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On January 1, 2021, the United Kingdom effectively leaves the European Union. While the deal reached on December 24 protects trade, France will still have to comply with new and more restrictive rules for its trade with the United Kingdom, which remains, to this day, one of its main trading partners. Analysis with Andreas Eisl, researcher specializing in European economics.
The European Union loses one of its member states on 1er January 2021 with the historic UK release. A divorce softened by obtaining a last minute deal, on December 24, 2020, allowing in particular to avoid the reintroduction of customs taxes and quotas for trade.
“European unity and steadfastness have paid off. The agreement with the United Kingdom is essential to protect our citizens, our fishermen, our producers, ”said Emmanuel Macron at the time.
For Paris, it was essential to protect trade. Besides being an economic partner in several key sectors such as aeronautics, automobiles and fishing, the United Kingdom is France’s largest trade surplus (12.5 billion euros in 2019). While the worst-case scenario seems to have been avoided, the impact of the new trade and cooperation rules on the Franco-British relationship remains to be determined. France 24 takes stock with Andreas Eisl, researcher specializing in European economic policy at the Jacques Delors Institute.
France exports to the UK more than it imports. The was the decision not to tax products essential for Paris?
Andreas Eisl : This is of course a crucial point, but it does not mean that trade will not be affected by Brexit. By leaving the single market, the UK is no longer required to apply European standards to the products it manufactures. But the products that the country exports to Europe must still meet these standards. This new rule implies more bureaucracy, due in particular to the controls of production chains, and French companies will have to assess the additional costs that these steps represent. However, the overall impact should be moderate as France’s economic dependence on the United Kingdom is less and it can turn to its other European partners.
30 % Of French fishing comes from British waters. What impact will this agreement have on hexagonal industry ?
Quotas on the different types of fish already exist for regulate fishing between British and Europeans in these areas. The agreement provides for a six-year transition period leading to a 25% cut in the EU’s quota. There will therefore be no economic shock but a long-term development. From 2026, the agreement provides for annual negotiations. However, the balance of power remains the same: the United Kingdom exports its fish on a massive scale to Europe and must make concessions in order not to see the reappearance of tariffs and quotas.
The aeronautical construction is the first hub of trade between France and the United Kingdom. Will Brexit weigh on French industry in this area?
It is true that there is particularly strong economic collaboration on this subject, but this is a particular area where politics play an important role. Aeronautics is one of the strategic sectors, such as transport and the automobile, which benefit from a specific agreement to preserve trade. But this industry is intrinsically linked to the military and, in this area, the impact of Brexit is more vague. The UK and France are the two biggest military powers in Europe. London is withdrawing from the EU and says it wants to regain its defense autonomy. This decision could push France, which defends the idea of a common defense for the bloc, to increase its military investments.
The Minister of the Economy Bruno Le Maire expects a limited economic impact for France (0.1% drop in GDP in 2021). Do you share this analysis?
Trade with the United Kingdom is favorable to France but overall, they represent only a small part of its foreign trade: 50 billion out of 500 billion.
As for the impact of Brexit on this 50 billion, the effect will have to be measured over time according to British decisions. It should be understood that Brexit is above all an ideological project based on a fantasized vision of sovereignty. Boris Johnson claims to want to regain more competitiveness but this is not possible since Europe, his main trading partner, demands that standards be maintained. He will now have to find a balance between ideology and economic reality.
For a country like France which has low growth, a loss of GDP, even 0.1%, is bound to be a problem. But given the scale of the health crisis we are going through, this loss seems almost marginal.