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With coronavirus hitting the economy hard, it would be understandable if the UK bought itself more time to negotiate a trade deal with the European Union. Brexit, in whatever form, could worsen the pandemic’s economic fallout and hinder the recovery of other European countries. But the UK wants to stick to the original deadline. It has not asked for an extension to the transition period, which would have allowed for another one or two-year window beyond December 31, 2020 to negotiate a new trade deal.
From the start of the Brexit negotiations, the EU has been committed to avoid the UK leaving the union without a trade deal, but thus far little progress has been made towards an agreement. Setting a hard deadline can be particularly useful if one party suspects that the other side will try to drag on the process of negotiating. So with six months to go, can we expect the UK and EU to be more decisive, and reach a compromise?
Quite why the UK is refusing to extend the deadline is a matter for speculation, given that there has so far been little progress in negotiations over a post-Brexit trade agreement. Prime minister Boris Johnson has said he wants a deal that gives the UK the best access to the European single market, without agreeing to a broad deal covering everything from security collaboration and data protection to aviation, fishing and farming, education and science. The UK’s cherry-picking approach, however, is off the table for the EU. Both sides will thus have to compromise in order to find some sort of resolution.
When it comes to that, having a hard deadline can reduce indecision. We have all been there. When there is no time limit, we mull over every little detail but when faced with a tight deadline, we have no choice but to make a quick decision. Psychologists who have researched deadlines have found that better task performance – or the completion of negotiations in the context of international politics and diplomacy – can, in part, be explained by the fact that individuals and groups become increasingly aware of the potential costs of a failure when a deadline is imminent.
“In the absence of a deadline or delay that is costly, there’s a temptation to hold out a little bit longer, or gather a little bit more information,” says Don Moore, a professor at Haas School of Business at UC Berkeley, who studies the psychology of confidence with a focus on decision-making and negotiations.
With the UK and EU now facing a deadline of December 31, the next six months could force more decisive action. But both negotiating teams may still be prepared to drag the negotiation out until closer to the deadline, banking on the opposite party to give in or compromise more. “Time is an important [element] in any negotiations, with both parties trying to keep their positions until the very end,” says Leila Simona Talani, a professor of international political economy at King’s College London. “However it is very likely, if not absolutely certain, that an agreement will be achieved by the deadline.”
A situation where an agreement is reached just before the clock strikes midnight, is the result of the so-called “deadline effect”. Sometimes the parties will stop the clock symbolically at midnight and continue negotiating well into the next day until a final deal is struck. This phenomenon is not uncommon in collective bargaining between employers and trade unions. However, it is unlikely the UK and EU negotiators will be shaking hands at 3am on New Year’s Day 2021. In practice, they will have to come to an agreement before December 31 so that the EU can seek approval from the individual member states and have time for the ratification process.
“People need to understand that this isn’t like a European Council meeting. This is a negotiation between the EU and a third country. Therefore, there is a limit to how many big-ticket items can be signed off at the last minute because the Commission will need to know that the member states are happy with the negotiation position,” says Philip Rycroft, who was the permanent secretary in the UK government’s Department for Exiting the EU and is now a specialist partner at business advisory firm Flint Global.
Even with an accord between the UK and EU, the final deadline won’t be final. This is because there are two types of deadlines: Self-imposed deadlines serve as guidance and can help avoid dithering. They might force action and better outcomes than if the parties wait until the very last minute to make a decision, yet, they are seldom as effective as externally-imposed deadlines. The latter deadlines are out of control and apply, for instance, to businesses that need to come to an agreement before a new regulation comes into force.
Although it is present in the withdrawal agreement, December 31 is in fact a self-imposed and somewhat artificial deadline. “The truth is that sovereigns like the United Kingdom or the EU have a lot of flexibility to keep talking, to negotiate, to revisit the terms of any agreement. That flexibility is a real weakness when it comes to trying to impose a deadline, because none of these imaginary dates that the EU is trying to impose are actually credible,” says Moore. If there is political will on the side of the UK and EU, they could still agree to extend the transition period at a later date – although this would require changes to the withdrawal agreement, a legal headache both parties will be keen to avoid.
With only six months left to negotiate a deal, the UK and EU will be focused on reaching an agreement on major issues, leaving some of the detail to work out at a later date. “Of course, when things have been sorted out, that’s not the end of the story because you’re then immediately in the management of the relationship and things will change constantly over time,” says Rycroft. The Irish border and trade deal will be just some of the aspects of that relationship that need to be maintained and potentially revised. “So there will be less high-profile but continuing negotiation connected to the UK and the Commission forever because that’s the nature of the relationship we will have,” he says.
Of course, there is the very distinct possibility that the UK is not declining an extension to focus the negotiators’ minds, but to end up with no trade deal at all by December 31. If that is the case, the economic fallout of the Covid-19 pandemic may have played a role in the UK’s decision, according to Moty Cristal, a former peace negotiator in Israel and now CEO of Nest, a consulting firm. “Nobody really knows how markets will behave and whether we will have a second wave [of coronavirus] or not,” he says.
Instead of being tied to existing EU rules – for instance on issues such as state aid – the UK could follow the default World Trade Organisation rules and work up new agreements with the EU in specific areas, giving it more freedom to use any tools to save its economy once the coronavirus pandemic settles.
“Everyone in negotiation thinks according to his or her logic,” says Cristal. “It might not be the logic of Brussels, it might not be that of the general public. When Johnson decides not to ask for an extension, there is a reason for that.”
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