Crisis on
Top of Crisis
The UK Steers Towards a No-Deal Brexit in the
Middle of the Pandemic
British Prime Minister Boris Johnson seems to be
planning to take his country out of the European Union at the end of the year,
even without a deal. The Continent is trying to limit the damage, but it would
spell disaster for the British.
By Peter
Müller, Michael Sauga und Jörg Schindler
23.06.2020,
17.45 Uhr
Things are
still going well for Thorsten Harke for the time being -- surprisingly well.
The businessman in the western German city of Mülheim exports chemical and
pharmaceutical products to the United Kingdom: pills, cosmetics, disinfectant.
Because such products currently in high demand internationally, the gross
revenues taken in by his group of companies went up by about 25 percent in the
first half of this year.
Trade in
the UK makes up a large part of that total, Harke says, because many market
segments are "experiencing an exceptional boom because of corona."
The
situation, though, could change quickly. If British Prime Minister Boris
Johnson doesn't soon sign a wide-ranging trade deal with the European Union,
Harke's 165 employees will soon be a lot less productive than they are now.
That is
because the UK would be treated as an outsider, not unlike India or Egypt are
treated today. Harke's companies would face longer transportation times,
contracts would have to be changed and new regulations - concerning imports or
product approvals, for example - would have to be honored. All that would drive
up costs even as new tariffs would eat into profit margins. Should Brexit not
be accompanied by a trade deal between Britain and the EU, Harke says, his
profits would drop by "several percent" and "make some
operations unprofitable."
Europe has
twice been able to avoid the catastrophic scenario of a no-deal Brexit.
Existing single-market rules were simply extended and cross-Channel trade
continued as before.
This time,
though, it doesn't look like common sense will prevail. Johnson has ruled out
another extension of the transition period and both sides will theoretically
need to agree on a wide-ranging trade agreement in the next few months.
Normally such a process takes years.
Large,
complicated, delicate issues are at stake: the jurisdiction of the European
Court of Justice; future collaboration on foreign and security policies; and
what has seemed to be the most controversial question thus far: How much cod
may Danish and French fishermen harvest from British waters. London and
Brussels should have been on their way to a compromise long ago, but instead,
they are further apart than ever. If nothing changes, cross-Channel trade will
collapse at the end of the year, and growth will slow. In the UK alone,
long-term growth could fall by around 7 percent, according to official
estimates. This slump would come on top of the deepest recession since the end
of World War II. It would be a "double dip," another hard blow for
the economy.
This would
make Europe of all places - which once created the global blueprint for
free-trade zones with its single market - a cautionary tale for globalization
and nationalism. The United Kingdom would decouple itself from its most
important trading partner, and the EU would find itself establishing new
barriers with the Continent's second-largest economy. Johnson's Brexiteers like
to describe their post-Brexit country as a "global Britain," but in
practice, it would be stuck alone outside fortress Europe.
Johnson's
U-Turn
When
Johnson signed the exit treaty with the EU last fall, he made far-reaching
concessions to the bloc on the most controversial issue. The Political
Declaration stated that Britain would uphold "the common high standards
applicable at the end of the transition period in the areas of state aid,
competition, social and employment standards, environment, climate change and
relevant tax matters." Europeans saw this as a signal that Johnson was no
longer considering pursuing a so-called "dumping" plan, in which he
would institute lower wages and laxer laws to compete with the EU.
Now,
Johnson is once again taking a hard line, as he made clear in a video
conference with European Commission President Ursula von der Leyen last Monday.
Although he did not explicitly withdraw his promise, he did repeatedly mention
the election manifesto with which he won the vote for the British House of
Commons last December, in which he promised a "true Brexit."
"Johnson
is distancing himself from the joint declaration," says Bernd Lange, a
German MEP with the center-left Social Democrats (SPD) who has been involved in
the talks as head of the International Trade Committee. "They no longer
want what was agreed upon." EU diplomats in Brussels are also dismayed
after a disappointing round of negotiations with their London counterparts in
early June. "Progress was in line with the - low - expectations,"
said one confidential report sent from Germany's EU representation to the
Chancellery and ministries in Berlin. It stated that "significant
breakthroughs were not achieved." This was apparently especially true when
it came to the issues of competition and fisheries.
Johnson
apparently wants to pick up where he started. At the end of last year, after
his landslide victory over the Labour Party, he temporarily portrayed himself
as the sympathetic Conservative, as a leader trying to steer the deeply divided
country toward a pragmatic exit. Now, he is once again positioning himself as a
Brexit ideologue for whom slogans matter more than political substance.
In mid-May,
for instance, the UK's Department for International Trade sent out a
celebratory note to British citizens. From January 1 of next year, it stated,
the government would exempt 60 percent of foreign trade from all import duties.
Goods worth some 30 billion pounds would suddenly become cheaper, including
dishwashers, refrigerators and even Christmas trees, cheaper.
What the
government didn't mention was that if London and Brussels don't agree on a new
deal, UK residents will need to pay a lot more for other goods. In accordance
with World Trade Organization rules, a 10 percent tariff would be applied to
German cars, along with a 40 percent toll on French cheese. Champagne,
prosciutto, tomatoes and countless everyday items would become more expensive.
Consumers would have to buy an entire forest of Christmas trees to compensate
for the extra costs.
Dramatic
Consequences
And that
would only be part of the price of a no-deal Brexit. Is Boris Johnson willing
to pay it?
If the
prime minister's rhetoric is anything to go by, it seems like he is. In a
February keynote speech, he mused that the world needed a country willing to
rush into a phone booth like Superman, take off its glasses, and re-emerge with
its "cloak flowing" to fight for global free trade. Close ties with
the EU, he argued, stand in the way of this goal, making a no-deal outcome more
palatable. He said he had "no doubt that Britain will prosper."
Since then,
Superboris has had to fight COVID-19, and his government's management of the
crisis has left little time for Brexit, and certainly not for suggestions that
it would compromise with the EU.
On the
contrary: Johnson's chief negotiator, David Frost, has repeatedly strained the
goodwill of the EU with his scattered provocations, and Conservative hardliners
have argued in tweets that the UK's departure from the EU was not meant purely
for the Brits, but that it was also about inspiring other countries to follow
suit.
Many in the
UK believe the hardline position isn't just rhetoric, but that it is
calculated. In the eyes of some Brexiteers - who make up the majority of
Johnson's cabinet - the pandemic could be a unique opportunity to gamble on a
no-deal outcome, which is now being referred to less dramatically as the
"Australian model."
They could
attempt to hide the inevitable dislocations spurred by Brexit behind the much
more dramatic devastation caused by the pandemic. From Johnson's perspective,
the trick could be tempting, though high-risk.
After all,
a no-deal outcome wouldn't just make cars and cheese more expensive. It would
disproportionately affect the industrial regions in the Midlands and the North
of England, where a majority of voters backed the Conservatives for the first
time in the December elections. Johnson swore to those people that he would end
their decades of economic decline.
But entire
industrial sectors there depend on smooth trade with the EU. The Tees Valley
alone is home to 1,400 chemical companies that ship more than 13 billion euros
worth of goods annually, mostly to the EU. Of the 168,000 people directly
working in the automobile industry, almost 100,000 work in the regions that
supported Johnson. Without cheap and predictable deliveries, local aviation and
food industries would also face problems.
The British
economy is already groaning under the effects of the pandemic. Even though
global supply chains have remained intact and trucks at the border in Dover
have been processed as quickly as ever, the country lost 20 percent of its
output in April alone.
A Brexit
Fantasy
That would
change under a no-deal Brexit. Tim Bale, deputy director of the think tank UK
in a Changing Europe, believes it is a "fantasy" to want to hide
Brexit amid the COVID-19 chaos. "Once we see supply chains disrupted and
prices going up, people will realize this has nothing to do with the coronavirus."
"Once
we see supply chains disrupted and prices going up, people will realize this
has nothing to do with the coronavirus.“
Tim Bale,
deputy director of UK in a Changing Europe
J
ohnson's
vision of a deregulated post-Brexit UK is also mostly hot air. His supporters
have breathlessly claimed in the last few months that the UK will be able to
pick up the slack left behind by a sluggish EU.
But if you
ask Johnson's ministers what regulations they intend to weaken, you tend to be
met with bashful silence. "Britain is a highly regulated economy, you
can't just quickly lower norms," says Sam Lowe, a trade expert at the
Centre for European Reform, a London-based think tank.
Johnson
doesn't even have enough support within his own ranks for the trade agreement
with the U.S., which he would like to use to pressure the EU. Some oppose U.S.
proposals to open up the British National Health Service to private American
insurance companies. Others support the domestic farmers, who are opposed to
U.S.-produced chlorinated chicken and hormone-treated meat. Since leaving,
London has signed deals with over 20 countries and trading blocs - all based on
current EU regulations.
The British
economy is now openly rebelling against Johnson's apparent plan. Carolyn
Fairbairn, the head of the Confederation of British Industry, argues that,
given the recession triggered by the coronavirus, companies in the country have
"no more reserves" to deal with a "no-deal Brexit at the end of
the year." She adds: "The resilience is exhausted."
And time is
running out. It's seen as unlikely that Johnson will agree to a last-minute
compromise as he did in fall of 2019, when an exit agreement was already in
place. Today, there is not a single sentence on which both sides fundamentally
agree.
The idea of
producing a paper of several hundred pages at a dramatically staged EU summit
in October is completely unrealistic, especially because the treaty would then
need to be translated into all official EU languages and ratified by the
European Parliament.
As a
result, Gabriel Felbermayr, the president of the Kiel Institute for the World
Economy, sees only one chance for a halfway tolerable outcome: the EU must rely
on a mini-treaty for trade in goods, which could be supplemented in the next
few years with further agreements on services and data protection. "Great
Britain is the largest European economy after Germany," the economist
says. "For this reason, the EU should accommodate the British and grant
them concessions, for example on the free movement of workers." Felbermayr
adds: "No deal would be the worst outcome for everyone."
Sem comentários:
Enviar um comentário