Britain leaves, the problems remain

Tonight, at midnight British time, Britain officially withdraws from the EU. There will be no major celebrations. There will not be much change for the time being, and this will be ensured by the transitional phase lasting until the end of the year.

Meanwhile, the shape of future trade relations remains open, and with it the question of whether this brexite will become a „hard brexite“ or not. The negotiations on a free trade agreement (FTA) will start on 3 March 2020, at least according to the EU’s timetable. So time is short and the negotiations will be very tactical on both sides. The latest threats from Boris Johnson’s replica also fall into this category: Recently he threatened to impose high tariffs on German cars and French cheese. In general, he said, negotiations on a free trade agreement with the EU were not his top priority; negotiations with the USA and also with New Zealand were on the agenda. Such statements are likely to be heard even more frequently in the coming months.

Negotiations for a free trade agreement usually take several years. The EU and the UK, however, have only a few months left for this mammoth task. By the end of the year a possible treaty must be ratified by all EU countries. The complexity of the processes involved should not be underestimated, nor should the sheer number of detailed questions that go with it. It is hard to imagine that all this can be regulated in such a short time. However, the British Prime Minister continues to rule out the possibility of extending the transitional period.
Several scenarios are currently conceivable to resolve this muddled situation. In the best case scenario, the EU and Great Britain can agree on a basic framework for a free trade agreement by the autumn. Under these circumstances, the British government should then also be prepared to agree to a „technical extension“ of the transitional period. This would allow the necessary time for clarifying the details and the ratification process. From the current perspective, this scenario is very likely, as it is the only realistic one.
Should the negotiations fail, it would be politically very difficult for Boris Johnson to request an extension of the transitional period, which he currently vehemently rejects. In that case, there would be a severe cut with Brussels. Great Britain would fall into recession and the Eurozone would also suffer significant losses. In response, the British government could then pursue a classic „Beggar-thy-Neighbor policy“ and lower taxes and social standards to attract investment. The EU would not have an adequate response to this and a lengthy economic dispute is likely to follow. With this in mind, the EU is also under some pressure to reach an agreement.

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