Policy makers in Brussels and London turn their attention to future relationship
The EU will propose a draft mandate for its trade relations with the UK today.
After the UK’s departure from the EU on Friday, Brussels and London are now tasked with negotiating a comprehensive trade deal.
The UK had a GDP of $2.8 trillion in 2018 and was the second-largest contributor to the EU’s budget in 2017; the country was an asset to the bloc’s collective economy. On the other hand, almost half of the UK’s exports in 2017 went to the EU, making the bloc a valuable contributor to the British economy.
Nevertheless, UK Prime Minister Boris Johnson has taken an anti-tariff line in regard to the future trade relationship. The EU fears this concession would give UK firms an unfair advantage, so Johnson’s refusal to extend negotiations beyond the very tight deadline of January 1, 2021 is highly ambitious. If negotiations end without a deal, World Trade Organisation rules will be triggered whereby tariffs and inefficient customs checks will be placed on Britain’s exports.
Given Johnson’s demands, expect the deadline to complete negotiations to elapse without a deal. Indeed, without a deal, the EU could lose 0.5% of GDP for 2021 while Britain would see losses of 3.5% of its GDP within the same time period.
Wake up smarter with an assessment of the stories that will make headlines in the next 24 hours. Download The Daily Brief.
