Triumphant Boris Johnson Bucks Pressure to Draw Out Brexit

Bucking expectations, newly elected British Prime Minister Boris Johnson said Tuesday he will essentially outlaw any extension to Britain’s transition period for leaving the European Union next year—a move meant to “get Brexit done” that will virtually guarantee more uncertainty over the United Kingdom’s future economic relationship with the EU, its largest trading partner.

After Johnson’s big election victory last week, many thought he would have room to be more flexible on the length of Britain’s transition, a period of time in which a hugely complex trade agreement must be negotiated, approved, and ratified in dozens of different countries. Otherwise, Britain will, in the end, essentially crash out of the European Union with an uncertain and costlier framework for its businesses to operate in.

Now, with a tight, self-imposed deadline of December 2020 to reach a trade deal with Europe, the U.K. faces the unappealing task of either accepting most of Europe’s demands and then trying to sell that politically as a victory or maintaining impossible-to-meet demands and all but ensuring the trade talks flounder.

The options pretty much boil down to “capitulation dressed up as a triumph, or a breakdown,” said Nick Witney, a senior fellow at the European Council on Foreign Relations.

British officials seem to believe that the reaffirmed December deadline will force the EU to negotiate a quick trade deal, though the bloc has never finished any trade negotiation in such a short space of time. EU officials, for their part, see the tight deadline as a reason to focus on only the very most important trade issues, rather than a more comprehensive pact.

For Britain, regaining the ability to chart its own trade policy (previously set at the European level) was a key driving force behind Brexit; promises of new free trade pacts with countries like the United States have been a constant refrain for the last three years. First, though, Britain needs to square up its future economic relationship with its biggest trading partner—which means overcoming a gulf of nearly unbridgeable differences.

What Britain seems to want is essentially the benefits of belonging to the European Union’s common market without assuming any of the obligations. It seeks tariff-free goods trade with Europe but wants to go its own way in setting environmental and labor standards, food safety rules, access to British fishing grounds, and the like. French and German leaders made clear just days after Johnson’s electoral victory that any future trade deal must ensure a “level playing field” between the British and European economies—meaning similar rules and regulations, including on items such as state aid.

“My guess is that there is huge confidence at Downing Street after the big election victory, a sense of, ‘How can the Europeans not give us what we want?’” Witney said. Though it’s hard to see how Britain can square the circle of asking the EU for privileges without swallowing some EU rules in return—the normal price of admission for access to the huge European market—there could be space for a bare-bones, limited agreement that covers a few important sectors, such as autos.

“Maybe there could be some sort of limited free trade agreement that avoids the awful consequences of crashing out with no deal,” he said.

The specific obstacles over the next year are legion—and complicated by Johnson’s desire to ink a free trade deal with the United States.

First, there is the absurdly short timeline. Most big trade pacts take years, not months, to pull together; the EU-Canada deal that many in the U.K. point to as a possible template for its own deal took seven years to conclude. The U.K. and Europe don’t expect to be able to start formally negotiating the new agreement until next spring, leaving something like nine months for a herculean task. After that, of course, all 27 EU member states must ratify the agreement before it comes into force—with no possibility, as of now, of an extension to Britain’s transition period.

Then there is Britain’s explicit desire to take back regulatory control from Brussels, one of the motivating factors behind Brexit. That includes an ideological shift toward more of a U.S.-style, deregulated economy, in contrast to the regulations-heavy EU. But Europe, which will put together its full negotiating mandate after consultations with all 27 members, is very unlikely to give away free access to its market while letting Britain set different regulatory standards that risk undercutting the competitiveness of its own firms, as France and Germany made clear.

That would leave Britain the choice of continuing to abide by many European regulations—a tough political sell in a Brexit meant to “take back control”—or accepting reduced access to its main market, a tough economic sell for business groups still fretting after three years of Brexit-induced uncertainty.

That’s where Johnson’s desire for a speedy trade deal with the United States complicates things. The United States, like Europe, wants trade partners to accept its own regulatory standards on all sorts of things, from food safety to pharmaceuticals. If Britain leans more toward the United States in key sectors—especially agriculture, a must-have for U.S. lawmakers—it will make it that much harder to reach a satisfactory deal with Europe.

“A U.S. deal would condition the future EU agreement,” said David Henig, the director of the U.K. Trade Policy Project at the European Centre for International Political Economy.

The urge, on both sides of the Atlantic, to reach a U.S.-U.K. trade agreement is more about politics than dollars and pence at any rate—America’s biggest trade partners are in North America, and Britain’s are, of course, across the channel. Yet that political imperative to reach a deal with the United States could make it harder to secure a beneficial deal where it really matters.

“If a U.S. deal comes first, then that is about politics, not the economics,” said Henig, a former British trade official.

Officials at the British Embassy in Washington said that Johnson is putting his new government together and that it is too early to discuss a possible trade pact with the United States. But on Monday, Johnson and U.S. President Donald Trump spoke by phone and discussed “continued close cooperation on issues such as security and trade, including the negotiation of an ambitious free trade agreement.”

There’s another potential pitfall for Britain in limited talks: Both former Prime Minister Theresa May and Johnson have talked of securing a trade agreement covering goods—not services—though there are often vague references to a “comprehensive” pact covering everything. A goods-only deal would be beneficial for Europe, which has a large goods trade surplus with Britain. But it would be less than ideal for the U.K., a services-heavy economy that runs a large service trade surplus with Europe.

“The implications of this for U.K. services firms, above all, is one of many dogs which has yet to properly bark in this process,” said Ivan Rogers, a former British ambassador to the EU, in a recent speech.

And then there is the question about fish. While perhaps not part of a strict trade agreement, Britain and Europe must reach an agreement about how they handle fisheries. Currently, EU states have access to British fishing grounds and vice versa—long a complaint of British fishermen, who felt they were shortchanged by joining Europe because British waters are bigger. Johnson has repeatedly said that he would take back control of British fisheries as part of his getting Brexit done—meaning excluding other European fishing states from those waters.

But that raises two big problems. First, there are eight European fishing nations who want to retain that access; as Rogers noted, it’s very hard to see them voting to ratify any trade deal without securing that access. And secondly, the British fishing industry lives off of exports: the vast majority of British-caught fish are sold to Europe, not consumed locally.

“How do we think we can shut the door on foreign trawlers and yet sustain substantial processed fish exports to Europe?” Witney said.

So now that Johnson has his electoral mandate and a reaffirmed deadline to leave Europe by the end of next year, one thing that is guaranteed is months more bickering over what Brexit ultimately entails. It may boil down to a choice between thin gruel in a minimal trade agreement—or a no-deal Brexit after all.