UK-EU Future New Relationship Update: UK’S Approach to Negotiation

Anyone trying to keep abreast of the ongoing EU-UK negotiations would be forgiven for being completely baffled as to what is actually happening. The problem is made immeasurably worse because every source of information has its own political leaning, resulting in a general lack of clarity of the progress being made if any is being made at all. The EU has, since 2016, seen the UK as taking a very hard line on its demands, which have directly conflicted with the central tenets of the political union. The UK, for their part, have accused the EU of being inflexible and unwilling to bend their principles. We are now over four years past that fateful date of 23^rd June 2016, so where are we now? Surely its all done and we have the "easiest trade deal in human history"ready to kick-off on the 1^st January 2020? Well, not quite.

Lack of clarity over what the UK wants

Despite the best endeavours of pro-Brexit politicians and cheerleaders to convince us of the contrary, there is still a lack of clarity as to what the UK wants from the EU, coupled with a growing willingness to renege on what was agreed in the Political Declaration.

Boris Johnson has said he wants an Australian style deal with the EU, which is slightly troubling for all of us as the EU does not have a trade agreement with our antipodean friends. He says he wants a Canada style deal too. But as Michel Barnier pointed out in February, "The UK says it wants 'Canada'. But the problem with that is that the UK is not Canada. Our relationships with the UK and with Canada are worlds' apart, a flight from Brussels to London takes 70 minutes, a flight from Brussels to Ottawa takes over 10 hours, EU27 trade with Canada reached 55 billion euro in 2018, that sounds like a lot. But our trade with the UK was worth well over 500 billion euro. Nearly ten times more!"

At Loggerheads Over the 'Level Playing Field'

One of the most contentious (understandably so) areas of the 'negotiation' so far is the lack of progress on agreeing on a way forward on the 'level playing field'. In an article by Anand Menon, Professor of European Politics and Foreign Affairs at King's College London, "The 'level playing field' is another major problem. It is not, as some in the UK have claimed, a last-minute trap sprung on London by Brussels. It has always been one of the EU's conditions. It is a demand rooted in self-interest: a large competitor economy on its doorstep represents a challenge. If the UK were given access to the EU market, it might succeed in undercutting EU firms. This is why Brussels is insisting on guarantees regarding UK regulatory standards; it's also the reason it is insisting on stricter rules than it felt necessary to enforce with smaller and more distant trading partners such as Canada". David Frost, the UK's chief Brexit negotiator, has asserted on this matter, "It is central to our vision that we must have the ability to set laws that suit us ... So to think that we might accept EU supervision on so-called level playing field issues simply fails to see the point of what we are doing. That isn't a simple negotiating position which might move under pressure – it is the point of the whole project". There is deep suspicion on behalf of the EU when they hear the UK insist that they will not allow chlorinated chicken or any other form of reduced regulatory standards, but as Anand Menon states, this is because Brexiteers have "spent thirty years insisting that deregulation was the prize to be gained from leaving".

There appears to be little backing down from the UK on this one, hence the best that might be achieved is some form of non-regression agreement which means that the currently shared standards will be maintained in the coming years.

State Aid is a Massive Sticking Point

The importance for the EU of finding an agreement on state aid cannot be overstated. Michel Barnier explained earlier in 2020, "State aid; environmental protection and the fight against climate change; social and labour rights; and taxation issues. This way, we will make sure that, somewhere down the road, perhaps in years to come, neither side will use unfair subsidies – nor grant derogations on industrial emissions or on labour standards – to win industries from the other. Because this would not just create unfair competition. It would also cause damage to the environment. And it would harm EU and UK workers. The simple fact is that a modern and sustainable trade policy requires ground rules". The EU sees state aid as essential to avoiding future unfair and distorted competition.

Is There Any Hope For a Deal?

There is little doubt that the most ardent Brexiteers will have Boris Johnson and David Frost on speed dial at present, desperate for the UK not to give in, or to enter into a deal at any cost. Some have a preference for the UK to walk away, without really understanding the implications for the people of the UK. The EU does want a deal, if even it is a pared-down set of arrangements; they do not want no-deal. Equally, they will not enter into a deal at any price, after all, they have 27 countries to think about. At the same time, there is simply not enough time to work out a comprehensive trade deal on all fronts; there will need to be many more years of negotiation to reach that point. As Anand Menon points out, if we do walk away from the negotiating table and fall onto WTO terms, it is hard to see how constructive dialogue could continue. While there is still time for a basic trade deal, this will not be enough to the offset damage to the economy. On this, Menon spells out the reality, "the modelling done by my institute, UK in a Changing Europe, estimates that the negative impact over ten years of the kind of deal currently being negotiated would be of the order of 6.4 per cent of GDP. This is in contrast to 4.9 per cent for May's deal and 8.1 per cent for no deal. Our most optimistic scenario suggests that a Brexit deal will leave the public finances £16 billion worse off (£49 billion in our most pessimistic scenario, about the same size as the budget for the Ministry of Defence, and more than twice the long-term increase in funding for the NHS announced in 2018)".

There is a chance of a basic deal, but we are still yet to see a projection which shows that the UK stands to benefit economically from Brexit. This is especially so in the traditionally Labour regions (many of which switched their allegiance to the Tories in the last election), whose economies are disproportionately reliant on the trade of goods and services with the EU.