With reports that European Union has begun legal proceedings against the UK over the Internal Markets Bill, Professor Abhinay Muthoo of the University of Warwick Department of Economics has commented on the impact this is likely to have on the ongoing trade talks as they approach their deadline.

Professor Muthoo said: “The EU Commission President Ursula von der Leyen has this morning announced that the EU are sending a letter of ‘formal notice’ to the UK Government over its Internal Market Bill as some provisions in this Bill override parts of the Withdrawal Agreement that came into effect on 31st January 2020. This action by the EU is the start of legal action against the UK.

“The UK Government has been given one month to respond to the letter of formal notice. The UK Government insists these provisions are necessary if a trade deal is not secured with the EU by the end of this (transition) year.

“The trade talks between the EU and UK will however continue this month, and will, I am sure, intensify over the coming weeks, in order for the parties to try to secure a deal. If a deal is reached, then the expectation is that such a deal would also resolve the issues around the controversial provisions in the Internal Markets Bill.

“I expect that a trade deal will reached, but only at the 11th hour, a bit like what happened last year around this time over the EU divorce deal. Both parties are in a (trade) negotiation, but with a deadline (end of this year). And it is well-known, if a deal is reached, it will only be reached close to the deadline. This is the so-called “deadline effect”, observed in many others kinds of negotiations with deadlines. Both parties are likely to compromise, in the end. For much of this year, they have been playing a version of the game of chicken, in real time, waiting for the other side to make concessions first, and at the same time preparing for the possibility of a no-deal outcome.”

1 October 2020

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Peter Thorley
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Email: peter.thorley@warwick.ac.uk

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