The EU and UK perhaps should show more of their cards to break the negotiationg impasse, and forge an agreement by the end of 2020.
In February 2020, in making observations about the negotiations this year of the EU-UK trade agreement and other future relationship issues, Sherbhert discussed certain aspects of the Political Declaration (PD) which is the agreed framework housing the principles to underpin the negotiation details. (See https://sherbhert.com/eu-uk-future-relationship-building-the-bridge/ ). Two observations are worth repeating:
- The PD will no doubt be invoked, selectively, by both the EU and the UK to suit their respective standpoints.
- From the principles of the PD “Above all , it should be a relationship that will work in the interests of citizens of the Union and the United Kingdom, now and in the future.”
So how is this game of poker going?
THE PROGRESS OF TALKS – NO MOMENTUM AND ENTRENCHED POSITIONS
As to trade arrangements, the PD clearly contemplates a Free Trade Agreement (no tariffs, fees, charges, restrictions and so on).
However, it is now June, and talks have not progressed as productively as some might have, perhaps naively, hoped. Each party levels accusations at the other’s intransigence. Take for example “Fishing Rights”:
While EU countries’ boats fishing in what are UK waters is not a major economic issue in the scheme of things, it was always predicted to become a major sticking point, and so it remains. This is despite the fact that the PD expressly acknowledges that a separate new agreement on fishing rights should be put in place by 1 July 2020. However, the negotiating mandate handed, by the 27 member states, to Michel Barnier (MB) and the Commision was that the EU should in effect have the same rights as it currently enjoys as if effectively the UK had not left the EU. This has been described by MB himself as “ maximalist”; this is stated to be not negotiable so far. This position is contrary to the PD and so the UK accuses the EU of backsliding from the PD, stating that , unless this approach is modified, there will be no deal. On the other hand, take the requirement for “a level playing field”:
The PD is clear that the economic partnership is to be “underpinned by provisions ensuring a level playing field for open and fair competition” contemplated to include commitments on both sides to prevent distortions of trade and unfair competitive advantages. “To that end, the Parties should uphold the common high standards applicable in the Union and the UK at the end of the transition period in the areas of state aid, competition, social and employment standards, environment, climate change and relevant tax matters”. The EU, from the start of talks, has been interpreting the PD to mean that it requires the UK to commit to adhere to all regulations the EU may adopt from time to time in areas such as state aid and competition. The EU seems to want the UK to submit to the European Court of Justice and agree to abide by regulations over which it has no control : this clearly is not in the PD.
But the UK is at the other extreme, and seems not to be acknowledging the clear commitment to at least the current high standards which it has adopted already; it is accused by MB of taking one step forward and two or three steps back: that is UK backsliding. The UK has, it is understood, historically been guilty of considerably less state aid offences than say Germany or France. It would be odd if the UK intends to lower standards after 2020 and so surprising if a commitment of some sort were not possible. The UK is committed by the PD to giving reasonable undertakings to ensure a level playing field (as is the EU) and surely must do so.
Perhaps a way through on the level playing field is provided by the express approach to financial services in the PD: that is for both the EU and the UK to maintain equivalent frameworks in the relevant areas to be covered and keep them under review, with close cooperation.
THE COVID-19 CRISIS REVEALS MAJOR HOLES IN THE EU’s OWN LEVEL PLAYING FIELD PRINCIPLES
An Economist article of 30 May addresses the weakness in the state aid approach across the EU, which is to impose rigorous limits on state aid, except where the Commission grants exemptions. Because Covid-19 (CV) and the response to it have created a risk of economic disaster, the rule has in effect been suspended or abandoned as individual Governments in the EU prop up their stricken industries with massive subsidies. Apparently Euro 2 Trillion has been poured into saving businesses from collapse, and half of that amount is by Germany into its firms. That works fine for the rich countries of Europe but works totally against the poorer. When the going gets tough , the principles and standards go out of the window. Of course, in the UK , the UK Government (UKGOV) is committing huge sums to support UK businesses too, but it is not part of the European financial club. The Economist cites that “ France and Germany have repeatedly demanded competition rules be bent to allow the creation of “European Champions””. They also suggest that these state subsidies might be here to stay in Europe.
In any event, as regards EU regulations which MB and the EU say the UK must abide by, they are capable of waiver by the Commission. The EU cannot seriously be suggesting that before taking an action which could offend a regulation, UKGOV must first get that permission: that would be to deny the independence of law making which is a major point of the UK people deciding to leave the EU. The PD itself expressly reaffirms the sovereignty of the UK.
IS THERE ENOUGH TIME TO AGREE A TRADE AGREEMENT BY END 2020?
It is clear on the face of the PD that the parties committed to an agreement by the end of 2020. CV has thrown into the equation social and economic spanners: hopefully the additional challenges presented by CV would encourage the EU and UK to more urgently and sensibly make rapid progress; to reap the obvious benefits of an agreement, as opposed to trading on WTO terms and having to manage whatever other uncertainties within the future relationship are not resolved by then. If the parties are willing ,it would of course be possible to establish mechanisms to implement those pieces that can be agreed, (for example, even if there is no overarching agreement, arrangements to ensure air traffic between the two could be in place). However, although it would be very damaging to do so, either party could take an all or nothing approach.
It is no great surprise that there is impasse at the start of June, as it will take a deadline looming to get movement on key issues – if the past EU behaviour is any guide to the future. An extension of up to two years is possible, but it must be requested by 30 June, unless another arrangement is reached. UKGOV is committed to “no extension”, but could agree to one if Parliament approves. The EU would contemplate an extension they say, as that maintains the status quo and the UK would continue paying into the EU budget (not ideal for the UK). It is to be remembered that the EU approach is always not to make major concessions, saying “non” until the eleventh hour: so where would an extension take the process- if say it were for 6 months, would key issues still be left until the end of the extended period? Most likely.
Could negotiations continue deep into December? Quite possibly. But , just as with Brexit itself, preparations for “no deal”, as still a possible outcome, will have to be accelerated in earnest from, it is said, September or October. It is in nobody’s interests for 2020 to end without an agreement on the future relationship. It is probably quite straightforward to reach a sufficiently full agreement by then if the parties behave as they committed to do in the PD, and dogma does not prevail (for example, on fishing rights the Norway/EU deal provides a precedent, and on trade the Canada/EU trade deal has previously been touted by both the UK and EU as a good start). The PD is peppered with words and sentiments of good faith, respect, cooperation, mutuality, and shared commitments. It is perhaps time the parties took them seriously.
When Boris Johnson meets Ursula Von de Leyen, the EC President, in June, they should perhaps apply that seriousness of cooperation, and instruct the negotiators to unblock. For that to happen, at least France and Germany need to embrace the spirit of the PD too. The PD says:
“The future relationship will be based on a balance of rights and obligations, taking into account the principles of each party. This balance must ensure the autonomy of the Union’s decision making and be consistent with the Union’s principles….. It must also ensure the sovereignty of the United Kingdom and the protection of its internal market….”. Is reaching a fair balance really that hard?
