The stakes are simply too high for both sides. The UK is just trying to create public space for itself to compromise on key issues – fish – and claim some victories on state aid. Despite the pandemic and this suspect behaviour by the UK on respecting prior agreements, the negotiations had already reached the expected technical conclusion. It’s now time for the politicians to wade in, make the murky compromises, and allow the negotiators to wrap up for a quick ratification in November.
So where are we now? What should a deal contain? What are the deal blockers? And what will the extra time look like?
5 key components under discussion in the FTA:
Any UK – EU FTA will contain five key components:
- Tariffs and quotas – will these be imposed on imports between the UK and EU?
- Customs – new declarations and safety checks will be required for all goods movements, but can they be limited? Brexit VAT is now largely resolved.
- Services – some limited, free provision of cross-border services, including financial services.
- Northern Ireland – what checks will be needed on goods moving between NI and the rest of the UK (‘Great Britain’ or GB’)?
- Framework – for governance and penalties on the above, also on unresolved issues and the future relationship.
Failure to achieve this will result in the UK Brexiting without an FTA, with major impacts to cross-border trade.
What are the Brexit deal blockers?
The three major stumbling blocks to striking an FTA are:
- State aid: The UK’s continuing access to the EU Single Market without close alignment to EU standards. This includes the ‘Level Playing Field’ rules, which ensure governments do not seek to help domestic companies with unfair rules. It includes: employment rights; social policy; environmental standards; state aid to domestic companies; competition and tax. The UK wants full control over state aid, and a free hand to subsidise young tech businesses. The EU fears the UK’s close geographical proximity to its markets could mean the UK could easily become a cheap competitor to EU businesses without regulatory alignment.
- Fishing rights: The EU wants its fishing fleets to have continuing access to UK waters. The UK wants to return full rights to UK-based fleets. The issue will come down to the process and timing for doing this. The EU is holding out on this hugely symbolic issue to gain negotiating leverage on state aid and other issues.
- Northern Ireland: This has now re-emerged as a major deal disrupter and the UK’s Internal Market Bill is threatening to crater the talks. The issue is controls on goods moving Northern Ireland to GB – will the EU insist on the regular export declaration? The Joint Committee, set up by the Withdrawal Agreement at the start of 2020, has failed to reach agreement on this. And the UK now realises these requirements will be in place in 2021 whatever happens on the FTA. So, the UK is bargaining on getting this rewritten, or leveraging it for other compromises in the FTA.
Playing into negotiating extra time
All of the above is part of the normal free trade agreement process. It’s just not meant to be played out on the front pages, on the broadcast news or in your Facebook stream.
The ninth and final negotiations will be done by early October. There will be an EU Council meeting on October 15. Then some emergency meetings with key leaders. Then a deal will emerge that everyone will claim as a victory. The EU Single Market and Northern Ireland security will be preserved. The UK will have gained full control on fishing and state aid, and be free to conquer the world. Everyone is a winner.
Oh, except hundreds of thousands of businesses. Who will have a week or two, at best, to implement the agreement on billions in trade.
Is anyone thinking about them?