The last-gasp Brexit deal negotiations, explained

Prime Minister Boris Johnson has warned of a “strong possibility” the UK will leave without a deal. But talks will go through Sunday, at least.

The Brexit deal talks will live to see another few days. Until Sunday, at least.

The European Union and the United Kingdom are trying — and failing — to come up with a deal on their future relationship before the December 31 deadline. And, on Wednesday, British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen had a marathon dinner in Brussels to try to salvage the Brexit negotiations.

As von der Leyen put it in a statement, she and Johnson had a “lively and interesting discussion on the state of play. We gained a clear understanding of each other’s positions. They remain far apart.”

A statement from the prime minister’s office called the discussion “frank.” “They acknowledged that the situation remained very difficult and there were still major differences between the two sides,” the statement said.

So the two leaders didn’t exactly get a breakthrough. The only thing they seemed to agree on was that, well, the EU and the UK just don’t seem to agree.

But they’ll give it another try, engaging in discussions through the weekend. After which they’ll either make a deal, or likely decide to walk away and prepare for no deal when the Brexit transition period ends on December 31.

The United Kingdom and the European Union have been trying for the last 11 months to negotiate an agreement that will define their future partnership after the UK formally left the bloc in January. But both sides remain stuck on major points — fishing rights, guaranteeing a “level playing field” on government subsidies and regulations, and how to enforce any deal — with very, very little time before the year-end deadline.

Getting a deal is in the interests of both sides, but reaching, ratifying, and implementing any deal in three weeks is going to be a challenge — and might not be feasible at this late stage.

But without any framework, the EU and the UK could face major disruptions in January on everything from trade to transport. It will be painful for both sides, but the UK, now all alone, is expected to feel that fallout more acutely, which will pile on to economic hurt brought on by the pandemic.

What’s holding up this Brexit deal

The United Kingdom formally left the European Union in January 2020, but it entered into an 11-month transition period in which it continued to follow EU rules.

The point of the transition period was to give the EU and the UK time to figure out their post-breakup relationship. The two sides need to come up with a trade arrangement, but they also have to deal with a slew of other issues, from fishing to security cooperation.

Those negotiations have dragged on for months, held up by three main issues: fisheries, governance, and state aid and regulations, or the so-called level playing field.

The fisheries issue is a relatively minor economic question for both the UK and the EU, but it’s taken on an outsize role in the debate. It accounts for a very small percentage of the UK economy — as the New York Times reported, Harrods department store contributes more annually to the UK economy — but it’s a politically important industry, and it’s symbolically tied to the Brexit ideal of reclaiming sovereignty, including over UK waters.

But the UK doesn’t take all the blame for this. Fishing is also a politically important and symbolic industry in some EU member states that want to retain access to UK waters. France wants to keep the current arrangements, and French President Emmanuel Macron has insisted that he will not sacrifice France’s fishing industry in any deal.

Governance is also an issue, which is basically how any deal will be enforced and what penalties — like additional tariffs on certain goods — will exist if one party breaks the terms of any agreement.

This is a particularly sensitive subject for the European Union, which is afraid the UK won’t live up to its commitments. The Brexit negotiations have soured trust between the two, made worse after the UK introduced a bill that would have violated parts of the Brexit deal Johnson reached with the EU last year.

That legislation, known as the Internal Market Bill, returned to Parliament on Monday, where members of Parliament re-added some clauses that would have breached the protocol around Northern Ireland. However, the UK extended something of an olive branch, with the government saying it will take out those provisions if the EU can address the UK’s concerns, and the two get a deal.

And then there’s the issue of state aid, often framed as the level playing field arrangements. The EU is insisting that if the UK wants tariff-free access to its single market, it can’t try to undercut the EU by subsidizing industries or businesses; the EU also wants to guard against the UK diverging on environmental standards or labor protections post-Brexit.

But the UK sees this as the EU trying to get it to follow the rules of the club it just left. Brexit was supposed to give the UK the power to reclaim its sovereignty and reestablish its own trading regime, so the UK has bristled at these demands.

This is basically where the two sides have been for months, entrenched on these same issues, with each side accusing the other of being inflexible. “The problem is that both sides want the other to blink first. That’s the root of the problem,” Anand Menon, director of the UK in a Changing Europe, told me earlier this week.

What are the prospects for a no-deal?

Sunday is the latest do-or-die date, but these kinds of self-imposed deadlines have been broken before. Both the EU and the UK could end up talking until the ultimate last moment.

But that’s a lot harder to do in this final stage of Brexit. If a deal is reached, both the European Parliament and the UK Parliament must ratify it, and the terms of the deal need to be implemented — something that is going to be very difficult to do on such a short timeline. And the relationship is changing, deal or no deal. For example, goods traveling between the EU and UK will now face customs checks and taxes.

Yet if the UK and EU don’t reach a deal, things are going to get really, really messy. All the trade and regulatory arrangements the UK was following will cease, and tariffs and quotas will kick in.

Checks and controls could create massive gridlock at ports of entry, which could lead to food and medicine shortages. Planes could be grounded. The pandemic drained some of the no-deal stockpiles the British government had built up, which it’s trying to replenish. The British government has warned of possible civil unrest. And all of this will be piled upon the economic hardships that stem from Covid-related lockdowns.

With this in mind, the European Commission put forward no-deal contingency plans on Thursday — basically a series of short-term, six-month arrangements that would soften the disruptions on January 1, including on aviation and road travel.

They would also allow for reciprocal access to waters for fishing until the end of 2021, or until the UK and EU can reach a deal on fisheries. The EU is making the offer dependent on the UK agreeing to maintain the same standards and regulations — a.k.a. the so-called level-playing field — which is likely to face opposition in the UK, especially among strong Brexit supporters.

The contingency plans presented by the EU may offer a bit of an off-ramp to the worst-case scenario. But only if the UK gets on board, which it hasn’t yet.

Meanwhile, Johnson said Thursday it was a “strong possibility” that the UK would leave without a deal, and he urged the public and businesses to prepare for an “Australian option,” which is the current euphemism for a no-deal crash-out on January 1.

The exact scenario the UK and the EU are facing now is the one they desperately wanted to avoid. And whether they can actually avoid it may have a lot to do with the internal politics in the EU, but especially the UK.

Johnson is under pressure at home over his handling of Covid-19, and he’s facing a rebellion within his own Conservative Party, primarily over Covid-19 restrictions. That right flank of his party is also ardently pro-Brexit — the very same people who don’t want to see the UK concede to the EU and are, at least rhetorically, willing to risk the costs of no deal.

If Johnson is seen as caving to the EU, he may face pressure from these Brexiteers, and so his toughness serves a political purpose. The question is, will he take the brinkmanship to the last possible moment, only to reach a deal and claim victory — or will he see the politics of being able to blame the EU if negotiations feel more politically palatable, at least in the short term.

The EU has its own internal politics to consider, and it may now see the best option as pushing forward these short-term contingency plans and regrouping in 2021. And if that’s the case, well, Brexit won’t really be over, again.