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Without compromise on both sides there will be no breakthrough in Brexit talks, regardless of any transition extension

Without compromise on both sides there will be no breakthrough in Brexit talks, regardless of any transition extension

David Frost and Michel Barnier arrive at the first bilateral meeting on formal negotiations of the future relationship between the EU and UK on March 2, 2020 in Brussels | PA Images

Laura Hutchinson | Dods Monitoring

6 min read

Despite Covid-19 causing delays, the UK is still looking to secure a Brexit deal by July – to achieve this, both the EU and the UK need to will need to let go of their wilful misunderstandings

It is strange to recall that the Theresa May era of parliamentary deadlock and paralysis, in which MPs sat late into the night and persistently refused to reach a consensus on Brexit, was just over one year ago. In the intervening period, her successor, Boris Johnson, after a turbulent first couple of months, has already achieved what many in the Conservative Party did not imagine possible. Brexit has been “done”; the first phase of it anyway. Following a significant electoral victory and the passing of the Withdrawal Agreement Bill in January, Boris Johnson has formally led the country out of a 50-year partnership and into an 11-month transition period expiring on 31 December 2020. During this transition period both sides have promised to construct a new, ambitious and dynamic future relationship between the UK and the EU, based on free trade and friendly cooperation.

Six months into the transition period and faced with a global pandemic already wreaking unparalleled damage to the world’s economy, the prospects for a future agreement being delivered this year are looking increasingly questionable and the UK business community is understandably anxious. 

Despite the fact that Covid-19 has undoubtedly dominated most countries’ political bandwidth for the past six months, and that UK/EU trade negotiations have languished accordingly, the prime minister has repeated his manifesto commitment that the UK will neither accept nor request an extension to the transition period. The EU has now accepted this commitment as definitive. 

Neither side to date has moved appreciably from their opening, mutual opposed, negotiating positions and seem at loggerheads. With the prospect of an extension to the transition period now formally off the table, both sides seem to be engaged in a game of ‘chicken’ hoping for movement from the other side as the deadline looms. 

For their part, the EU are insisting that a deal must be done by 31 October in order to allow time for member states to scrutinise and ratify it. Not to be outdone, Boris Johnson has rather startled EU leaders by summarising a recent call with European Commission President Ursula von der Leyen by declaring he could see “no reason why you shouldn’t get that [a deal] done in July”.

Nevertheless, both sides have agreed to intensify talks and recent indications that political leaders on both sides are beginning to re-engage in the negotiations offer some hope of progress in the next couple of months. Progress though will continue to stall unless flexibility is shown by both sides. For the UK, the Government is operating under a – perhaps willful – misunderstanding of how the EU negotiates Free Trade Agreements. Each deal negotiated is tailor-made, factoring in the individual country’s requirements, economy, geography and the intensity of trade. 

The much-coveted EU/Canada CETA deal was negotiated on the basis that Canada exports under 10% of goods and services to the EU, is thousands of miles away and willing to accept regulatory barriers. Moreover, CETA took seven years to negotiate and Canada was not in the process of unstitching itself from the European Union whilst doing so.

There has to be an acceptance of this by the UK Government if progress is to be made. UK exports of goods and services to the EU amount to almost 50%, and it is geographically close to the Single Market. Because of this the UK cannot realistically expect an “off the shelf” deal with the EU, it must be bespoke, and it must contain some legally binding commitments on alignment to prevent the UK from undercutting their markets. The desire for a zero tariff/zero quota FTA is a legitimate one, but the UK cannot expect one whilst simultaneously demanding absolute sovereignty – any agreement is essentially a trade-off between the two. 

For the EU, there needs to be a realisation that they cannot hold onto all the beneficial aspects of their current trading relationship with the UK, especially those connected with fisheries. Although there is an acceptance that the UK is leaving the Common Fisheries Policy, there have been signs that the EU expects the status quo to continue and that they expect the UK to tie any agreement on fisheries to a wider FTA – “fisheries for financial services”. 

The EU could be forgiven for thinking that the UK would accept such a trade-off, given the UK fishing industry accounts for around 0.12% of the UK’s GDP. However, such an assumption ignores the deep-rooted ideology and symbolism behind Brexit, in which recovering UK fishing rights has become a proxy for regaining national sovereignty. 

Fisheries is symbolic of the Leave cause, and Boris Johnson, the man who fronted the campaign and brandished a kipper in the 2019 Conservative leadership election whilst making – incorrect – assertions about its packaging, knows he would not survive long as prime minister if he made a concession over this industry. 

So concessions are required of both sides and without them there will be no breakthrough in talks – regardless of whether the transition ends this year or in 2021.  Both sides have their ‘red lines’; for the EU it is the need for the UK to commit to maintain regulatory alignment, to avoid the threat of an off-shore competitor undercutting their markets; for the UK it is gaining (or at least being seen to gain) national sovereignty over economic decision-making. There is room to manoeuvre within both concepts, but it promises to be a bumpy road to any agreement.  

There are also straightforward practical considerations to be taken into account; British businesses have issued repeated warnings that the pandemic has stripped away any capacity they had to prepare or implement the necessary changes associated with a deal, even if one was negotiated and agreed by July or October.

As things stand, the prospect of both sides failing to reach an agreement of any sort remains worryingly high. For many UK businesses, the impact of no-deal, coupled with the impact of the coronavirus pandemic would be terminal.  

The timescale of transition is important therefore; if good progress is being made in the negotiations then flexibility towards the transition timescales and deadlines should be shown. The danger is that, if sufficient progress is not made within the next few months, then the transition timescale and political statements about not extending it, become self-determining; driving both sides towards a No-Deal outcome that neither wants but that neither can, for political reasons, avoid.

 

Laura Hutchinson is head of UK BI Consultancy and principal political consultant at Dods. Hear more on Brexit from Laura in her live webinar on Wednesday 1 July. It will also feature The House magazine's very own Daniel Bond, along with editors from PoliticsHome, The Parliament Magazine and Civil Service World. You can register to be part of the discussion here.

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