It is time to prepare for a no-trade Brexit, UK Prime Minister Boris Johnson said on Friday, just hours after the country's largest grocer warned of potential food shortages should disruptions occur after the Brexit transition period ended.
Johnson's announcement heralds a final showdown between the UK and the European Union on whether the two sides can conclude a free trade agreement that can come into effect by January 1st. It comes the day after the prime minister's self-imposed deadline for reaching an agreement – that is definitely not yet achieved.
In a statement, Johnson said the UK has always wanted a casual relationship under the EU's trade deal with Canada, but the EU wouldn't play ball. Indeed, EU leaders said Thursday that they would not budge on key fishing rights claims and that the UK continues to adhere to EU state aid rules to enable an agreement. "
"They want the continued ability to control our legislative freedom and our fisheries in ways that are obviously unacceptable to an independent country," said Johnson. "And since we only have ten weeks until the end of the transition period on January 1st, I have to make a judgment about the likely outcome and get us all ready."
He went on to say that Britain should prepare for "more of Australia's arrangements based on simple principles of global free trade" – in other words, a no-trade scenario since the EU does not have one with Australia.
However, Johnson did not answer the question of whether or not the talks would continue.
Pressing this point, his Fortune press office referred to a tweet from European Commission President Ursula von der Leyen, who replied to Johnson's speech: “The EU continues to work for a deal, but not at any cost. As planned, our negotiating team will go to London next week to step up these negotiations. "
– – Talks: The EU continues to work for a deal, but not at any cost.
As planned, our negotiating team will go to London next week to step up these negotiations.
– Ursula von der Leyen (@vonderleyen), October 16, 2020
It's hard to tell at this point whether the negotiations are indeed doomed – Johnson's order to prepare for a no-deal might signal just that, or it might be a sign of Brinks manner.
But time is really running out. Johnson's October 15 deadline was based on the fact that the EU was hoping to reach an agreement for national government approval at their summit on Thursday (the meeting after which they made their statement that Britain would have to give in). and heads of government ready The loose target was based on the need for every EU country to ratify the agreement in good time before it came into force on January 1st.
However, Johnson and von der Leyen agreed in early October that negotiations should continue for another month as some progress had been made.
The UK technically left the EU in late January but will continue to act as a member of the bloc until December 31 if the rules are respected. If there isn't a trade deal that regulates the following, the result is likely to be messy businesses, especially those that operate just-in-time supply chains between the EU and the UK across borders.
John Allan, chairman of the supermarket giant Tesco, said on Friday before: "We cannot rule out that with some upheavals in the ports of entry into Great Britain there will be at least a shortage of fresh food for a short time."
"The country's food supply chain continues, but there may be some things that we must learn to live on for a few weeks, possibly a few months," Allan added.
After Johnson's speech, the UK's largest trade association, the Confederation of British Industry (CBI), reacted with a twinge of fear.
"After four years of negotiations and so many hurdles, this is no time to give up," said Carolyn Fairbairn, director general of CBI, in a statement. “Neither side can afford to fall on the last fence. A deal is the only outcome that will protect COVID-affected livelihoods at a time when every job in every country counts. "
Fairbairn said an agreement was needed to avoid customs controls on the border between Northern Ireland and the Republic of Ireland to the south and west, "secure investments that are vital to future jobs" and enable a data sharing agreement that " so important to the 80% UK service economy ”- this agreement is already uncertain due to UK surveillance laws.
Banks have already moved an estimated $ 1.5 trillion in assets and 7,500 financial services jobs from the UK to continental Europe in the event a no-deal scenario removes their passport rights for EU clients from the UK.
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