At the time of writing, British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen, had just hours prior, agreed to extend the deadline for negotiations to determine relations between both sides after 1st January 2021 when the United Kingdom (UK) completes its exit from the European Union (EU). The UK and the EU are negotiating a free trade deal, agreements on law enforcement, judicial cooperation, transport, fisheries and on sharing information in security databases.

Readers will recall that nearly five years ago, British voters chose to leave the EU in the aftermath of a referendum in June 2016. While the UK left the EU on 31st January 2020, as part of a transition deal, it remains part of the EU’s economic and security arrangements until the end of 2020. Both Parties are now racing against the clock to have a legally binding framework in place to govern their future relationship.

On one hand, the EU wants the UK to follow its standards related to food safety, labour, health, environmental issues such as industrial pollution and government support for the private sector, including fisheries. In short, the EU wants to limit the extent to which the UK can roll back existing standards, while subscribing to future EU standards.

On the other hand, the UK wants an outcome which grants it the freedom to depart from EU standards as well as EU judicial processes. However, the EU is concerned that should the UK enjoy the flexibility to ignore EU standards, British companies could potentially secure an unfair advantage over their EU competitors, essentially creating an uneven playing field. Beyond this clear economic concern, there is also a much broader political calculation being made by the EU. If the UK ends up in a more advantageous position than it otherwise enjoyed as a Member of the EU, this could potentially incentivise other Euro-sceptics to push their countries to exit the bloc. Naturally, the EU would want to discourage this.

Writing in the Wall Street Journal, Stephen Fidler argues that among other things, a deal would provide a strong basis for future cooperation, avoid the need for tariffs on goods and limit new bureaucratic obstacles to trade between the UK and the EU. However, a deal is not a certainty.

If the UK and the EU are unable to agree on a deal, the implications are many. A no-deal Brexit can serve as a diplomatic, political and economic setback among long-standing allies. For example, on the economic front, if both Parties impose tariffs on their respective goods, this will increase prices for businesses and consumers.
Diplomatically and politically, there is also a risk that cross-channel relations could become toxic for several years.

Specifically, for the UK, many economists and academics worry that a no-deal outcome would be damaging for the British economy. For example, there are fears that no-deal would slow the economic recovery from the novel-coronavirus pandemic, cost jobs and depress UK exports to the EU.

Beyond the UK and the EU, what happens after Brexit fully takes effect is also of interest to the rest of the world. Undoubtedly, a no-deal Brexit would complicate matters and create uncertainty for firms that use the UK as a base to conduct business in the EU. The reverse would also apply, that is, firms that use the EU as a base to engage in business in the UK.

Furthermore, at a more philosophical level, there is an ongoing stress test on globalisation and the outcome of the Brexit referendum was one indication that all was not well with the globalisation project. Pockets of dissent exist not only in the UK, but also in many areas of the world with respect to free trade, migration and pooled sovereignty through the sharing of certain institutional and legal structures. Deal or no-deal, Brexit is a lesson to all world leaders that more needs to be done to ensure that there is a more equitable distribution of the gains from globalisation and regional economic cooperation.

Finally, globalisation and regional economic cooperation for the benefit of the few is not acceptable. Open borders and open markets should redound to the collective good of society and there must be a way to ensure that marginalised communities are heard, and their issues addressed. Otherwise, the seeds of discontent will germinate, and the consequences will not necessarily be favourable.