The authoritative source for independent research on UK-EU relations

28 Feb 2020

Relationship with the EU

a deal

The honest answer is that we don’t know – a deal will require one or both parties to move. But they are less far apart than they look or than the rhetoric or accompanying commentaries seem to imply.

First, both are looking at a relatively distant relationship. The UK has decided it wants to sit on the bottom step of the Barnier staircase. Indeed much of its mandate is a demand for an “unspecial relationship” – it fillets the EU’s recent FTAs and asks to be treated pretty much like any other Canadian/Japanese or South Korean.

The May rhetoric of bespokeness is ditched – as is any hint of common rulebooks, alignment or participation of EU agencies. Boris Johnson left the Cabinet over the Chequers proposal – and Chequers is now well and truly chucked for an ERG version of the future relationship.

Both sides do of course recognise that the UK and the EU will inevitably have a relationship that is different from the one with a country thousands of miles, not a few kilometres away, and one with a land border which needs to stay open. The UK wants, for instance, agreements on continued cooperation on police and justice which is not part of those normal trade negotiations.

It explicitly says that road haulage arrangements need to recognise geographic proximity – and makes a bid for “operating flexibilities” in the name of the environmental benefits efficiency can bring.

It wants to go much further than the EU has ever done before on recognising professional qualifications: if progress is not made on ways of easing cross-border service provision there will have to be some sort of special deal for the island of Ireland: services was the big omission from the protocol agreed last year.

The EU sees the UK’s proximity as an argument for its notorious level playing field provisions to guarantee a rogue UK does not put downward pressure on European standards. Michael Gove pointed out that the EU did not try to impose those on the US in the failed TTIP negotiations, even though the volumes of trade are similar but also pointed up areas where the UK is already well above EU minima.

Objectively the two sides are miles apart on this. But the EU’s demands are more modest than their rhetoric. On environment and social protection, the EU has asked the UK not to row back from the position at the end of transition – and then added some language about maintaining “corresponding high standards over time”.

There is a reference to “appropriate and relevant” Union standards – but also to “international standards”. There should be a landing point on judging each sides standards on their substantive merits. On tax, the UK does not seem to be far from offering what the EU is looking for.

That leaves state aid as the outstanding LPF battleground: the EU wants the UK to apply EU rules forever: the UK simply offers notification and consultation. The UK seems to have set the offer low – to give scope to move up. But (apart from the issue of how much the UK has already committed on this through the NI protocol) this seems a prime area where the EU has other means of protection through simple trade defence if it thinks the UK is subsidising an industry unfairly.

Fish may be the battle of the summer. There is huge scope here for both sides to cut their noses off to spite their faces: both in terms of scuppering the wider deal but also in ensuring a lose-lose both for their fishers and for their fish consumers. But this is the ultimate identity symbolism versus economic rationality debate – and where we end up will show which is likely to come out on top.

The other big gulf is on the form of the agreement. The EU wants to avoid a Swiss style arrangement with multiple treaties and a governance gap – and sees an overarching association agreement as a means of fending off demands for the same treatment from other third countries who have so-called MFN clauses in their existing agreements.

The UK wants a set of independent agreements each with their own dispute resolution processes to ensure that the EU cannot punish UK transgressions under one heading by action on another where it may be more vulnerable.

The EU also wants the ECJ to stay the ultimate interpreter of EU law. That will be the EU’s reddest line – but one where there are workarounds. Even the EU accepts the ECJ will not be the final arbiter in disputes under the future agreement.

EU voices are already denouncing the UK deal as cherry picking. But it is picking from an already established fruit bowl and is miles away from anything the UK wanted under Theresa May.

The UK accepts there will be checks, friction and formalities, even as it seeks ways of reducing them (though bizarrely it is only now asking for business views on the economic impact of their proposals – a case of lighting the blue touchpaper and standing well back).

Talk of leaving the single market and customs union and yet retaining the “exact same benefits” is a distant memory. It means ministers have accepted (even if they can’t bring themselves to say it) a hard border in the Irish Sea.

In the autumn, the UK showed it could move from its firm commitments to do a deal. But the EU showed it could also be pragmatic: it traded a (potentially) forever guarantee of no hard border in the backstop for a frontstop with a unilateral exit mechanism and took a bet that Stormont would never vote for a hard border in the island of Ireland.

Whether we end up with a deal or not depends on two things.

First: is the EU prepared to take a bet that, for all its rhetoric, a “sovereign” post-Brexit UK won’t look hugely different from the one it has been used to living with for the last 47 years – and if it does, the EU has the means to defend itself?

Second, in the absence of the parliamentary pressure which forced no deal off the table last year, is the government prepared to take some domestic political hits to avoid leaving the EU on what it now dubs “Australia-style terms” – but which is really the  more familiar trading with our largest partner on WTO terms.

By Jill Rutter, senior fellow at The UK in a Changing Europe.

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