We are now over a month into the UK being outside the EU, Single Market and Customs Union and project fear has turned into project reality. While some of this might be transitional teething problems, others are not and
will certainly lead to sectoral shifts in the UK. There is the fishery industry, which discovered that being able to fish more does not imply selling more. There are many smaller export-oriented businesses in the UK, focused on the EU market so far, finding
out that the costs on either side (UK exporter and EU importer) are simply too large for business being profitable. Social media are full now of former
Brexit-fans that feel conned. One of the main frictions on the retail level has been the exit of the UK from the EU VAT system – it is important to note that this was one of the earliest
decisions of the UK Parliament to force Theresa May towards as hard a Brexit as possible. While annoying for individuals (like my family and me), it has turned into a major headache for small businesses. And this is just on the goods-side.
The service sector has been all but ignored; the performing arts profession has been outspoken about the failure of the UK government to agree to visa-free travel for performing artists. Similarly, the fashion industry has started to complain. It is important
to note, however, that this does NOT imply that there will not be winners from Brexit – yes, there will be: most obviously, customs agent has become an attractive career perspective for young people. In the medium- to long-term, firms offering substitutes
for imports from the EU will emerge. On balance, however, it has become clear that Brexit will cost the UK economy and society dearly, something that even Michael Gove – though
unintentionally – acknowledged when he – correctly – claimed that Scottish independence and a trade border between England and Scotland would be even more costly than Brexit.
Then there is the issue of the Northern Ireland protocol, which introduces border controls between Great Britain and Northern Ireland in order to prevent such controls to happen between Northern Ireland and the Republic of
Ireland. The European Commission committed a grave mistake a week ago invoking the emergency provisions in Article 16 of this protocol to prevent COVID vaccines from crossing the invisible border between Ireland (EU) and Northern Ireland (UK).
This decision was taken on a Friday late afternoon (someone in Brussels might have started with these weekend drinks just a bit too early), without any coordination with Ireland. The immediate outcry led to a quick turn-around. This mistake was not only
grave but surprising, given the critical role that solidarity with Ireland and the Irish peace process has played over the past four years of Brexit negotiations. But it was certainly interesting to see that DUP’s Arlene Foster suddenly discovered the
benefits of Northern Ireland staying in the Single Market, something that she and her party had so much fought against.
The main problem is that this mistake gives
the UK government yet another excuse in undermining the Northern Ireland protocol – to remind everyone, it was the UK government that first tried to undermine this protocol last year with the Internal Market Bill, which included powers for the UK government
contrary to its obligations under the protocol. Back then, it declared that its intention was to put pressure on the EU to get a zero-tariff, zero-quota trade deal. Well, they got this one, though a rather thin agreement. Ultimately the border controls
in the Irish Sea are the result of the Brexit Trilemma and the Brexit choices of the UK government – exit from Customs Union and Single Market and you have
to put a border either on the Irish Island or in the Irish Sea.
It is interesting to see the reaction of Brexiters to the new reality, ranging from the ridiculous
to the bizarre. On the one hand, there is the one academic economist speaking out in favour of Brexit who pronounced that the new trade frictions are illegal under WTO rules (well, they
are not). Then there is the call for Britons to go back and plant their own food. At the same time, the government has been busy handing out money to sectors that are most affected
and scream loudest and keeps referring to transitional issues. And while the government refused for a long time to acknowledge that there are customs control between Great Britain and Northern Ireland, it has now changed course and is again threatening the
EU with defaulting on the Northern Ireland protocol. One minor point that they have been ignoring, however, is that the current trade deal is being applied provisionally as it still has to be approved by the European Parliament (EP), which – unlike
the very sovereign mother of all parliaments – has been studying the deal for more than the 24 hours that has been given to the British parliament. A final vote won’t happen until the end of this month. And I am not convinced that the EP
will look kindly at the constant threats by the UK to walk away from its obligations under the Northern Ireland protocol.
As I wrote before, the Brexit soap opera
is far from over, we are simply in a new season! Old themes are brought up again and again; expect this to continue for many years to come!