ASSESSMENTS

The Scramble to Secure EU-U.K. Trade Ties Amid COVID-19

Apr 29, 2020 | 10:00 GMT

A pro-Brexit banner is seen outside the Houses of Parliament in London on Oct. 30. 2019.

A pro-Brexit banner is seen outside the Houses of Parliament in London on Oct. 30. 2019.

(TOLGA AKMEN/AFP via Getty Images)

Highlights

  • The COVID-19 pandemic has severely delayed free trade agreement negotiations between the European Union and the United Kingdom.
  • This, combined with logistical and political obstacles, has made it unlikely that the two sides will reach a comprehensive trade deal before Britain's scheduled departure from the EU single market on Jan. 1. 
  • London and Brussels, however, will still seek to avoid a "no-deal" U.K. exit from the single market, which would worsen the economic fallout from COVID-19.
  • This will increase the likelihood of a limited trade deal covering goods and a few services by the end of the year, or an extension of the United Kingdom's membership in the single market into 2021.

Time is running out for the European Union and the United Kingdom to reach a free trade agreement before Britain's scheduled exit from the EU single market on Jan. 1, 2021. The second round of negotiations, which ended on April 24, failed to produce significant progress. This leaves only two more rounds of scheduled talks before London has to decide whether to extend its participation in the single market in late June, lest risk having to trade with the European Union under costly World Trade Organization (WTO) tariffs starting next year. As both sides reckon with the economic fallout from the COVID-19 crisis, a limited trade agreement that preserves the status quo of U.K.-EU trade relations as much as possible, or an extension of London's membership in the single market, will become increasingly likely in order to avoid a disruptive "hard" exit that neither Brussels nor Britain can afford. ...

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