These Are the Big Brexit Battles Ahead 
The U.K. imported almost 1.5 million autos made by German, French and Italian-owned brands in 2018. (Photographer: Balint Porneczi/Bloomberg)

These Are the Big Brexit Battles Ahead 

(Bloomberg) --

As Brexit enters its final phase, the European Union is preparing to navigate the most complex negotiation in its history: its future relationship with Britain.

It promises to be an even bigger and more complicated fight than the political skirmishes over the U.K.’s decision to leave, with everything from trade to security cooperation up for discussion. A deal will require the approval of the remaining 27 members of the bloc -- and all have their own different national interests at stake.

U.K. Prime Minister Boris Johnson has made the path to an agreement even more difficult by pledging to use Brexit as an opportunity to break from what he claims are stifling EU rules. His decision to leave himself only 11 months to reach an accord is being taken in European capitals as a sign he intends to seek only a limited agreement with the EU.

“We will now have a competitor at our front door,” German Chancellor Angela Merkel said last week. “A competitor who will strive to show what it has in front of our door.”

These Are the Big Brexit Battles Ahead 

Most EU members insist they share a common agenda in the looming negotiations. They want to form a zero-tariff, zero-quota trade relationship; protect the integrity of the single market; and defend regulatory standards that ensure a level playing field. But all countries have their own individual red lines. Here’s a guide to some of the likely flashpoints, based on interviews with officials in capitals across the EU.

Sequencing

On the surface, the EU appears to have the upper hand in any negotiations given the advantages that come from access to the bloc’s gigantic single market. Then there’s the fact the Britain will need to reach agreement with the bloc on topics that extend far beyond trade -- security co-operation and aviation rules, for example.

“All this needs to be coordinated so that we maximize our negotiating leverage,” Sabine Weyand, the commission’s director general for trade, said this week.

But Johnson’s abbreviated time-line might put the bloc’s all-or-nothing strategy at risk. If there isn’t enough runway to negotiate all the topics simultaneously, the EU would be forced to choose which issues to prioritize, something that would inevitably upset some member states.

“Time is very short,” European Commission President Ursula von der Leyen said this month. “We’ll put specific focus on those issues that are an economic cliff-edge at the end of 2020 if they would not be done,” she said. “These are issues where we have neither an international framework to fall back on nor the possibility to take unilateral contingency measures.”

Even if the timetable is tight, each EU member state will want to defend their own industrial interests.

Automobiles

Officials in Germany, Poland, Austria, Romania, and the Czech Republic all singled out cars and auto parts as one of their most important sectors that need to be protected.

These Are the Big Brexit Battles Ahead 

The U.K. imported almost 1.5 million autos made by German, French and Italian-owned brands from the continent in 2018, worth a total estimated sales value of 35 billion euros ($39 billion), according to Bloomberg Intelligence. Some of Munich-based BMW AG’s production is based in Britain. Any customs barriers would affect the industry’s complicated global supply chains.

Agriculture

This was highlighted by France, Italy, Denmark and Latvia.

Agriculture is so fundamental to the U.K.-EU trading relationship, it’s difficult to imagine it wouldn’t be included in the deal. The question is how detailed an agreement can be struck in a matter of months.

Today, EU member states enjoy free access to British agricultural markets, something they will want to continue -- but not at any cost. If the U.K. lowers its food safety standards to attract trade from other countries, in particular the U.S., a deal between the U.K. and the EU will be complicated.

Fisheries

This is a major concern for Ireland, the Netherlands, France and Spain.

France has already made access to British waters after Brexit a key demand. But the U.K. government has vowed to leave the EU’s Common Fisheries Policy and to protect its own fishing industry by reasserting control over territorial waters.

Gibraltar

That the rocky outcrop at the western entrance to the Mediterranean has belonged to Britain has been sore for Spain for more than three centuries. While Madrid only has a temporary government at present, any successor may seek to use the outpost’s anomalous status as a bargaining chip in trade negotiations with the U.K.

Ireland

Ireland has special sensitivities when it comes to Brexit. It is the only EU member to share a land border with the U.K., and about 1 billion euros of trade is carried out between the two every week.

The Withdrawal Agreement allows for an uneasy fudge that will avoid any reappearance of the physical border that has scarred the island -- but a comprehensive trade deal would help to render that messy compromise obsolete.

Security

In an increasingly uncertain geopolitical environment marked by cyber-attacks and terrorism, both sides have indicated they intend to cooperate closely. As a military power with extensive intelligence capabilities, the U.K. has leverage in this area.

©2019 Bloomberg L.P.

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