EU-UK agenda: Brinksmanship to the end

This article is part of our special report All aboard: EU policy train builds up steam after summer.

After more than four years of brinksmanship and delay it should surprise no one that the final act of the Brexit process – agreeing on an EU-UK trade deal – will go down to the wire.

The post-Brexit transition period, during which the UK remains part of the Single Market, ends on 31 December but, in reality, the UK and EU have around two months to avoid trading on World Trade Organisation terms.

Negotiators have continued to meet over the summer break – the seventh round of talks between the EU and UK over post-Brexit trade relations resumed on Tuesday evening (18 August) over dinner between EU chief negotiator Michel Barnier and UK counterpart David Frost. The UK says that the remaining negotiating rounds will seek to “plug the gaps”. EU negotiators are less optimistic – after the latest round was completed on Friday (21 August), Barnier repeated that an agreement was “unlikely”, adding that he was “disappointed, concerned and surprised” by the UK’s rigid stance on fisheries and state aid.

“I simply do not understand why we are wasting valuable time,” Barnier told reporters.

In truth, little progress has been made on the long-standing disagreements since the UK formally left the EU on 31 January. State aid, fishing rights and the governance of a deal remain unresolved and the rhetoric from both sides is that of frustration.

The UK is due to stop following EU rules on so-called “state aid” at the end of the transition period, and has not unveiled details of what its subsequent regime will look like. State subsidies are an unlikely point for a right-wing government like Boris Johnson’s to derail a trade deal. EU officials say that they are prepared to compromise by accepting that the UK’s state subsidy regime will not mirror the EU’s, but that they need some guarantees on what it will look like.

On fisheries, meanwhile, the UK wants the EU’s deal with Norway to be the precedent for their own agreement.

The question of procedure and timing could also become a growing problem in the coming weeks.

Earlier this week, a UK government spokesman insisted that a September deal was the target. The following day a European Commission spokesman said a deal would need to be agreed by October “at the latest”.

The EU wants to have a deal that can be signed off by the European Council in mid-October. It would then need to be ratified by the European Parliament and national parliaments.

David Frost’s team have submitted a consolidated text – focusing particularly on goods and services. UK officials say that they that the document should be taken seriously as a sign to the EU that talks can move on to more detailed discussions.

The new UK text, which has not been made public, covers small businesses, intellectual property, digital policy and financial services, as well as geographical indicators for the first time. The UK says that the Commission team hasn’t engaged in detailed discussions on it, and believe that unless progress is made on consolidated text by mid-September a deal will be near impossible to reach.

In the meantime, London is making steady but slow progress with other bilateral trade negotiations – with the United States, Japan, Australia, New Zealand and Norway at the front of the queue although none are likely to be finalised before mid-2021 at the earliest.

Australian politicians have this week demanded freedom of movement with the UK – the ending of which for EU citizens was one of the UK’s red lines when leaving the bloc.

The UK insists that economic self-interest will mean that a deal eventually gets done. That attitude explains why this week talks have focused on the UK’s demands that British hauliers are allowed to travel across EU states. It also wants them to be allowed to make up to two drop offs within an EU country and three in total across the EU27, plus unlimited access for empty lorries.

But this is almost akin to the rules covering drivers from EU member states, and the Commission team believes that, with the UK refusing to keep existing rules on working time and tachographs measuring how far hauliers have been on the road, this would amount to the UK ‘cherry-picking’ from the single market.

The alternative – an annual permit system – would be “extremely bleak” for the UK sector, says Elizabeth de Jong of the UK’s Freight Transport Association.

It is not the only important industry where the EU is playing hard-ball.

On Monday (17 August, the Commission warned the City of London that there would not be time before early-2021 to set up close to 40 equivalency agreements to allow financial institutions to continue to have full access to EU financial markets.

Should the stalemate fail to be broken, the long-threatened ‘no deal’ scenario will become reality.

Both sides have stepped up their ‘no deal’ planning in recent weeks, with the UK announcing plans to spend £705 million (€800m) on new infrastructure at its ports and border points to help smooth the flow of traffic after it leaves the EU single market.

As ever, the disconnect in perception between London and Brussels remains wide. Some on the EU side – including Trade Commissioner Phil Hogan – suspect that the UK is running down on the clock and sees the economic disruption caused by the Covid-19 pandemic as cover for a ‘no deal’ scenario. However, UK negotiators maintain that they are working in good faith and express bemusement at what they perceive as the Commission’s intransigence.

Over the next two months we are likely to find out which is correct.

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