The eighth round of Brexit trade talks started last week with tension escalating to a whole new level. Last Wednesday, Prime Minister Boris Johnson and his government published the Internal Market Bill, a legislation aiming at overriding part of the Northern Ireland Protocol that is included in the Brexit Withdrawal Agreement in an event whereby no trade deal is struck between the UK and the EU.

After the end of the Brexit transition phase on 31 December 2020, the UK will leave the EU’s single market and customs union. However, the Northern Ireland Protocol allows Northern Ireland to continue trading under EU’s trading rules, preventing a hard border between Northern Ireland and the Republic of Ireland, thus allowing goods to move freely between both countries without having to go through any checks. On the other hand, goods moving from Northern Ireland to the UK will be subjected to customs declarations and new checks, vice-versa. In a scenario whereby the Internal Market Bill becomes law, it will allow the UK to amend or disregard the rules on goods moving between the UK and Northern Ireland.

However, three of the UK government’s top legal advisers warned that the Internal Market Bill will constitute to a breach of the Withdrawal Agreement and international law. One day after the bill was published, European Commission Vice-President Maroš Šefčovič called for an extraordinary meeting of the EU-UK Joint Committee in request to understand the UK government’s motivation behind this bill. During the meeting, the Vice-President emphasized that the timely and full implementation of the Brexit Withdrawal Agreement including the Northern Ireland Protocol is a legal obligation that if failed to be carried out, will damage the trust and risk future relationship negotiations between the two countries. He also warned the UK government that the EU will not hesitate to carry out the legal remedies stated in the Withdrawal Agreement in an event of a violation of the legal obligations.

To make matter worse, Prime Minister Johnson emphasized that if no trade deal is finalized between the UK and the EU by 15 October, the UK will accept the fact and move on. This means that both countries will be trading on World Trade Organization (WTO) terms starting from January 2021. Trading on WTO terms will lead to costly tariffs and border checks between both countries. The possibility of a no-deal Brexit outcome has conjured many to speculate the potential adoption of negative interest rate by the Bank of England, causing the British pound to take a nosedive last week. The Internal Market Bill will be tabled in Parliament this week. If the bill gets passed by Parliament, we may be up for another week of pound weakness.

(This article was originally published on Samtrade Academy on 14 September 2020)

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By Jin Dao Tai

JinDao Tai is an Entrepreneur, Award-Winning Forex Coach & Trainer, International Speaker and Multi-Million Dollar Trader. Starting out his career as an economic & financial consultant in Australia, one day he decided to change his life and pivoted into multiple entrepreneurship endeavours and eventually into managing a multi-million dollar portfolio.

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