Last-minute Britain-EU Deal on Brexit Leaves Some Significant Issues Unresolved

Editorial

12:36 JST, December 26, 2020

The worst-case scenario of trade tariffs being revived between Britain and the European Union, which would have plunged the economy into chaos, has been narrowly averted.

Both sides must continue their efforts to build a constructive relationship.

Britain and the EU have agreed on a post-Brexit future relationship centering on a new free trade agreement.

Britain left the EU in January this year, and the transition period in which it is treated as equivalent to an EU member state will finish at the end of the year. If they had failed to reach an agreement on the FTA and tariffs were restored, these would have been an unavoidable major impact on the manufacturing and distribution sectors on both sides.

The deadline for negotiations, which was initially set for mid-October, was significantly delayed. A decision by both sides to avoid further damage in the face of the economic downturn caused by the coronavirus pandemic may have been behind the last-minute agreement.

It is significant that Britain and the EU maintained free trade and established a framework for long-term cooperation. On the other hand, the gap between the two sides has once again become obvious.

The negotiations were difficult because British Prime Minister Boris Johnson took a hard-line stance, proposing full restoration of national sovereignty. He called for the right to have independent policies on subsidies to domestic companies, environmental regulations, labor standards and so on.

In response, the EU stressed the importance of fair conditions for competition and urged Britain to abide by EU rules as a condition of it continuing tariff-free trade with the EU’s single market.

In order to maintain the unity of the EU, it can be said that the bloc did not distort the principle of not allowing Britain to “cherry-pick” what it wants.

Britain finally conceded and effectively accepted the current EU rules. It is reported that if measures are taken to distort fair competition, the two sides will make efforts to mediate with a view to sanctions.

Regarding fishing rights in British waters — another point of contention in the negotiations — Britain insisted on a sharp reduction in quotas for EU member nations, but in the end both sides agreed on a 25% reduction over 5½ years.

Detailed rulemaking for financial services, which support the British economy, has been postponed. On the EU side, there is a deep-rooted distrust of Johnson, who downplays deals with the EU. It seems that some sources of friction remain.

For Britain, the EU accounts for half its total trade. Johnson has said that he will conclude FTAs with the United States and Australia as well and lead Britain to prosperity, but he needs to gain a solid footing first.

Japanese companies based in Britain will also be influenced by the Britain-EU trade deal. For example, they newly will be required to obtain certificates of origin to receive preferential tariffs. The Japanese government must make efforts to gather information on the agreement.

— The original Japanese article appeared in The Yomiuri Shimbun on Dec. 26, 2020.