To use the words of British Prime Minister Boris Johnson, Brexit has been done. The UK left the European Union on January 31.
However this is not the last word on the matter. The UK has left the EU indeed, but it now needs to reach an agreement on a number of things, the most important of which is trade. Agreement has to be reached by December 31 of this year. So is Brexit truly done?
I must say that the signs so far are not encouraging. Johnson has stated that he is not willing to make any concessions to the EU in exchange for a free trade deal. So the coming nine months are likely to be a battle between the UK and the 27 EU member states.
I write nine months because after agreement is reached there needs to be a ratification process which should easily take two months. If no deal is achieved by December 31, the UK will face a very uncertain economic future and there would also be an impact on the member states of the EU.
The EU is making clear its red lines which cannot be crossed. It insists that the UK must accept alignment with its legislation on workers’ rights, the environment and state aid, as the price for a free trade deal, similar to what the EU has with Canada. The reason for this is that, in the absence of such alignment, it would create a competitive advantage for UK firms competing against EU-based ones.
There are strong ties between Malta and the UK in a number of economic spheres
The EU is also insisting on fishing rights in UK waters for its fishermen and it wants a role for the European Court of Justice in any disputes with the UK. These are also no-go areas for the UK, which is why there is indeed a very difficult road ahead before any sort of agreement is reached. We need to add to these aspects such as financial services, postal services and student exchanges
According to Johnson, another alternative that there may be is an agreement similar to that which the EU has with Australia. However, that agreement is not a free trade deal as it involves the imposition of tariffs on various goods. As such there is not really the time to come to an agreement during 2020. From the EU side, it is claimed that this is not an option as an Australia style of agreement does not really exist.
There is yet a third alternative which is no deal at all and trade relations between the UK and EU would be governed by the rules of the World Trade Organisation. The impact of this on the UK economy and the economy of the 27 EU member states could be dramatic.
All this is essential for Malta. There are strong ties between Malta and the UK in a number of economic spheres. There are also agreements related to the health and treatment of Maltese patients in the UK.
During the last 16 years, these ties have been based on the premise that there has been the free movement of people, goods, capital and services between the two countries, and as a result they got stronger. Before that we had various arrangements that provided for a special relationship between the two countries. Therefore we cannot emphasise enough the risks that a no deal between the UK and the EU would have. What would be the arrangements for British tourists visiting Malta and for Maltese visiting the UK? What would be the impact on the medical and pharmaceutical sector?What about imports and exports of goods? And how will the financial services sector be impacted by the lack of an agreement?
These are all areas where we need to have both a Plan A and a Plan B. Plan A would be based on a scenario of an agreement between the EU and the UK, while Plan B would be based on a lack of agreement. As a country we cannot be caught unawares and 11 months is too short a period to make elaborate plans for each eventuality.
Brexit may be done but there are still many hurdles to be overcome before it is truly done.