If the UK and the EU cannot agree on a deal by December 31, the pair will default to WTO rules – an expensive scenario.
UK Prime Minister Boris Johnson is heading to Brussels for crisis talks with European Commission President Ursula von der Leyen aimed at unlocking stalled negotiations over a post-Brexit trade deal.
The pair’s meeting – set to be held at 18:00GMT on Wednesday, over dinner – comes amid growing fears of a chaotic no-deal finale to the five-year Brexit saga.
The United Kingdom leaves the European Union’s orbit on December 31; Britons voted to leave the bloc on June 23, 2016.
Tense talks between the two sides over a free trade agreement have hit a stumbling block in recent days due to continued division over three key issues – fishing rights, competition rules and the governance of any deal.
A no-deal outcome would likely result in an economic hit for both sides, major disruption at UK-EU border points and political acrimony.
Addressing the UK Parliament on Wednesday, hours before his meeting with von der Leyen, Johnson said a “good deal” was still “there to be done”.
However, he also told MPs the UK would “prosper mightily” under any circumstances and “seize all the opportunities Brexit brings”.
But main opposition Labour Party leader Keir Starmer accused Johnson, who won a landslide election victory a year ago on a pledge to “Get Brexit Done”, of “dithering between the deal we need and the compromise he knows his backbenchers won’t let him do”.
Brexit-supporting MPs in Johnson’s ruling Conservative Party have said he must ensure the UK remains sovereign, sets its own rules and keeps control of its rich fishing waters in the event any trade deal is signed with the EU.
“I genuinely hope this is the usual Prime Minister’s bluster … and that a deal arrives at the last minute,” said Starmer. “But for some people and their jobs, it is already too late.”
Britain’s Office for Budget Responsibility (OBR) has forecast a four-percent drop in national economic output in the long run as a result of the UK’s departure from the EU, even if a free-trade agreement is reached.
Failure to agree on such a deal would wipe an extra two per cent from the national gross domestic product (GDP), driving up inflation, unemployment and public borrowing, the body said earlier this month.
On the EU side, German Chancellor Angela Merkel dampened hopes of a swift end to post-Brexit negotiations on Wednesday.
Merkel told the German Parliament there was “still the chance of an agreement,” but stressed that the EU would not compromise on its core principles.
“One thing is clear: the integrity of the (EU’s) internal market must be preserved,” she said.
“If there are conditions from the British side which we cannot accept, we are prepared to go down a road which is without an exit agreement.”
Her comments came after Michael Gove, a senior minister in Johnson’s government dealing with Brexit issues, told the UK’s Times Radio the EU would have to compromise if it wanted a deal.
“The EU has to move,” he said.
The UK formally left the EU in January, but has since been in a transition period during which it remains in the EU single market and customs union, meaning that rules on trade, travel and business have stayed the same.
That all ends at the end of this year, and if by then there is no agreement the pair’s trading relationship will default to World Trade Organization (WTO) rules from the beginning of 2021.
WTO rules would see financial tariffs, quotas and other regulatory barriers come into play, potentially affecting hundreds of billions of pounds worth of annual trade between the UK and the EU.
Al Jazeera’s Neave Barker, reporting from London, said there still appeared to be “insurmountable problems that neither side can really get beyond”, with time to avoid such a no-deal scenario running out.
“We know that some big progress was made on Tuesday when it came to a separate deal over how trading would continue between Northern Ireland and the Republic of Ireland going forward,” he said. “But all the [other] sticking points haven’t gone away.”