It may very well be that more financial freedom is exactly the kind of stimulus the economy needs to regenerate. As there is no real precedent only time will tell whether dealing with the effects of Brexit and Covid-19 at the same time was the correct path to take.