BREXIT: OPPORTUNITIES OR PROBLEMS?

As soon as Britain left the European Union, it got slapped by its most faithful—as it might seem—ally in the quest for independence.

President Trump called Prime Minister Boris Johnson to discuss the security of telecommunications networks, as Britain closes in on a decision on Huawei’s role in the country’s future 5G network. According to Financial Times, all the participants in prime minister’s office stood stunned at Trump’s rude and furious expressions during the conversation.

After the conversation, London decided to postpone the trip of the British Prime Minister to Washington in March until further notice.

Boris Johnson has repeatedly criticised the U.S. president for his threats to start a new trade war with Europe, breaking agreements with Iran and for the fact that "From Brussels to China to Washington, tariffs are being waved around like cudgels - even in debates on foreign policy."

Trump pretended that he did not notice this criticism praising Johnson every now and then. "They have a wonderful new prime minister," he said in Davos in January, looking forward to negotiations on a "terrific new deal with the United Kingdom."

The phone call that followed shortly after Davos showed President Trump's real attitude toward Britain. Johnson had to part with the idea of blackmailing Brussels with his negotiation accomplishments with the U.S.

Frankly, it was not clear what Johnson was after even before this infamous telephone conversation. First, the U.S. now has a trade surplus with Britain, and is not willing to enter into a new deal to its own detriment. Secondly, it is no secret that Trump is unpredictable and prefers threats instead of diplomatic negotiations. This time he promised to raise tariffs for British cars if they ever decide to work with Huawei.

The direction of blow was not chosen spontaneously. For the UK, the automobile industry is one of the top priority areas that needs to be rescued. Due to uncertainty with Brexit, automobile production in Britain has been falling for the third year in a row having reached the lowest level in ten years. Plus, global car makers with plants in the UK fear that the year could end without a new trade agreement with the European Union. They are already thinking about moving production facilities to other countries.

Europe does not believe

Although the UK officially left the EU on January 31, the process will go through a so called  transitional period until the end of this year, during which the country's economic relations with the remaining 27 members of the union will not undergo any changes. London is also required to comply with all laws and decisions of the union, although it no longer participates in any of its governing structures.

EU and Britain have to agree upon a wide range of issues by the end of 2020, including trade, data protection, security, aviation, cargo transportation, fishing, and so on. According to Michel Barnier, the EU’s chief negotiator for Brexit, in addition to the new free trade agreement, more than 600 international agreements should be negotiated.

Apparently, no one in Europe believes that the UK will be able to agree upon a comprehensive deal covering all aspects of Brexit within the time frame set by Johnson.

Negotiations will start on March 3 and should end in October-November, so that there is time for ratification in respective parliaments. There has never been a case in history when a comprehensive free trade agreement was drafted and approved by the parties involved in such a short time.

For example, negotiation on the free trade agreement with Canada started back in 2009 and ended only in 2016. But it is still pending ratification by the remaining EU bodies. Also, negotiations between the EU and Australia began in 2016 and are still underway. Ironically, Boris Johnson views these agreements the exemplary models for future relations of Great Britain with the EU.

By the way, the source data used for the above agreements was completely different.  After all, relations between Canada/Australia and the EU cannot be the same as those between the EU and Britain. There are many differences. Firstly, neither Canada nor Australia have ever been part of the EU, hence their economic link with Europe is insignificant. The share of  EU in the UK imports and exports accounts for 54% and 43%, respectively. Secondly, there is a tight time frame. Thirdly, according to the British government, after Brexit and with the agreement on free trade, the country's economy will become 5% less than it would be if it were a full EU member state. If Britain fails to reach a trade agreement with the EU, meaning the regulation of trade relations in line with the WTO tariffs, the British economy will shrink even further, by 7.6%. According to forecasts, after Brexit, the British economy will be able to grow by an average of only 1.1% until 2023. Otherwise, these figures would be twice as more. Fourthly, the UK has to resolve many controversial, including territorial, issues now. And finally, the mandate of confidence in the Johnson government has been issued solely for a favourable ‘divorce’ with the EU. In case of failure, Tories risk to lose public support, pushing the country into uncertainty once again.

Conflicting issues

The problem of tight borders between the Republic of Ireland and Northern Ireland, which will have to leave the EU as part of the UK, was not solved by the May’s government. Basically, that was one of the reasons why Theresa May resigned. Johnson agreed to an option which assumes no customs posts or passport control within the island of Ireland, while Northern Ireland remains part of the customs territory of Great Britain. Nobody knows how this will work in practice.

The EU will support Spain in its territorial claims against Gibraltar. British sovereignty over Gibraltar was officially confirmed in the 1713 Utrecht Treaty to the dislike of Spain back then and now. As part of the EU, Britain could resist Spanish claims, but now Madrid will get full support from the other EU member states. Back in November 2018, EU leaders agreed that Gibraltar "not included in the territorial framework" of future agreements between the two parties. London will have to conclude separate agreements on issues concerning Gibraltar, preliminary coordinating them with Spain.

The rule of equal access to the fishing zones of the united Europe has been in force for many years. Eight EU countries are fishing in the waters of the UK (30% of the French fishing catch). and the fishing ban was one of the main requirements of Brexit supporters in a referendum in 2016. Johnson tried to raise this issue, but faced with the tough opposition of Brussels, which threatened to ban the supply of seafood from the UK to Europe in response. However, the authorities of the Guernsey Island, which is part of the Channel Islands, UK, believe that they are free of transitional rules. On February 1, they closed access to their waters for European fishing vessels and proposed to develop a certain system of the so called individual permits. London, under pressure from Brussels, had to deal with this arbitrariness.

Brexit has split the British society. In the 2014 referendum on independence, 55% of Scots voted to remain part of the UK. However, two years later, already 62% were against leaving the EU. Recent opinion polls show that, if the referendum were now, the majority of Scots would have supported independence from the UK. When the EU flag was lowered from administrative buildings in the UK on January 31, the Scottish Parliament defiantly left it. Pressure on London demanding a new referendum on independence is intensifying.

Another problem may arise with issues related to the EU requirements on the free movement of EU citizens, as well as the compliance with rules on competition, subsidies, social protection, and environmental protection. Johnson’s cabinet, referring to the same agreement with Canada, is trying to prove that it is possible to conclude a free trade agreement without all this. But Brussels makes it clear that it will not give in. "Without the freedom of movement, you will not be able to freely move capital, goods and services. Without equal conditions in the field of environmental protection, labour, taxation and state assistance, you will not get access to the largest single market in the world," EC President Ursula von der Leyen warned the UK.

Living up to expectations

The decisive victory of Tories led by energetic Boris Johnson last December sparked a surge of long-forgotten optimism among British companies and consumers. According to survey conducted immediately after the election, the number of British citizens who expressed confidence in the imminent recovery of the British economy was 41%, the highest indicator since March 2017. 53% of responding businessmen were more optimistic about the prospects of their companies than three months ago.

The country was tired of uncertainty, and it now feels relieved after the withdrawal from the EU on January 31. This tiredness was the main reason for the crushing defeat of the Labourites, who proposed holding a second referendum. But the Britons thought that it would extend the uncertainty for another months and took the mandate back.

Boris Johnson was able to convince even the residents of industrial districts, who had always voted for Labourites, to cast their votes for the Tories. Now the British believe that the government is obliged to live up to their expectations and conclude a free trade agreement with the EU.

However, it seems that the new government is losing its optimism every passing day. According to Anand Menon, Director of the UK in a Changing Europe, Johnson’s government has shifted the rhetoric from brave claims that Brexit is "full of opportunities" to the acknowledgement of Brexit as a "problem to be solved".