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Brexit: Running the Clock Down

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Brexit: Running the Clock Down

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On Monday, the Brexit negotiations entered a two-week, supposedly intensive, supposedly very hush-hush phase intended to achieve significant progress. That’s because the gaps between the UK and EU positions are so large that any thing other that a very bare-bones deal would require serious horse-trading.

However, pretty much everyone except readers of the UK press realizes that the odds are close to nil of anything more than such a minimal agreement that it would be functionally only a bit better than a crashout. No well informed commentator expects the UK to escape having hard borders with the EU, which in turn creates what economists like to call “non-tariff trade barriers” which can really gum up the works.

Remember that participants in talks have strong incentives to play up the notion that the parties are making progress, since a sense of momentum can lead to progress. However, despite some cheery spin, the more substantive accounts underscore that large gaps on fundamental issues like “level playing field” remain. And worse, a new story from the well-connected Tony Connelly of RTE indicates that the differences on another core issue, fishing rights, are if anything widening.

However, the UK would be able to claim something of a victory if it at least got to a “no tariffs” agreement. Consider some of the alternatives, per Automotive News:

Toyota and Nissan will ask for reimbursement from Britain if the UK government fails to agree on a trade deal with the European Union, the Nikkei financial daily reported on Monday.

The Japanese automakers are bracing for a 10 percent tariff on cars exported from the UK to the EU and are demanding that the government pay extra costs, the Nikkei reported on Monday.

British Prime Minister Boris Johnson said on Sunday that he did not particularly wish for a Brexit transition period to end without a new trade deal in place but that Britain could live with such an outcome….

Toyota builds the Corolla and the related Suzuki Swace compact cars at its plant in Burnaston, central England. It also produces engines at a factory in Wales.

Nissan operates Britain’s biggest car factory in Sunderland, northeast England. The plant’s production includes the Qashqai, Juke and Leaf. Honda also builds the Civic in Swindon, near London, but the company is closing the factory next year.

The plant would be “unsustainable” if Britain leaves the EU without a trade deal, Nissan said in June.

Europe and the UK’s car industries last month said a disorderly Brexit would cost the sector 110 billion euros ($130 billion) in lost trade over the next five years.

Now it is possible that our reading is unduly downbeat and the EU side has it right, that Boris Johnson will blink. With Brexit now polling as unpopular, one would think he could sell a softer deal to Parliament and quell a revolt by the Ultras, but I am not on top of the party split. Either way, expect more theatrics before year end.

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