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18.10.2019 02:19 PM
GBP/USD. What has changed in the Brexit agreement?

Recent data from the EU summit suggest that Boris Johnson and Jean-Claude Juncker agreed on a "deal" on Brexit. However, for a long time, traders, and many politicians, did not know what exactly, in fact, the EU and Britain agreed on? The answer to this question is interesting even in the context of tomorrow's vote in the British Parliament on the "deal". In addition, although we already know now that representatives of at least three parties in Great Britain, DUP, Labor and Scottish, opposed Johnson's version of the agreement, we still offer to figure out how the current version of the agreement differs from Theresa May's agreement and which was rejected three times Parliament?

It can be recalled that the main stumbling block in the negotiations between London and Brussels was the so-called "back-stop" mechanism, which obliged Northern Ireland to remain in a single customs zone until the parties found a way to maintain the transparency of the border between Ireland and Northern Ireland. Accordingly, Belfast should continue to live according to the rules of the European Union, and Great Britain could not fully conduct its own trade policy.

The new version of the agreement provides that the EU and Britain will remain in their previous economic relations throughout the transition period, after which the Kingdom will begin to move slightly away from the Bloc, restoring full independence in the areas of migration and trade. With respect to Northern Ireland, a number of changes have been adopted regarding UK-EU trade, which will pass through the country, and the procedure for taxation. Also, after 4 years, it is the Parliament of Northern Ireland that will decide whether to keep the current rules for border transparency or to abandon them. In the second case, the EU and Great Britain will have to offer an alternative within two years. However, the current version of the Brexit agreement also has many shortcomings, on the basis of which many politicians have already refused to accept this agreement. The main reason is the same UK dependence on the European Union. The European Union, in turn, will be able to set duties on any goods, and the amount of VAT for Northern Ireland will not be established in accordance with the rules of the Kingdom. For residents of Northern Ireland, the cost of many goods can rise.

In fact, the new version of the agreement also provides for a certain dependence of Great Britain on the European Union through Northern Ireland. Yes, the borders will remain transparent, as London wants, but many EU rules will continue to operate in Northern Ireland, which does not give complete independence and freedom to action on the international stage of London. Based on these considerations - Brexit seems to be there, but the UK will remain dependent on the EU - three parties have already refused to accept the current agreement and the probability of the failure of the "Johnson deal" tomorrow is very high.

Paolo Greco,
Analytical expert of InstaForex
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