EVEN though recent months have conditioned us to expect warnings of yawning differences between the UK and European Union after each and every tortuous round of trade talks, no matter that time is running out, statements following last week’s negotiations were something special.
So too was a follow-up exchange between the UK and EU chief negotiators, David Frost and Michel Barnier, on social media over food standards and imports, and Northern Ireland.
Sterling found itself on the ropes last week as financial markets took stock of the UK Government’s proposal to bring forward legislation which could override key aspects of the existing withdrawal agreement with the EU relating to Northern Ireland. The Northern Ireland protocol in the withdrawal agreement was formulated painstakingly to avoid the re-emergence of a hard border on the island, and creates a customs and regulatory border in the Irish Sea. Northern Ireland, to avoid checks and controls on the island, will be required to apply EU customs rules and align with a list of single-market regulations. These regulations cover product requirements and safety including rules relating to chemicals and medicines, and food safety and standards for animal products, as well as state aid.
The UK Government’s controversial internal market bill cleared its first hurdle in the House of Commons on Monday night, in spite of concerns over a breach of international law in the context of the withdrawal agreement.
Last Thursday, following round eight of negotiations, Mr Barnier declared: “Nobody should underestimate the practical, economic and social consequences of a ‘no deal’ scenario.”
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He is right. It is important to realise what we are talking about here, not only given the scale of the short-term disruption on which much attention focuses but more importantly, for the UK, in terms of the grim long-term economic damage from failing to land a trade deal with the huge EU bloc.
If Boris Johnson and his Cabinet need a reminder, forecasts drawn up by the Theresa May government highlighted the major cost of failing to reach a deal and moving to World Trade Organisation terms. Of course, the UK will by leaving the European single market be incurring huge (and otherwise avoidable) economic costs in any case. However, given the hidebound ideology of the Tory Brexiters in this regard, at this stage mitigating the damage by securing a comprehensive free trade deal with the EU sadly looks like the least-bad outcome which is possible.
The UK has, as it has engaged in ever more dramatic sabre-rattling in recent months in the negotiations with the EU on the future relationship, highlighted its stepping up of no-deal preparations. And it remains difficult to escape the notion that many Brexiters, for ideological reasons and even though it goes against any kind of economic common sense, have been in favour of a no-deal departure all along.
It was also difficult not to see portents in Mr Barnier’s statement last week, especially given the seeming dramatic deterioration in the mood music around the negotiations, from an already out-of-tune place.
Mr Barnier said: “To conclude a future partnership, mutual trust and confidence are and will be necessary. The chief negotiators and their teams will remain in contact over the coming days.
“At the same time, the EU is intensifying its preparedness work to be ready for all scenarios on 1 January 2021.”
The legislation being brought forward by the UK Government in the internal market bill does not look anything like an auspicious base for mutual trust and confidence. Quite the contrary.
Mr Barnier also spelled out in clear terms the EU’s continuing problems with the UK’s demands in the free trade negotiations. The differences between the two sides, it seems, are as great as ever.
He said: “The UK is refusing to include indispensable guarantees of fair competition in our future agreement, while requesting free access to our market.”
Mr Barnier added: “Similarly, we are still missing important guarantees on non-regression from social, environmental, labour and climate standards.”
The first point, on a level playing field requirement taking in state aid, seems perfectly reasonable, given the UK’s proximity to the EU, which makes it very different, from the bloc’s perspective, to Canada or Japan. The UK continues to want the type of arrangement Canada or Japan has with the EU.
Then there is the fact the UK chose to leave the EU. It remains impossible to see this as anything other than an ideological move, which makes no economic sense, driven by a separatist agenda on Europe promoted by people including those with an extreme dislike of the EU. You even hear arch-Brexiters sound off about how Blighty’s move will help bring about the demise of the EU, a ridiculous idea. So far, noisy right-wing opposition to the EU in other countries has, thankfully, come to nought. Sadly though not so in the UK.
Mr Barnier, who would surely be doing UK citizens a favour if he secured the non-regression guarantees he is seeking, took to Twitter on Sunday to make some key points from the EU side.
He declared: “Protocol on IE/NI is not a threat to the integrity of the UK. We agreed this delicate compromise with @BorisJohnson & his gov in order to protect peace & stability on island of Ireland. We could not have been clearer about the consequences of #Brexit.”
You would imagine the EU would have been clear indeed, particularly given the length of time it took to thrash out the withdrawal agreement.
Mr Barnier added: “Sticking to facts is also essential. A case in point: EU is not refusing to list UK as a third country for food imports…To be listed, we need to know in full what a country’s rules are, incl. for imports. The same objective process applies to all listed countries.”
Lord Frost retorted: “On 3rd country listings: the EU knows perfectly well all the details of our food standards rules because we are operating EU rules. The situation on 1.1.21 is accordingly perfectly clear. We have discussed this frequently with the EU including last week.
“Any changes in future would be notified to the WTO and EU in the usual way with plenty of lead time. The EU lists dozens of countries globally on precisely this basis, without any sort of commitment about the future.”
Continuing a long thread of tweets, he added: “Yet it has been made clear to us in the current talks that there is no guarantee of listing us. I am afraid it has also been said to us explicitly in these talks that if we are not listed we will not be able to move food to Northern Ireland.
“The EU’s position is that listing is needed for Great Britain only, not Northern Ireland. So if GB were not listed, it would be automatically illegal for NI to import food products from GB.”
Brexiters have long focused on emotive topics in these negotiations. Remember the fisheries publicity stunt on the Thames ahead of the 2016 referendum? Now we have the issue of Northern Ireland food “imports” from Great Britain rearing its head.
As we approach the December 31 end date for the transition period, which has kept the UK in the European single market since technical Brexit on January 31, it seems the negotiations with the EU are going backwards rather than forwards.
Of course, a deal should be far more important to the UK than the EU. After all, the UK is on its own in this context (as well as being internally divided on Brexit) and the world’s biggest free trade bloc is 27-strong, even if the Conservative Government seems blissfully unaware of this big reality.
Mr Johnson this month declared that leaving the single market with no deal if the trade talks with the EU were to collapse would still be a “good outcome” for the UK. But that is not what the hard analysis published by the Theresa May government shows. Quite the opposite in fact, certainly in economic terms.
EU and UK automotive leaders joined forces this week to warn “no deal’ would mean combined EU-UK trade losses of up to €110 billion (£101bn) by 2025, on top of around €100bn in lost production value so far this year because of the Covid crisis.
They flagged the fact that it is only about 15 weeks until the transition period ends.
Calling for an “ambitious free trade agreement”, they added that “new calculations show the catastrophic impact of ‘no deal’ with WTO tariffs putting production of some three million EU and UK built cars and vans at risk over [the] next five years”.
Mike Hawes, chief executive of the UK’s Society of Motor Manufacturers and Traders, said: “These figures paint a bleak picture of the devastation that would follow a ‘no-deal’ Brexit. The shock of tariffs and other trade barriers would compound the damage already dealt by a global pandemic and recession, putting businesses and livelihoods at risk. Our industries are deeply integrated so we urge all parties to recognise the needs of this vital provider of jobs and economic prosperity, and pull out every single stop to secure an ambitious free trade deal now, before it is too late.”
The UK car production sector, of course, looks particularly vulnerable to a no-deal scenario, given overseas manufacturers with UK huge operations have flagged repeatedly and in no uncertain terms the importance of continued access to frictionless trade with EU countries. Large numbers of jobs look to be dependent on such an arrangement.
The joint plea by the EU and UK motor manufacturing sectors is a fine example of the degree to which European co-operation is crucial to overall economic prosperity and living standards.
Such a philosophy may be anathema to the more extreme Brexiters.
But their ideological views have no bearing on the actuality of the situation. No amount of patriotic tub-thumping and anti-European rhetoric can change that.