Why have the EU and UK been unable to reach a post-Brexit trade deal?
The chief reason is a lack of political will. The UK government is willing to countenance leaving the EU without a trade deal. Therefore, it is unwilling to negotiate hard to get one. On the EU side, there is a preference for a deal but no appetite to make concessions that would hand the UK a victory. EU leaders fear that concessions would encourage secessionist ambitions in other member states.
The most contentious point of disagreement has to do with state aid—that is, government subsidies to businesses. To ensure a level playing field for firms across the EU, government freedom to assist businesses through tax breaks, grants, or other expedients is curtailed. Traditionally, the UK’s ruling Conservative Party has favored these restrictions on government intervention in commerce. But Prime Minister Johnson chafes at them. His government wants the freedom to support UK tech companies; it may also want to subsidize companies in the relatively poor northern part of the country.
For their part, EU leaders are unwilling to allow the UK such freedoms. They fear the prospect of UK businesses competing in European markets with the help of the UK government.
What is the Internal Market Bill and why is Johnson pushing it?
The Internal Market Bill would allow the UK government to renege on promises contained in its withdrawal agreement with the EU, signed in January 2020.
The withdrawal agreement lays down that Northern Ireland will be part of the EU’s single market and customs union, and that goods will therefore move freely across the unpoliced border with the Republic of Ireland. This was done to prevent a so-called hard border on the island, which many feared could inflame lingering tensions from the decades-long conflict in Northern Ireland. The agreement also requires that goods moving between mainland Britain and Northern Ireland must be subject to customs oversight, since Northern Ireland could otherwise become Britain’s illicit back door into the EU. If approved by the UK Parliament, which seems likely, the Internal Market Bill would undo the UK’s commitment to provide such oversight. The UK government admits that this would violate the withdrawal agreement and therefore international law.
The bill has been criticized by five former Conservative Party leaders, but Johnson is pushing it because he objects to the idea of a border within the UK. He may also see it as a bargaining tactic. The bill has caused a political storm, capturing the attention of Europe’s top leaders, and Johnson may believe that their irritation increases the odds that they will offer concessions.
What happens in the event of a no-deal Brexit?
With or without a trade deal, the UK will leave the EU’s single market on December 31, 2020. If there is no deal, the UK will trade with Europe under the rules laid out by the World Trade Organization. The UK would have the same access to the single market that, say, Australia enjoys.
If there is a deal, EU-UK trade will be subject to fewer tariffs and restrictions. In particular, the auto and agricultural sectors would be better off.
What does this mean for the UK’s relationship with the United States?
President Donald J. Trump sees a kindred spirit in Johnson and sympathizes with the Brexit project. Most other U.S. political leaders have a different perspective.
Since joining the EU in the 1970s, the UK has been useful to the United States as a bridge to Europe: if Washington wanted to inject its preferences into EU deliberations, the best strategy was to persuade Britain of its case and let the British carry the view to Brussels. With Britain leaving the EU, however, it can no longer play this role. The United States will lose an important channel into Europe.
For reasons of history and sentiment, the United States also has an interest in the peace and prosperity of Ireland. Brexit—particularly the prospect of a hard border—threatens the delicate peace on the island, and the Johnson government’s bill has exacerbated tensions. This has further weakened the U.S.-UK relationship.
Finally, the tension could upend hopes that Brexit will free the UK to strike a new trade deal with the United States. Trump and Johnson have touted the potential for a U.S.-UK free trade deal, but U.S. congressional leaders say they would block it if Brexit deliberations end up harming Ireland.