Discussions between the UK and EU have reached the point of farce, with both sides talking at each other instead of to each other.
Based on what has been said so far, any chance of reaching a deal on a future trading relationship that keeps most of what is already in place seems remote.
COVID-19 is preoccupying national governments to almost the exclusion of all else in the battle to manage public health, but the EU isn’t directly involved and has a dedicated team to focus on nothing else but the future trading relationship.
The EU had also clearly held the upper hand in the first phase of negotiations on the withdrawal agreement, very much due to the wide division in the UK government of the time.
This has changed, with the UK general election giving a clear endorsement to the Boris Johnson Brexit policy and COVID-19 has exposed divisions between EU member states that the UK will seek to exploit in the negotiation.
Farmer angle
The problem for farmers on the island of Ireland is that this battle of political wills has potentially devastating implications for agriculture more than any other sector of the economy.
The UK is Ireland’s main trading partner for agricultural products and there is no alternative, especially for beef.
For Northern Ireland, the withdrawal agreement has made provision for uninterrupted trading on the island of Ireland, but even the part that was considered closed is in some doubt.
The joint EU-UK management committee is due to meet again this week, but friction is already evident around the issue of EU inspectors being facilitated and commencement of work at access points to Northern Ireland from the UK to facilitate inspections.
If this part of the agreement were to unravel, the entire issue of trade across the border on the island of Ireland comes into play again, impacting almost half of NI lamb sales and one third of milk sales.
WTO option
If discussions on a future trading relationship fail and the UK doesn’t use the option to extend the transition arrangement, then from 1 January 2021, trade will take place on WTO terms.
This involves substantial inspections and tariffs which would greatly frustrate trade, especially for agricultural produce. Imposition of full WTO tariffs would price Irish beef out of the UK market and British lamb out of the EU market.
The UK could adopt a low- or zero-tariff approach, but this would devalue the UK market for both British and Irish farmers, as it would be extremely attractive to South American exporters, where cattle prices are making the equivalent of €2.50/kg.
End game
Of course, it needn’t come to this and it will be financially disastrous if it does, in addition to the economic cost of COVID-19 that applies in both the UK and EU27.
The withdrawal agreement itself was signed off at the last minute and there is no reason why diplomatic language cannot be stretched to give the UK the sovereign recognition it requires with them discretely remaining closely aligned with the EU on standards and trading practices.
It is very much in farmers' interests everywhere in the UK and Ireland that they do.
Brexit: UK still need to ‘iron out’ NI border trade specifics – Gove