The EU-UK Future Relationship Negotiations at the halfway point

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After four rounds of the EU-UK future relationship negotiations there have been few signs of progress.  Key sticking points revolve around level playing field provisions, fisheries, and governance of the future relationship.  In addition, an exchange of letters between the chief negotiators ahead of round four suggested that the negotiations were going nowhere fast.  With the transition period set to end in just over six months’ time, the race is on for the UK and the EU to reach an agreement on the future relationship.

The High-level conference

In that environment, Prime Minister Boris Johnson met with the European Commission President Ursula von der Leyen, along with her European Council and European Parliament counterparts on 15 June.  The High-level summit was timetabled to allow a stock take of progress in the negotiations.  The Joint Statement published following the meeting suggested a more positive outlook for the negotiations with a joint commitment to increase momentum in the discussions:

“The Parties agreed nevertheless that new momentum was required. They supported the plans agreed by Chief Negotiators to intensify the talks in July and to create the most conducive conditions for concluding and ratifying a deal before the end of 2020. This should include, if possible, finding an early understanding on the principles underlying any agreement.”

No extension to transition

The work to find an agreement has arguably been given more urgency by the UK Government’s decision not to seek an extension to the transition period.  This means that on 1 January 2021 the UK will exit transition and, unless a trade agreement is ratified, will be trading with the EU using World Trade Organisation rules – in effect a no-trade deal Brexit. The UK Government may be hoping that now a decision on not extending transition has been made it will focus EU minds in working towards a deal.

The UK Government’s decision not to seek an extension to the transition period was condemned by both the Scottish and Welsh Governments.  It is likely to put more strain on intergovernmental relations around Brexit-related matters. 

Deal or no-deal?

Whilst the mood music emanating from the High-level conference was more positive and a new intensity will be given to the negotiating rounds during July and August, there is still a significant gap between both sides in terms of negotiating red lines.  As discussed in a previous SPICe blog, a deal is possible, however, it will require political compromise from both sides.  When the former Permanent Secretary at the Department for Exiting the EU, Philip Rycroft gave evidence to the Scottish Parliament’s European Committee on 4 June, he said reaching a deal was in both the EU and the UK Government’s interests.  He also suggested that whilst it would require an enormous amount of work, a deal is still possible.  On how a deal could be reached, Phillip Rycroft told the Committee:

“From looking at those issues carefully, I have no doubt that there is scope for compromise. It is possible to see a way forward on each of those three matters. It depends, crucially, on the political will to make compromises, which will have to come from both sides. It is not a one-way street; both sides have taken strong positions on those matters and both will have to shift. In my view, if the political will exists, a deal is possible by the end of the year.

How likely is that outcome? I am not a betting man, but if I was asked for odds I would not put them much better than 50/50. Even at that, I am probably ahead of most commentators, who are more gloomy about it.”

What kind of a deal?

Whilst a deal is possible before the end of 2020, it is very unlikely it will cover all the different areas covered in both the EU and UK negotiating texts.  For example, as the clock ticks down it is probable that both sides will seek to focus on some key areas to ensure the basis of an agreement with negotiations continuing in other areas into 2021.  This would result in a free trade agreement and possibly an agreement on fisheries, whilst in other areas such as security and transport a new agreement might need to wait.  Phillip Rycroft confirmed this in his appearance with the European Committee:

“We might get a free-trade agreement, but there are plenty of other domains—I have mentioned security; other examples are transport, energy and UK engagement in EU programmes—which might not be sorted out within that timescale. I suspect that even if we get a deal, we will still see negotiations continuing into next year on various aspects of our future relationship.”

Looking ahead

The negotiations are set to continue during the summer with both sides aware that a deal probably needs to be reached by October to allow it to be ratified in time for it to come into force at the end of the transition period.  Reaching a deal is likely to require political compromises on both sides and may result in a more streamlined agreement than both sides might have hoped for.  A deal which focuses on a small number of areas will also mean that negotiations will continue into 2021 and beyond as the EU and the UK seek to add elements to what they manage to agree in the next six months.

Iain McIver, SPICe Research