A free trade deal between the UK and European Union looks more promising as the two sides have reportedly made considerable progress in negotiating a new accord, which has to take affect after the transition period that ends by the year-end.
The United Kingdom left the EU on January 31 but the main terms of its membership remain in place - including being in the EU customs union and single market - during a transition period until December 31.
Michael Gove, Britain’s top minister overseeing Brexit talks recently said he was confident a free trade deal would be clinched with the European Union as there had been a distinct change of tone from the bloc in recent weeks allowing progress to be made.
“The omens are good for a deal. Now of course there is some tough talking to do,” Gove said. “I believe that there will be a successful negotiated outcome.”
While Britain has always said it believed a deal was possible, the tenor of the comments from Gove - one of the most senior Brexit supporters in Prime Minister Boris Johnson’s government - was distinctly more positive than in recent months.
In late May, for example, Gove was demanding that the EU break the impasse in talks.
Failure to reach a deal would convulse global trade just as the world comes to terms with the economic destruction sown by the novel coronavirus.
The EU is willing to compromise by softening its demand that Britain heed the bloc’s rules on state aid in the future, diplomatic sources told Reuters earlier this month.
Although a failure in trade talks is certainly possible, The Guardian noted, “A deal this year is more likely, for several reasons. First, there has been more progress than one might suppose from the public comments of Barnier and David Frost, the UK negotiator.
The EU has hinted at a softer line on fisheries and state aid, and agreed that an arbitration mechanism rather than the European court of justice should adjudicate on disputes.
The UK has moved a little, too. By making clear that it will stay in the European convention of human rights it has facilitated future co-operation on justice and home affairs.
The United Kingdom needs a trade deal because it will leave the European Single Market and European Union Customs Union on January 1, 2021. The trade deal would affect EU-UK trade, which accounts for 49% of international UK trade.
During the Brexit negotiations in 2017 (of the withdrawal agreement), the two sides had agreed that trade negotiation could only start after the UK’s withdrawal, because such negotiations could not happen when the UK still has a veto right within the EU.
For this and other reasons, a transition period after Brexit day was defined to allow those negotiations. The transition period started on the February 1, 2020, in accordance with the withdrawal agreement. The first deadline is December 31, 2020, which can be extended for two years. The British government, however, stated that it will not apply for any such extension.
