How the New COVID-19 Strain Could Save a U.K.-EU Trade Deal

Largely cut off from the rest of Europe, Brits are getting a hint of the economic and political ramifications of going it alone.

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The deadline set by the European Parliament for a trade deal between the U.K. and the EU has officially passed. Despite this, a trade deal is now more likely than it has been in many months. The new strain of COVID-19 that was first detected in the United Kingdom, and which is likely responsible for a dramatic increase in cases in the U.K., has given the British a preview of what, in a worst case scenario, going it alone might actually turn out to be like.

The new strain, while probably not deadlier than the original, is far more contagious. In response the U.K. government is now canceling Christmas for tens of millions of British citizens who live in the newly created “Tier 4” regions. Travel from these regions to other regions is now banned, non-essential shops and service providers such as hairdressers have been forced to close, and no one is to leave home without a reasonable excuse (i.e. work or education). People living in these regions are not allowed to meet other people indoors unless they live with them. 

Many countries all over the world have already banned or severely restricted travel from the U.K. The Eurotunnel that connects the U.K. with France was temporarily closed (as of Tuesday, truckers and travelers trying to cross the border must first clear a rapid COVID test), and as of this writing 11 member states have already announced that they will refuse entry to travelers from the U.K. The EU is expected to issue a union-wide travel ban soon. It is frankly unlikely that this will contain the spread of the new strain, which has already been detected in Italy. It is not unreasonable to think that the travel ban has less to do with stopping the spread than it does with politics. More specifically, the ongoing trade negotiations between the U.K. and the EU.

What does any of this have to do with these negotiations? What we have to understand is that a “no deal” Brexit, in which the U.K. leaves the transition period with no trade deal in place with the EU, was always going to be bad for the British economy, at least in the short term. There is a risk that the new border controls that will be imposed as freedom of trade and movement ends will mean significant delays and perhaps shortages of imported food. 

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  1. Mads Lindstrøm

    And for those who would like a history lesson, the greatest political sitcom, well, the greatest sitcom ever made has the answer to why UK joined the European Union https://www.youtube.com/watch?v=ZVYqB0uTKlE

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  2. Mads Lindstrøm

    If UK successfully leaves the EU, then it will lead to a big boost within other EU member states to leave the EU. Successful both in terms of being economically successful (or at least not unsuccesful) and gaining real political independence. Obviously, the EU do not want other member states to leave, and thus have two good outcomes 1) getting UK to make a deal that requires them to implement most or all EU regulations without having a vote in how those rules are made or 2) hoping the UK will suffer economically to scare of other wood-be leavers.

    Granted, this is just one motivation among many for EU and individual member states tries to effect the process with their individual interests. However, there is real concern whether the union can hold together long term and the fate of UK will influence that.

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      John Gustavsson @Nationstatist

      Yes, I agree. In case I haven't been clear about this, I do support Brexit, and I think a lot of this is about vindictiveness on the side of the EU.

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  3. Tim Johnson

    Sure, you might have disruptions in food and medicine, but you need to balance that with the warm fuzzy feelings of claiming 'Independence!' from those European bureaucrats.

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      John Gustavsson @Nationstatist

      Interestingly, I have a piece coming up about why the UK is right to leave the EU, so stay tuned.

      Just out of curiosity, would you accept the US (I assume you are American) giving up its independence in exchange for a boost in GDP?

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        Rajeev

        In a way I think the difference is the UK was already part of the EU. But I think Puerto Rico while more analogous to a Cyprus, is a great example of this train of thought. There were significant parts of the population that wanted independence, wanted to remain a territory and wanted to join as a state. All three factions have resulted in the territory status quo.

        But now I think Puerto Rican’s are moving toward desiring statehood because while it would force more obligations to follow other states, it would benefit them economically to be part of a diverse nation.

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      Jonathan Crymes

      Brexit was sold by supporters as “the single most important issue in the western world” and that the world would “find out if a nation is truly able to govern itself.” And yet all this headache was predicted by opponents and it frankly seems to me that the UK sold itself on a philosophically high-minded tanked economy.

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  4. Brett

    I found the political punditry interesting, thanks, but I don't understand the connection being drawn between Brexit and the pandemic. If UK was still fully in the EU what would be different? It would still be prudent, wouldn't it, to lock down travel in this way? Or maybe it wouldn't be prudent, but I don't see how it would help matters if UK could force free travel of its people on an unwilling French (say) populace. Had Brexit never happened I would think the last few days would look more or less the same vis a vis travel etc.

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      John Gustavsson @Nationstatist

      Thanks for your comment! Let me clarify: The UK ambition is to be "Global Britain" after properly leaving the EU. It is very difficult to be global Britain if most big countries around the globe won't even let your people in. This creates delays in restructuring the British economy away from Europe, and towards the world. The additional downturn in Q1 from the extended and more severe lockdowns also make the overall pain worse.

      In the long run, this might not matter to much, but there are political considerations here. A crash landing in Q1, after the horrible year that 2020 has been, would end Boris Johnson's premiership. Thus, a deal is now more likely.

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        Rajeev

        Thanks for your informative article! I think one lesson future countries could learn from the UK is that a little goodwill can go a long way.

        When Brexit occurred it came about so quickly with an overwhelming number of citizens not really knowing enough about it. They certainly affirmed it in the future when they supported it again; however, the rhetoric toward the EU in the initial push seemed to leave a bad taste in countries like Germany that had made some sacrifices in recent years prior to the vote.

        So it’s not surprising that the EU is kind of quietly out for blood. Hopefully the deal will be amicable but at this point the EU could easily try and strongarm the UK leading to a lose-lose situation for both sides.

        I think prior to Covid-19 the UK felt like from their perspective no deal would hurt the EU more; however, now it seems like the UK probably realizes a no deal Brexit could be catastrophic in the short term.

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    2. Mads Lindstrøm

      The new UK coronavirus strain restricts trade due to border restrictions. No deal Brexit restricts trade. That is the connection.

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    3. Very Old Grumpy Guy

      I also interpret this lock down as a dress rehearsal for a no deal Brexit. It is all well and good to vote for "independence" in the abstract, without having to consider the negative effects of restricting trade. Still, Brexit won the vote. We will all watch with interest how it turns out.

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      Jonathan Crymes

      I think the author is claiming that the economic damage caused by the pandemic will make it even more difficult for UK to manage the economic disruptions inherent to a “no deal” Brexit from the EU.

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