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European Union, U.K. brace for complicated trade talks after Brexit

Click to play video: 'Uncertainty remains for U.K. a day after Brexit' Uncertainty remains for U.K. a day after Brexit
WATCH: Uncertainty remains for U.K. a day after Brexit – Feb 1, 2020

If you thought the drawn-out battle over the U.K.’s departure from the European Union was painful, wait until you see what comes next.

While Britain formally left the EU at 11 p.m. local time Friday, the hard work of building a new economic relationship between the bloc and its ex-member has just begun. There are difficult negotiations ahead as the U.K. goes its own way while trying to preserve links with its biggest trading partner, covering everything from tariffs and product standards to British industry’s ability to recruit foreign workers and the EU’s access to U.K. fishing grounds.

READ MORE: Brexit is final — U.K. formally leaves EU 3 years after referendum

“There’s a massive agenda to be agreed: trade in goods, trade in services, data protection, security cooperation, aviation, road haulage, fishing, you know the list is endless,″ said Jill Rutter, a senior research fellow at U.K. in a Changing Europe, a think tank that studies Britain’s relations with the now 27-nation bloc. “It is unprecedented.″

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For now, little has changed. The two sides agreed on a transition period that keeps current rules and regulations in effect until Dec. 31. But that gives the U.K. government just 11 months to negotiate a comprehensive trade deal that could decide the prospects of British businesses for decades to come. The EU accounted for 54 per cent of Britain’s imports and 43  per cent of its exports in 2016, according to the Office for National Statistics.

Click to play video: 'Mixed emotions on UK’s final day in the European Union' Mixed emotions on UK’s final day in the European Union
Mixed emotions on UK’s final day in the European Union – Jan 31, 2020

French President Emmanuel Macron published a letter on his Facebook page Saturday morning in English, addressed to his “dear British friends,” that sought a conciliatory tone.

“Never has France or the French people – or, I think it is fair to say, any European people – been driven by a desire for revenge or punishment,” he said.

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Hours after Britain officially departed, a group of 17 members of the now diminished EU bloc sent a message that the union will remain strong despite losing one of its largest members.

READ MORE: EU Parliament approves Brexit agreement days before deadline

“It’s the first day the European Union is with 27 member states, and in this moment of division, it is important to send a message of cohesion,” Portuguese Prime Minister Antonio Costa said Saturday.

Costa spoke before a meeting of the Friends of Cohesion, a group of member states from southern and eastern Europe interested in maintaining the EU funding that helps redistribute wealth in Europe.

Click to play video: 'Boris Johnson says U.K. departure from EU is ‘new act’ for country' Boris Johnson says U.K. departure from EU is ‘new act’ for country
Boris Johnson says U.K. departure from EU is ‘new act’ for country – Jan 31, 2020

With challenging trade talks expected to begin fairly quickly, British Industry groups are already lining up to protect their interests.

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Hotel and restaurant owners say they need to maintain the existing supply of workers from the continent to ensure rooms are cleaned and dinners are prepared. Car makers want to preserve prompt deliveries from European suppliers to avoid manufacturing delays.

Banks and insurance companies are lobbying to maintain access to the lucrative European market. And fishermen want to regain control of fishing grounds they believe have been plundered by European rivals for the past four decades.

Click to play video: '‘Mr Brexit’ Nigel Farage celebrates with supporters at Leave party as U.K. departs EU' ‘Mr Brexit’ Nigel Farage celebrates with supporters at Leave party as U.K. departs EU
‘Mr Brexit’ Nigel Farage celebrates with supporters at Leave party as U.K. departs EU – Jan 31, 2020

If that wasn’t enough for Prime Minister Boris Johnson and his ministers, the British government also is keen to negotiate separate trade deals with individual countries now that the country has broken away from the EU. Johnson’s top trade prize outside the EU is the United States, the world’s biggest economy.

But the Americans have already made difficult demands. Secretary of State Mike Pompeo was in London last week warning of security concerns linked to Chinese telecoms giant Huawei and pressuring British officials to overturn their decision to let the company take part in upgrading the country’s wireless network.

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READ MORE: Brexit day — Boris Johnson touts ‘new beginning’ on last day as EU member

Reconciling all these demands will be difficult because any attempt to meet U.S. demands by lowering British standards will push Britain further away from European rules. The EU has already made clear that the price of access to its markets is continued adherence to the bloc’s regulations.

Speaking to reporters on Friday, Canadian Prime Minister Justin Trudeau said his government is “very confident” there will be minimal disruptions related to trade, investment and other ties with the U.K. following Brexit.

“We have been engaged with the United Kingdom over the past few years, working on that transition plan, to make sure the very important trade numbers between Canada and the [U.K.] are not disrupted at all,” Trudeau told reporters on Friday.

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In a tweet posted Saturday morning, Canada’s Foreign Affairs minister Francois-Philippe Champagne said as a “friend, partner and ally” of the U.K., Canada “looks forward to continuing to work closely in support of the rules-based international order.”

Even the most difficult issue settled during the first round of negotiations between the EU and the British government — the knotty question of Northern Ireland — remains problematic.

READ MORE: Brexit is official. Here’s what happens next

In an effort to protect the peace process in Northern Ireland and finally win approval for his EU withdrawal deal, Johnson agreed that Northern Ireland would keep the same rules as the bloc’s single market for goods after Brexit.

As a result, customs checks won’t be needed on the border between Northern Ireland, which is part of the U.K., and the Republic of Ireland. Instead, some checks will have to be conducted on goods that enter Northern Ireland from the rest of the U.K. that are destined for the EU

Click to play video: 'U.K. celebrates in London as the clock hits Brexit hour for leaving the EU' U.K. celebrates in London as the clock hits Brexit hour for leaving the EU
U.K. celebrates in London as the clock hits Brexit hour for leaving the EU – Jan 31, 2020

This essentially means that Johnson agreed to place a trade border in the Irish Sea — upsetting many of his own allies because it treats Northern Ireland differently to other parts of the United Kingdom. Unionists who want to remain part of the U.K. fear the deal will push Northern Ireland closer to the Irish Republic over time.

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Meanwhile, Brexit is already reshaping the economy and workers from the EU have started to vote with their feet.

Click to play video: 'Brexit: U.K. union jack flag removed from European Council' Brexit: U.K. union jack flag removed from European Council
Brexit: U.K. union jack flag removed from European Council – Jan 31, 2020

London Mayor Sadiq Khan said last week that fewer EU citizens are coming to work in the city these days, and too many are leaving, causing employment shortages in industries like construction, hospitality and social care.

At a small gathering of reporters, he repeatedly stressed his dismay at the turn of events and insisted that London was a global city that welcomed EU citizens.

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