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Why The “Level Playing Field” Remains The Impossible Final Roadblock To A Brexit Deal

5 min read

For months the key sticking points to agreeing a Brexit deal have been the same; fishing and common standards.

As the negotiations reach their final stages it looks like the latter, also known as the “level playing field”, will be the very final stumbling block.

To veteran Brexit-watchers this will come as no surprise, the issue has dominated the trade talks right from the start. It is almost as much a philosophical debate as an economic wrangle, and strikes at the very heart of the sovereignty the Leave vote was sold on.

But what does it actually mean on the negotiating table, and why is it still such a sticking point?

The EU has always insisted if you want access to its single market then you have to sign up to regulatory alignment, creating, if you will, a "level playing field" on which EU member states and other countries can trade.

Meanwhile the UK government has always said Brexit was about regaining the sovereignty to be able to set their own rules outside of EU regulations, if it so wishes. 

The question has always been whether the two sides could find an unlikely compromise between these two fundamentally different stances, and with less than three weeks until the end of the transition period it continues to look as though the answer is they can’t.

At its most basic level this is about agreeing a set of common rules and standards which will allow fair trade and doesn’t allow businesses in one country to gain a competitive advantage over those in another.

It is a core principal of almost every trade deal around the world, including those the EU signed in recent years with Canada, South Korea and Japan, and was in the Political Declaration as part of the Brexit divorce deal.

But for Brussels the longstanding relationships and deep ties the UK has to the continent means they believe the level playing field should be cast much wider than in agreements elsewhere, and must include things like workers' rights, environmental protections and state aid subsidies for businesses.

A fear their former member could become a low-tax, low-regulation trade rival 25 miles off their coast – a Singapore in the North Sea – drove initial demands Britain would not only have to keep all existing standards, but agree to keep to all future EU rules too.

A compromose known as "dynamic alignment", would allow the EU security against the UK tilting the level playing field towards themselves in the future by rowing back on standards or offering subsidies to home-grown firms to help undercut European competitors.

But that was never going to fly back in London, where Boris Johnson has repeatedly said he wants a zero tariff, zero quota deal which allows for divergence in regulation down the line and the EU has sunsequently dropped the demand.

Johnson has claimed the UK will maintain existing high standards in many areas but will not agree to being more closely aligned with the EU deals than any other country with a deal. This is what he means when he asks for a “Canada-style” deal.

But Brussels insists that given the interconnectedness created by the UK's geographical proximity and volume of trade with the EU, deeper commitments are required than countries such as Canada. 

The European Commission president Ursula von der Leyen laid it out pretty simply at the start of this year: “Without a level playing field on environment, labour, taxation and state aid, you cannot have the highest quality access to the world’s largest single market.”

There is still a potential route out of this dead end, but unfortunately that leads into yet another seemingly immovable roadblock.

Negotiators have been working on proposals which would see the UK make a commitment not to lower standards below the current baseline through something called “non-regression clauses”.

In order to allow for future flexibility there would be "compensatory clauses” in the deal, effectively allowing one side to pay to diverge in one area by creating subsidies in another.

But this requires a mechanism to adjudicate and enforce such measures, and deciding who gets to decide is in itself a major point of contention as the EU has insisted the European Court of Justice has oversight.

The UK, however, with its "make our own laws" Brexit battle-cry still ringing in Leave voters' ears, wants nothing to do with the European Court of Justice. 

Which is why the government’s rhetoric has shifted to seeking a so-called “Australia-style” deal if a comprehensive free trade agreement is not available. Operating largely on World Trade Organisation rules, this is little more than "no deal" by another name. 

Because although trade is on much less favourable terms than a zero-tariff deal, it does have the benefit of an independent panel to adjudicate on any disputes, and ultimately this is what may prove to be the ultimate deciding factor between whether the UK goes it alone with a "deal" or "no deal" come January.

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