This guest blog on the political priorities of European Union (EU) member states in the current phase of EU-UK negotiations (March 2020 onwards) has been produced by Fabian Zuleeg, Chief Executive of the European Policy Centre. As with all guest blogs, what follows are the views of the author, not those of SPICe or indeed the Scottish Parliament.
The blog reflects the author’s view on current priorities that do not necessarily coincide with the stated positions of the Member States themselves. It also makes no claim to be comprehensive, but rather tries to focus on those positions of most relevance for the eventual success or failure of the negotiation process. It should be noted that overall there are few divergent interests among the 27 member states (EU27); it is more a question of emphasis on specific priorities.
Overarching negotiating framework
Before going into the different policy areas, it is worth setting out briefly some of the general conditions which will frame the negotiations:
- Unless there is an extension to transition, there is very little time to reach a deal (and even with the maximum possible extension of two years, it remains a very tight timetable). Even for the most basic free trade agreement usually a much more significant negotiation period is required.
- The default outcome remains no deal if no agreement between the EU and the UK is found. While there are some temporary/unilateral bridges that could be put in place, no deal remains the most costly outcome for both sides.
- The future trade relationship is at the core of the negotiations. Unless it is agreed, there will not be other agreements. The same applies to fisheries as the EU has sought to have that agreed before the trade negotiations.
- The EU has the greater leverage in the negotiations, given asymmetric size and costs, as well as time pressure on the UK.
- EU27 are likely to remain united in terms of the Brexit process, but not necessarily on specific policy interests. This makes it more difficult to strike a deal; any fragmentation of interest among the EU27 increases the chance of no deal. At this moment in time, no real areas of conflicting interest have emerged between member states, although some countries focus more on specific policy issues (as set out below) than others.
- There remains a question about whether the final outcome will be EU-competence only or a mixed agreement involving both EU and Member State competences. Ratification will differ under each scenario with a mixed agreement requiring ratification in every member state. If ratification is incomplete by the end of the transition period, only those elements that are covered by EU competences could provisionally come into force. Whatever form is chosen, it is highly likely that the final decision of the EU27 will be unanimous. Even if legally possible, it is unthinkable that a member state would be outvoted on a genuine significant objection to such an important agreement meaning that any serious objections by a member state would need to be resolved to its satisfaction ahead of agreement being reached.
Role of the institutions in Phase 2
Within the negotiations, the EU institutions will play an important role. Their main functions in these negotiations are briefly discussed below:
- The European Commission has the main coordination role but is bound by the Member State Mandate. To reach a deal, the Commission will need to agree a landing zone for the agreement with the UK, while keeping the negotiations manageable, for example by largely excluding areas of interest like services that are too complex for this timeframe, as well as trying to keep diverging Member State interests under control. The Commission could thus be the UK’s most important ally in these negotiations if the UK wants to reach a deal.
- The European Parliament will have to agree on the final deal. It has put a strong emphasis on Level-Playing-Field Conditions (LPF), including demanding equivalent standards with dynamic alignment over time, also highlighting the need for effective carbon pricing. It also wants to see ‘tax dumping’ by crown territories addressed. It opines that the current UK system on data protection doesn’t meet ‘adequacy’ and that the UK should not have access to Schengen databases post Brexit. It claims there should be access to UK waters for EU fisheries and that it might be necessary to investigate protection for sensitive sectors like agriculture.
- The European Court of Justice (ECJ) might be called upon to assess whether any negotiation outcomes are compatible with the EU Treaties. If the ECJ rules that they are not, they can’t stand. Possible issues the ECJ might be required to rule on include the legality of extension of transition once the summer deadline has expired, any Commission assessment of adequacy of UK standards and/or involvement of the UK as a third country in any EU institution, programme or decision-making process.
Extension of transition
There is a provision for the extension of the transition period by an additional one or two years if agreed by July 2020. If the UK Government was to ask for this extension, in principle the EU27 would be minded to grant it, subject to a satisfactory arrangement on UK payments for continued participation in EU programmes (determined by the next Multi-annual Financial Framework (MFF) that has not yet been agreed). However, the UK Government has stated, and legislated to this effect, that it will not seek an extension beyond the end of 2020.
If there was a desire to extend transition after the July deadline has passed, there is a legal question whether this would be possible under the authority of Article 50 or whether it would constitute a new mixed agreement, with the associated more complex ratification. It is likely that an attempt to prolong transition after the July deadline would end up in front of the ECJ. Agreeing an extension after the deadline has passed would require strong (unanimous) political will by the EU, so the question would be in what circumstances such a request would be made (unresolved conflicts vs. a technical extension to finalise agreement).
There is a strong consensus across member states that there needs to be a robust governance mechanism to ensure that the UK implements its commitments under the Withdrawal Agreement and under any future agreement, in part explained by low trust in the level of commitment by the UK Government. This raises the question of oversight, including the role of the ECJ, as well as sanctions in case of breach, with guillotine clauses (suspending the entire relationship with the UK) seen as desirable by many Member States.
The underlying starting point for the EU is that the UK has become a third country. Any participation in any EU institution, programme or decision-making process will have to be compatible with EU rules on third countries.
Trade (tariffs and quotas)
The most important consideration for the EU27 is the integrity of the Single Market(SM). There is significant concern that the UK could be the soft underbelly of the Single Market. This implies that there has to be a robust system of checks, ensuring that UK products only have preferential access to EU markets if fully compliant with EU standards.
Additional issues might well arise during the negotiations, for example trade in agricultural products. If this becomes an issue, those EU countries with a relatively large agricultural sector will insist on protective measures.
There is a united front of countries interested in fisheries insisting on a high degree of access to UK waters post transition. These comprise of Northern/Western coastal states, including France, the Netherlands and Denmark. The countries not directly affected have backed these demands, for example agreeing to making the deal on fisheries a pre-condition for the wider trade agreement.
Level playing field (LPF) conditions
All member states share a concern over potentially unfair competition from the UK post Brexit, through lower standards on environmental and labour protection, taxation, state aid and competition policy. There is a strong belief in many capitals, including in Berlin and in Paris, that LPF conditions are essential and that has been reflected from the beginning in the EU mandate, and was also reiterated in the Political Declaration (PD).
Recent statements from the UK Government have intensified these concerns, with many EU Member States noting that the UK is reneging on the provisions of the PD. As a result, there are now voices, for example in France, that want to move from the originally envisaged non-regression, which would not restrict the UK if standards remain high, to dynamic alignment with ECJ oversight. While the Prime Minister indicated in his speech last week that the UK Government was committed to maintaining high standards in level playing field areas such as social and environmental regulations, concerns among the EU27 persist, noting that the arrangements must also safeguard the level-playing field in future if the UK Government of the day pursues different policies.
There are specific questions raised by Member States about state aid/competition policy, in particular in relation to governance issues. From the EU27 perspective, it is not sufficient to have the same rules but there also needs to be a system of effective enforcement/implementation.
Environment and climate change are further concerns, especially for countries that envisage a more ambitious approach by the EU in future. If the EU increases its commitment but the UK remains at the same level, it could create a competitive disadvantage for EU firms.
Northern Ireland protocol
One of the core concerns for Member States is the implementation of the commitments in the WA, in particular the Northern Ireland (NI) protocol. This has particular salience for the Republic of Ireland and, as in Phase 1, the remaining Member States will take the lead from Dublin. Unless the Protocol on NI is implemented to Ireland’s/the EU’s satisfaction, there will be no trade agreement. The integrity of the SM will remain of paramount importance, implying some checks in the Irish Sea.
Participation in EU programmes
The UK might wish to participate in certain EU programmes, for example Horizon Europe. If there is an extension to transition, the UK will continue to be in these programmes but there will be budgetary implications; these are, as yet, uncertain, given that, so far, the next MFF has not been agreed.
Without a deal, the UK is highly unlikely to continue being inside EU programmes in the longer term. With a deal, while there are some positive aspects of the UK’s continued participation, it is likely to take some time as it will depend on MFF agreement and subsequent third country arrangements. It is also likely that Member States that might forego a financial shift in their favour if the UK remains in the programmes and those that lose out financially from the UK leaving (through the impact on the new MFF) will look for some additional financial compensation.
On financial services, there are a number of countries that might benefit from relocation of UK activities, including the Netherlands (Amsterdam), France (Paris), Germany (Frankfurt and Ireland (Dublin). While there is some interest in preserving the UK contribution to the EU-wide capital market, for example in the area of venture capital, this will not change the overall approach to the UK’s financial services, which will effectively place the City of London outside the SM.
The EU27 have a significant interest in a high degree of cooperation on European foreign and security policies. However, this is dependent on progress in the trade negotiations.
When it comes to internal security, judicial cooperation and data sharing, there is a general interest in continued cooperation but the overall approach will be determined by what the legal framework allows in relation to third countries, as well as the consideration that the UK as a non-member state can’t have better access to EU systems than existing Member States, for example when compared to Denmark with opt-outs in the field of justice and home affairs.
When it comes to data protection, the overall EU approach is going to be driven by the legal framework. In essence, this is not a topic open to negotiations. If there is UK divergence, it implies that there can’t be any transfers of personal data between the UK and the EU.
Individual country issues/future issues
There is a high degree of uncertainty regarding any additional issues that might be brought up in the negotiations, depending on individual member state priorities. For example, there is a possibility that Gibraltar becomes a stumbling block in the negotiations if Spain chooses to highlight this issue. This has implications for the timing – if the talks get stuck on particular issues, it is hard to see how they can be concluded by the end of the year.
There is very little time to conclude a trade deal by the end of December but an extension to transition looks unlikely. There are many sources of potential conflict, with specific EU country issues coming to the fore. There might even be direct confrontation on some of these issues, for example on fisheries where there might well be clashes between UK and EU trawlers. As there will be little give, and given the EU’s leverage, if the UK wants even a basic deal by end of December, the UK Government will have to concede to Member State interests, for example on fisheries, LPF and governance. All of this implies that the chance of no deal remains very high.
Fabian Zuleeg; Chief Executive of the European Policy Centre