Post-Brexit Deal Reached: Hooray for the Fish

The Financial Times reports Britain and EU Poised to Announce Christmas Eve Brexit Deal.

Fish remained the final stumbling block yet the total amount of harvested fish amounts to only €650 million ($790 million) annually.

Christmas Eve Announcement Expected 

Bloomberg reports U.K., EU Set to Announce Brexit Trade Deal After Compromise.

One EU diplomat said the U.K. had made concessions on fisheries in recent hours that had unlocked the deal. According to two people familiar with the matter, Johnson has accepted that the bloc’s share of the catch in U.K. waters should fall by 25% over a period of five-and-a-half years. Britain had initially sought an 80% reduction over just three years, but in recent days had offered a cut of 30%.

The bloc had refused to accept a reduction of more than 25% in the value of fish caught, saying even that was hard for countries like France and Denmark to accept, according to officials with knowledge of the discussions.

This would be phased in over five and a half years. The U.K. previously offered three years while the EU were pushing for 10.

The EU also wants to be able to impose tariffs on the U.K. if, after the fisheries transition period, the government restricts access to its waters. In its latest compromise offer, the U.K. said it would accept tariffs on fisheries but not in other areas, such as on energy, as demanded by the bloc.

Fish Are Cheering

The fish are cheering. The EU will catch 25% less of them phased in over 5.5 years.

Hooray!

Unfair Competition

The other major stumbling block was a huge dispute over alleged “unfair competition”.

There is no word yet on how that was solved but I expect Johnson did not sell the farm. By that I mean the UK will not be at the mercy of the European Court of Justice.

There will of course be some other arbitration mechanism. As long as Johnson avoided the ECJ trap, the deal will be very minimal but also fair.

Win-Win Setup

The deal also includes tariff-free electric car manufacturing.

That component seems to benefit the UK the most, as the deal allows parts to come from outside EU.

In the final analysis, all trade deals are a win-win setup. If they aren’t perceived that way, there is no deal.

Rush is On 

Johnson will have to hold an emergency session of Parliament and the EU will have to bend some rules as there is no time for it to vote this year.

This final outcome was easily predictable as was the length of time it took to reach it.

As I said way back in January, then again in June, October, and November: Everything in the EU happens at the last minute if not much later.

December 9 Flashback

A Post-Brexit Trade Deal Now Looks Likely

The New York Times reports Boris Johnson Fails to Break Brexit Deadlock in Brussels Talks

The above story is mostly rear view silliness. A key breakthrough happened yesterday when out of the blue Boris Johnson dropped a threat to break the Withdrawal Agreement.

Bluffs Cancelled

Earlier this year, the EU demanded complete fishing rights and for the UK to agree to a level playing field as decided by the European Court of Justice.

Boris Johnson responded with a bluff of his own, to break the Withdrawal Agreement in regards to Ireland.

What I Expect

1. Johnson will offer some fish tails.
2. The EU will demand the whole fish.
3. Johnson will offer fish heads and tails and if necessary, fish livers.
4. Nigel Farage will complain no matter what part of the fish the EU gets.

Since a deal makes sense for both sides, it is far more likely than not there will be a deal. But please note that it’s only December 9.

There is plenty of time for more threats and more bluffs before a deal is reached.

Even then it will not be the “final deal”. It will be a bare bones WTO agreement of some sort with provisions to haggle for years to come.

Will Anyone Be happy?

• The hard Brexiteers will not want to give France a single fish.
• Nigel Farage is certain to howl.
• The Remainers would gladly give France two-thirds of the fish and subject themselves to the ECJ as well just for the privilege of being back in the EU’s clutches.
• In the EU, France fell way short of what it wanted and Spain did not get Gibraltar.

Few will be happy with this. Relieved yes, happy no. And that will make this a fair deal.

Pending a review of the arbitration mechanism, Boris Johnson did as well as he could have.

Yes the EU got more fish than the UK wanted to give, but look at the massive concession the UK got on cars. That was worth how many times more?

Deal Comparison

Please note the entire Brexit Trade deal was 1000 pages long vs the 5593 page Covid-Budget deal in the US.

— Mike "Mish" Shedlock (@MishGEA) December 24, 2020

Final Thoughts

A good trade deal could fit on a napkin. Both sides would abolish all tariffs, fees, duties, etc.

But this was the best that could realistically be expected.

Mish