EU-UK negotiations – seconds out, round 3!

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The third round of future relationship negotiations between the EU and the UK government took place last week.  The negotiations were conducted by video-conference due to COVID-19 and it seems all did not go well. So, what are the sticking points and how might they be addressed?

Round 3 summary

With the deadline for reaching a deal now just seven and a half months away (assuming there is no extension to the transition period) progress and goodwill appeared to be in short supply.  Whilst both the EU’s chief negotiator Michel Barnier and the UK’s chief negotiator David Frost made statements about continuing to work for a deal, both sides’ feedback did not suggest any sort of agreement was in the offing. 

Disagreements about requiring the UK to continue to follow EU level playing field provisions and the nature of a future fisheries agreement continue to stall the negotiations.  On level playing field provisions, Michel Barnier suggested that:

Despite its claims, the United Kingdom did not engage in a real discussion on the question of the level playing field – those economic and commercial “fair play” rules that we agreed to, with Boris Johnson, in the Political Declaration.

In response, David Frost said that whilst there was still time to agree a comprehensive free trade agreement along with other sectoral agreements, it would not be possible if the EU continues to insist on:

including a set of novel and unbalanced proposals on the so-called ‘level playing field’ which would bind this country to EU law or standards or determine our domestic legal regimes, in a way that is unprecedented in Free Trade Agreements and not envisaged in the Political Declaration

Given both the EU and the UK have cited the text of the Political Declaration it is worth noting that in relation to a level playing field it said:

Given the Union and the United Kingdom’s geographic proximity and economic interdependence, the future relationship must ensure open and fair competition, encompassing robust commitments to ensure a level playing field. The precise nature of commitments should be commensurate with the scope and depth of the future relationship and the economic connectedness of the Parties.

On fisheries, the EU believes any agreement should be based on its current access to UK fishing waters whilst in response David Frost said that agreement will be impossible whilst the EU continues to “insist on fisheries arrangements and access to UK fishing waters in a way that is incompatible with our status as an independent coastal state.”

In a further statement which potentially makes future negotiations harder, David Frost added that the UK government couldn’t understand why the EU continues to “insist on an ideological approach which makes it more difficult to reach a mutually beneficial agreement”

Possible compromises?

Given both sides seem determined to hold their respective red lines, it is still unclear whether a deal is possible.  Speaking to the House of Lords European Union Committee on 5 May, the Chancellor of the Duchy of Lancaster, Michael Gove MP speculated about the possibility of

reaching a deal with the EU that was not to be zero tariff and zero quota, and there were to be some tariffs, particularly perhaps on agri-food. 

However, even if the UK government did seek a deal that didn’t provide for complete coverage of zero tariffs and zero quotas, Michel Barnier indicated that this would not necessarily be a straightforward approach.  He suggested it would set EU-UK trading relations back decades and lead to “a detailed – and highly sensitive – negotiation of each tariff line” which as demonstrated by the EU’s deals with Japan and with Canada can take years.  Barnier added that such an approach would still require the same level playing field rules adding:

But more than this, even if we were to eliminate on 98% or 99% of tariffs, the EU would still demand the same strong Level Playing Field guarantees.

If there is to be a compromise on the EU’s level playing field demands, it may come in the shape of the UK government signing up to a commitment to non-regression.  This would involve a guarantee from the UK government that for example, environmental and labour standards will not be reduced from the level they currently are.  This would be rather than a commitment to keep pace with changes which may take place within the EU in the future.  Whether this would satisfy the EU’s demands would remain to be seen.

On fisheries the sticking point revolves around how much access EU boats have to UK waters.  The EU wants a permanent arrangement based on current access which EU boats enjoy whilst the UK is in effect a member of the Common Fisheries Policy. The UK government wishes to take back control of UK waters and agree a fisheries arrangement – presumably with some access for EU boats to UK waters – on an annual basis.  If there is to be a compromise on fisheries, it may be that the UK agrees to a multi-year arrangement – but not a permanent one – giving EU boats a degree of access to UK waters.  The level of that access may depend on each side’s relative desire to get a deal.

On to June

The fourth round of negotiations are due to take place during the week of 1 June.  Both sides will hope to see progress on negotiations ahead of a high-level EU-UK summit scheduled for later in the month to review progress. 

If little progress is made during the first week of June, the question of whether either side should seek an extension to the transition period is once again likely to be raised.  With the deadline for any request falling at the end of June, little time will exist for agreeing such an extension.  However, the UK government has consistently stated it will not look to extend the transition period and would also reject any EU request for an extension.

Another possible outcome is that either the UK or the EU may end the talks at some point over the next few months if they believe a deal is not possible.  When pressed on this issue by the House of Commons Committee on the Future Relationship with the EU, Michael Gove refused to be drawn into a discussion about whether the UK might leave the talks if a deal didn’t look likely to be achieved. 

Whatever outcome the UK government wishes to pursue, it is clear that the clock is ticking on the time available to reach an agreement and avoid an effective no-deal exit (from the transition period) at the end of the year.  As a result, June is likely to be a key month in the negotiations.

Iain McIver, SPICe Research