Friday, March 29, 2024

MEATY MATTERS: Brexit by no means a done deal

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At long last, three and a half years after the surprise referendum result, Britain has formally left the European Union, with expressions of sorrow in the EU Parliament, dignified satisfaction from the United Kingdom government, anger and sadness on the part of Remainers and noisy displays of joy by chief Brexiteer Nigel Farage and his cohort in the European Parliament.
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Amid all the excitement the British MEPs still remembered to submit their claims for payment for their last day of work.

In spite of both sides’ stated intention of negotiating constructively and in good faith to try to reach agreement on the terms that will govern the future relationship between Britain and the EU there appears to be very little on which they will find common ground. 

That makes it highly unlikely terms will be agreed by the December 31 deadline, in which case the UK government will either have to ask for a one or two-year extension or crash out without an agreement, otherwise known as a hard Brexit. 

The second option would mean a reversion to World Trade Organisation tariffs instead of the desired free-trade agreement, meaning trade between the UK and the 27 EU members would incur huge tariffs, some as high as 60%. 

One such item would be lambs, which are exported live from Britain to France in large numbers to meet French demand, while Britain is the main destination for Irish beef. That would be a major distortion for British agriculture and food consumption patterns. 

Obviously, the disruption of the lamb trade would also have a large impact on exports of New Zealand lamb to its traditional markets.

Before the emergence of coronavirus in China in the last month, that would have been viewed as more of an inconvenience than a serious problem, and the former might yet prove to be a short-lived issue. 

But it doesn’t take much imagination to see the potential impact on trade of a global pandemic as well as a hard Brexit. Nobody has any idea when coronavirus will be brought under control or its effect on the consumption habits of the Chinese population or world trading patterns so speculation is pointless.

Brexit is equally difficult to pick but there are several clear pointers to how the two sides will approach the next 11 months. 

British Prime Minister Boris Johnson has already ramped up Britain’s negotiating stance announcing the intention to do border checks on EU imports from January 2021. That has horrified businesses, especially logistics companies and supermarket chains, and will also cause concern for countries exporting to the UK, especially exporters of perishable produce.

Since Theresa May’s resignation Johnson has stated his preference for a Canadian type free trade deal covering most goods, which took seven years to conclude, but the EU has said that will entail alignment with EU regulations, which Britain is adamant it won’t accept, notably on immigration, labour laws and fishing. 

Johnson is apparently furious at what he sees as the EU reneging on the deal he agreed before Christmas and is no longer wedded to pursuing the Canadian style agreement. The latest British position is it would be happy to negotiate a looser agreement where both sides can cherry-pick their tariff-free preferences, presumably by mutual agreement, while applying a points-based immigration system and reverting to WTO terms on everything else.

Since Brexit day the UK has announced its intention to start the process of negotiating a series of free-trade deals, though technically it is not supposed to do so until after December, and to take Britain’s seat at the Geneva offices of the WTO in its first formal step as an independent trading nation. 

The EU has told the WTO it still speaks for Britain until December 31 but that is clearly not what Britain thinks. 

New Zealander Crawford Falconer, the UK’s lead negotiator, has a team of 700 lawyers and experts who are all set to implement more than £100 billion of trade deals that will roll over in January 2021.

The main trade deals in the UK’s sights, apart from with the EU, are with the United States, Japan, Australia and NZ. 

Though American President Donald Trump has signalled a wish to conclude a really good agreement with the UK there will be fishhooks that might be difficult to resolve, including the 2% digital tax to be applied to multinational corporations from April.

The US has already made it clear to the EU a similar proposal will invoke retaliation. 

Britain aims to conclude the free-trade agreement with Japan as soon as the implementation period ends in December and finalise negotiations with Australia and NZ by the middle of next year.

Its next objective is to use its trade negotiations with the three Comprehensive and Progressive Trans Pacific Partnership signatories as a stepping stone to full membership of CPTPP, which represents 13% of global trade, third only as a trading bloc behind NAFTA and the EU. 

NZ’s role as the cabinet secretariat of the CPTPP is an added advantage for concluding an early deal with this country. It is also seen as putting pressure on the EU to agree terms by the end of this year.  

This all sounds very logical and achievable when said quickly but my suspicion is it will take all Falconer’s trade diplomacy skills as well as Boris’ flamboyant determination if the UK is to have any hope of getting it all done and dusted by the end of this year.

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