Calming the EU and Sending Love Calls to the US... UK Preparing for the 'Post-Brexit' Era

Concession on Controversial Internal Market Law... No-Deal Possibility Remains Despite Positive Momentum
25% Tariff on US Products Also Lifted

Boris Johnson, Prime Minister of the United Kingdom [Image source=Reuters Yonhap News]

[Asia Economy Reporters Jeong Hyunjin and Kwon Jaehee] The UK has effectively nullified the Internal Market Bill, which it had aggressively pushed during the Brexit transition period negotiations, and has decided to remove punitive tariffs imposed on the United States. As the end of the transition period approaches at the end of this month and the outcome remains difficult to predict, this move appears to be an attempt to keep all possibilities open, including a No Deal scenario for the 'post-Brexit' period.

According to BBC and other sources on the 8th (local time), Michael Gove, UK Chancellor of the Duchy of Lancaster, and Maros Sefcovic, Vice-President of the European Commission, announced that they had reached an agreement on customs and quarantine procedures at the Ireland-Northern Ireland border. The agreement focuses on detailed matters related to trade across the Ireland-Northern Ireland border, which had been the most contentious issue in the original EU withdrawal agreement. The UK had introduced the Internal Market Bill in September to override the EU withdrawal agreement provision that Northern Ireland would follow EU regulations, but this time, the UK deleted key provisions of the bill and agreed on specific export declaration requirements, rules related to the supply of medicines and food, and procedures for animal and plant quarantine.

This agreement is separate from the ongoing future relationship negotiations between the two sides. However, the decision is noteworthy because it could serve as 'a momentum' amid the No Deal risk looming over the future relationship talks. In particular, since the UK government had strongly advocated for this bill, there is hope that it might lead to a change in the EU's negotiating stance.

Attention in the transition period negotiations is focused on the face-to-face meeting scheduled for the 9th between UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen. Although the two sides had a phone call on the 7th, negotiations remain sluggish, prompting Johnson to head to Brussels, Belgium. With the EU summit scheduled for the 10th-11th, the UK government believes that if the talks on the 9th go positively, negotiations could resume on the 11th.

However, a dramatic agreement on the main issues causing the deadlock is unlikely, making a full agreement practically difficult, and the possibility of a No Deal remains. Michel Barnier, the EU's chief negotiator, said on the day that the likelihood of an agreement between the two sides is very low. Bloomberg, citing multiple EU officials, reported that "the final agreement depends on whether Johnson makes a political decision."

The UK government is also accelerating preparations for the post-Brexit transition period. Liz Truss, UK Secretary of State for International Trade, stated in a press release that "we want to establish a deep trade relationship with the United States" and announced the removal of punitive tariffs imposed on US products related to aircraft subsidies. Previously, the EU had imposed tariffs of up to 25% on $4 billion worth of US products in retaliation for illegal subsidies to Boeing by the US government.

The UK's move is interpreted as a strategic step to conduct bilateral trade negotiations with the US after the transition period ends. However, despite the UK's overtures, it remains uncertain whether a UK-US trade agreement will be reached in the short term. US President-elect Joe Biden recently told the New York Times (NYT) in an interview that "he will not rush to conclude new trade negotiations" and that "he will not enter into any new trade agreements until significant investments are made in domestic workers and education."

Amid ongoing chaos, the British pound exchange rate has experienced increased volatility. Major foreign media report that the expected volatility of the pound over the next four weeks is the highest since March, when the COVID-19 pandemic first struck.

This content was produced with the assistance of AI translation services.