EU-UK negotiations – View from Brussels and London

17 Jul 2020

DRD Partners take a 360° look at the view on the EU-UK negotiations on a future trade deal from Brussels and London ahead of next week’s discussions.

17 July 2020

Brussels and London partners, Tamlin Vickers and Pete Bowyer, take a 360° look at how both capitals view the EU-UK negotiations on a future trade deal as they go into an intensified stage of face-to-face discussions in London next week.

The view from Brussels

The optimism which followed the mid-June call between Johnson, Von der Leyen and Michel, when it was agreed to have ‘intensified’ negotiations through July, has since dissipated. Barnier made it clear following that call, both publicly and privately, that the EU was willing to soften some red lines. His overtures were met with a deafly silence from the UK side, causing consternation and frustration, particularly given that it was the UK – and not the EU – which had insisted on the intensified negotiations in the first place. A common view is that officials’ summer holiday plans have been disrupted for no good reason. A sacrilege in this city.

That said, most officials still believe that a deal is there to be done and that tangible progress in the current period of intensified discussions could pave the way for high-level political sign-off in the autumn. Compromises would have to be made on both sides. What might the landing zone look like on the main issues of contention?

The level playing field is the thorniest issue by far. While the EU has indicated willingness to compromise on labour and environmental standards by agreeing to reference third party standards as a benchmark, the Commission and Member States (particularly France, with Germany’s support) are united in their support for a tough line on state aid. A compromise being discussed privately contains the following elements: a two to three year non-regression clause committing the UK to follow the state aid rules in place as of 31 December; an annual EU-UK consultation to review evolving standards and discuss any proposals to change these standards; and the establishment of a resolution mechanism independent to the European Court of Justice (ECJ), without undermining that court’s role as the sole interpreter of EU law.

On fisheries, the landing zone would provide for regular quota negotiations, but less frequently than the UK request of every year – perhaps every two to four years. On governance, the UK will likely have to accept an overarching structure in exchange for the EU agreeing to find a creative way to reduce the role of the ECJ. On financial services, the EU’s position has, if anything, hardened, and any hopes of a lenient or pragmatic approach have pretty much disappeared. The EU’s goal is to manage the UK as a third country while maintaining stability in its financial system, and it is using the Capital Markets Union project to reduce reliance on the UK’s equity markets in the long term.

The EU remains unsure of the UK’s strategy and many believe that Number 10 is simply making it up as it goes along. The EU has accordingly begun to crank up its no-deal arrangements, dusting off plans made last year. Set against this bleak picture, there are hopes that Johnson will signal movement later this month, opening the way for an agreement. Germany, which holds the rotating Council presidency until the end of this year, is keen to reach a deal (though, of course, not at any cost) and is likely to seek to bring France around to supporting some sort of compromise. It is all still to play for and the ball is currently in the UK’s court.

The view from London

On one point, at least officially, the UK and the EU are aligned: Downing Street is keen to reach a deal too (though, of course, not at any cost), and it has set September as its new deadline. That date is significant, as it’s also the date that the UK’s chief negotiator, Sir David Frost, becomes the UK’s National Security Adviser. Few believe that he will be able to maintain his single-minded focus on keeping the UK-EU talks on track whilst wearing another, very critical hat.

A deal agreed in September also gives time for it to be presented to the European Council Summit in October, and subsequent sign-off by the European Parliament well ahead the end of the transition period on 31 December. So, as talks enter a new, intensified round of face-to-face negotiations in London next week, the Prime Minister has promised to “finalise a deal within six weeks” amid protestations that legendary British pragmatism will eventually win the day over crude European ideology – or so they think.

As both sides readily admit, “significant divergences” remain. That’s a euphemism for yawning chasms on the three critical issues, as Tamlin our Brussels consultant points out above, of fishing rights, the future influence of EU courts in UK laws, and how far Britain will be able to loosen its rules and still enjoy access to the single market. On the surface, Ministers still talk tough about the UK being a “newly, independent sovereign state”, threatening to leave after the transition period on what they describe as “Australia terms” (i.e. no trade deal whatsoever) if we can’t get our own way.

To help prepare the UK for the unrivalled benefits of leaving the EU without a deal, the government this week launched a glitzy £93 million advertising campaign urging the great British public to prepare for the exciting future opportunities ahead, including higher mobile phone roaming charges, higher health and travel insurance costs, passport delays and no longer being able to take Fido to the Dordogne on a family holiday each year. The message to Brussels is clear: the UK’s future is bright, and Britain is moving on with or without a deal.

But not everyone is convinced. The calculation on the continent remains that Boris needs a deal more than Brussels does, and he will be under pressure to deliver one not least to protect the most vulnerable in society, many of whom are concentrated in the so-called ‘Blue Wall’ seats that delivered the Prime Minister his triumphant election victory last December (when he promised them “an over-ready deal”, lest we forget).

In the weeks ahead, most believe that the rhetoric will finally hit the road and compromises will be reached on each of the key sticking points. One way out of the woods may be for the Prime Minister to follow the suggestion of one of his illustrious predecessors: Tony Blair (that may be a bitter pill to swallow, but hey, it’s the message, not the messenger, that’s important). Blair has suggested that the UK’s strategy henceforth should be to persuade Brussels it can meet anti-subsidy protections and non-regression on labour/environmental standards not through EU law, but through domestic rules and enforcement, by way of an independent regulator. That still leaves fisheries, but at the end of the day, by securing compromises in other areas, the nation’s interests may need to be placed ahead of theirs, however unpalatable that may be to the fishermen of Grimsby.

Of course, nobody suggests that any of this is going to be easy to achieve. But the alternative, if agreement cannot be reached, is for both sides to face a further enormous economic shock on top of the brutal damage already done by coronavirus, and for UK-EU relations to be soured well into the mid-2020s. For negotiators on either side of the Channel, it’s going to be a hell of a summer.

PHOTO Credit: Telegraph / Olivier Hoslet /EPA Pool

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