The UK and the EU have a trade deal. Reality will now intervene

After more stops and starts than I can count, the UK and the EU appear to have agreed the outline of a trade deal.

There is a lot more work to be done. The deal has to be “nodded through” the Council of Ministers, and then voted on by the European Parliament. In the UK, the deal was voted through after half a day (!) of debate. That a treaty of this importance could be voted on that quickly is not a testament to the efficiency of parliament, but a very powerful indication of the way in which the current government has no interest in debate or discussion.

There are 2000+ pages in the draft deal, so anybody who claims to have read it all is probably bullshitting. However, it is clear that on the most contentious issue, fishing rights, both sides (as you would expect) ended up compromising, and the UK and the EU have kicked the can down the road by referring vaguely to “working groups”. This is a classic piece of double-speak for “we couldn’t agree on the details, so we will hash it out later”.

The big question is how the deal will impact the UK economy. The problem in answering that question in the short term will be impact of Covid-19, which is probably impacting the UK more than any part of Brexit, especially since the UK is still in the Transition period out of the EU. After January 1st, the UK will be outside of the EU, obliged to follow the same rules in many areas as non-members.

A smart government would have asked for an extension of the Transition period, since there are enough curveballs out there being thrown at the UK due to Covid-19 to make taking on any more risks highly unwise. However, this is not a smart government, or maybe it is a government trapped by promises made to covert controllers (like the oligarchs that increasingly dominate politics and media ownership).

I expect the economic impact to be gradual. There may be short-term fresh food shortages, but those can always be mitigated – for a price. I expect the prices of many imported food items to rise significantly. This may give UK producers a boost in the short term, but most of those producers will also find it a lot more difficult to sell into the EU, so the overall impact to businesses will be neutral at best.

One of the aspects of the modern world that many Brexit voters and supporters still do not understand is the extent to which countries trade with each other, and the extent to which disruption of that trade has an immediate practical impact on a country. The UK will find this out, immediately for items such as perishable goods, and slowly over time for non-perishable goods.
The main medium-term impact will be in the services sector, which is a large percentage of the UK economy. The trade deal does not cover most of that area of the UK economy, so UK service providers will be operating at a disadvantage when trying to sell into Europe. I expect to see a lot of service-based businesses, especially financial services, relocating to Ireland or Northern Europe in the next 1-3 years. I believe that Ireland will be a main beneficiary of the shift.

The most damaging medium-term impact will be in manufacturing, which still provides a lot of employment, especially in the former heavy industry areas of the UK. I expect overseas manufacturers to cease inbound investment in the UK in favour of other EU countries. The hassle and expense of running a manufacturing location in the UK, outside of the EU, will make new investment unprofitable. This will unfold over time, but will be very economically damaging to many of the old industrial areas, and I would not rule out social unrest.

The UK is going to get an expensive and painful lesson over the next 5 years about the practical meaning of the word “sovereignty”. It is my belief that when future historians write about the late 20th and early 21st Centuries, they will conclude that the terms “sovereignty” and “trickle-down” were two of the most egregious bullshit political slogans ever invented. This article explains why “sovereignty”, as used by Euroskeptics, was, is, and always will be a pile of streaming brown fertilizer. 

To some extent, the lesson on “sovereignty” will be irrelevant. The Leave vote was never about “sovereignty”. That was a post hoc rationalization, a slogan to hang Leave on as a strategy. The real driver for the Leave vote was resentment about increasing inequality and austerity, channeled successfully by demagogue politicians into hostility to the EU. Remember that until 2015, when the idea of a Referendum on EU membership was floated, the EU was not even at 10% in surveys of UK electoral careabouts. But suddenly, the EU became the Source Of All Ills? That’s one large pile of bullshit right there.

Now that the EU is off to one side, and no longer directly involved in the stewardship of the UK economy, the utter irrelevance of any argument based on sovereignty is going to be shown up. Although, distressingly for the hardcore Brexit supporters, who really wanted a WTO-only Brexit, the need to interact with the EU on any aspect of the trade agreement will continue to be seen as a Bad Thing and a reason for letting the current agreement expire after 2025, when it will expire unless renewed by mutual agreement. So, the idea that Brexit is a done deal that leaves the UK able to do what it likes without reference to the EU is a pile of caca. The UK is going to be negotiating with the EU, whether it likes it or not, for ever and a day.

Regions in the UK such as Cornwall, who benefited from EU funding, which bypassed UK government decision makers, will now discover that the promised “Brexit dividend” was and is a mirage, like those “sunlit uplands”, and other glib slogans, some recycled from the Glorious Days of Empire, that were put into the media and on the sides of buses. The fishing industry is going to discover that the Brexit bonanza is illusory, and farmers will soon discover the downside of being outside the EU when it comes to exporting livestock and produce.

Having watched this shit-show from afar, I have no current intention of returning to live in England. The country lost my respect when the citizens voted three times in 9 years in a way that showed that they know next to nothing about Civics and how to select useful politicians. I may buy a property in Ireland or Scotland, but not England.

I expect Scotland to become an independent country within 10 years and to re-join the EU shortly after independence. I also expect the move for Irish unification to be unstoppable within 5 years, once the reality of being outside the EU with a bizarre border hits home in Northern Ireland.

 

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