Brexit brinkmanship: Johnson says prepare for no-deal, cancels trade talks

Britain's Prime Minister Boris Johnson has repeatedly said that his preference is for a deal.
Britain's Prime Minister Boris Johnson has repeatedly said that his preference is for a deal.PHOTO: REUTERS

LONDON (REUTERS) - Prime Minister Boris Johnson said on Friday (Oct 16) it was now time to prepare for a no-trade deal Brexit unless the European Union fundamentally changed course, bluntly telling Brussels that there was no point in talking any more.

A tumultuous “no deal” finale to the United Kingdom’s five-year Brexit crisis would sow chaos through the delicate supply chains that stretch across Britain, the EU and beyond - just as the economic hit from the coronavirus pandemic worsens. 

At what was supposed to be the “Brexit summit” on Thursday (Oct 15), the EU delivered an ultimatum: it said it was concerned by a lack of progress and called on London to yield on key sticking points or see a rupture of ties with the bloc from Jan 1.

“I have concluded that we should get ready for January 1 with arrangements that are more like Australia’s based on simple principles of global free trade,” Johnson said.

“With high hearts and with complete confidence, we will prepare to embrace the alternative and we will prosper mightily as an independent free trading nation, controlling and setting our own laws,” he added.

EU heads of government, concluding a summit in Brussels on Friday, rushed to say that they wanted a trade deal and that talks would continue, though not at any price.

German Chancellor Angela Merkel, Europe’s most powerful leader, said it would be best to get a deal and that compromises on both sides would be needed.

French President Emmanuel Macron said Britain needed a Brexit deal more than the 27-nation EU.

Johnson’s spokesman said talks were now over and there was no point in the EU’s chief negotiator Michel Barnier coming to London next week barring a change in approach. 

“The trade talks are over: the EU have effectively ended them by saying that they do not want to change their negotiating position,” Johnson’s spokesman said. 

The pound oscillated to Brexit news, dropping a cent against the US dollar on Johnson’s remarks but then rising before falling again on his spokesman’s comments.

Rhetoric?

After demanding that London make further concessions for a deal, EU diplomats and officials cast Johnson’s move as little more than rhetoric, portraying it as a frantic bid to secure concessions before a last-minute deal was done.

Dutch Prime Minister Mark Rutte said he thought Johnson had signalled that London was ready to compromise. 

While US investment banks agree that a deal is the most likely ultimate outcome, the consensus was wrong on the 2016 
Brexit referendum: when Britons voted by 52-48 per cent to leave, markets tumbled and European leaders were shocked. 

Asked if he was walking away from talks, Johnson said: “If there’s a fundamental change of approach, of course we are always willing to listen, but it didn’t seem particularly encouraging from the summit in Brussels. 

“Unless there is a fundamental change of approach, we’re going to go for the Australia solution. And we should do it with great confidence,” he said.

 A so-called “Australia deal” means that the United Kingdom would trade on World Trade Organization terms: as a country without an EU trade agreement, like Australia, tariffs would be imposed under WTO rules, likely causing significant price rises. 

European Commission President Ursula von der Leyen said she was keen for a deal, though Macron was more downbeat.

“The state of our talks is not that we are stumbling over the issue of fishing, which is the British’s tactical argument, but we’re stumbling over everything. Everything,” Macron said.

“The remaining 27 leaders of the EU, who chose to remain in the EU, are not there simply to make the British prime minister happy,” he added. 

Merkel called for Britain to compromise. “This of course means that we, too, will need to make compromises,” she said. 

Britain formally left the EU on Jan 31, but the two sides have been haggling over a deal that would govern trade in everything from car parts to medicines when informal membership known as the transition period ends Dec. 31. 

Johnson had repeatedly asserted that his preference is for a deal but that Britain could make a success of a no-deal scenario, which would throw US$900 billion (S$1.22 trillion) in annual bilateral trade into uncertainty and could snarl the border, turning the southeastern county of Kent into a vast truck park.

The EU’s 27 members, whose combined US$18.4 trillion economy dwarfs the United Kingdom’s US$3 trillion economy, says progress had been made over recent months though compromise is needed. 

Main sticking points remain fishing and the so-called level playing field – rules aimed at stopping a country gaining a competitive advantage over a trade partner.

“We are heading into very dangerous territory,” said Ian Wright, the chief executive of Britain’s Food and Drink Federation. “In the event of a no-deal Brexit, shoppers will - literally – pay a heavy price.”

Johnson said discussions showed the EU would not give Britain a comprehensive trade deal such as the one the bloc has with Canada.

“It does seem curious that after 45 years of our membership they can offer Canada terms they won’t offer us.” EU officials have said Britain, with the world’s 6th largest economy and geographically next door to Europe, poses a much bigger competitive challenge than distant Canada and so cannot be offered a similar accord.