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01 Jun 2020

Relationship with the EU

draft trade agreement

On 19 May 2020, the UK government published its own draft Comprehensive Free Trade Agreement (CFTA) along with a number of other related documents.

According to Michael Gove, the purpose of the move was to facilitate discussion in forthcoming negotiations by making the UK’s stance clear not only to the European Commission but also the member states.

The draft agreement and related documents addressed everything from aviation to social security coordination. Although the divide between the UK and the EU appears wider than ever, there may be more scope than it seems for a patchwork compromise.

The bulky 291 page agreement was accompanied by a short four page letter was addressed to Michel Barnier, the EU’s chief Brexit negotiator, from David Frost who is the Prime Minister’s Europe Adviser and chief negotiator.

It was unbending, seeking to establish that the UK was simply building upon precedent in rejecting the ‘level playing field’ required by the EU in exchange for market access, and forcefully making the case for the CFTA.

Furthermore, whilst the letter acknowledged the EU’s concerns about the UK’s proximity to the EU bloc it simply dismissed them as being without precedent.

Thus while the UK proposed a dispute settlement mechanism similar to the one that the EU has with Canada it did not concede that the cost of noncompliance by the UK would be much higher set against the cost of noncompliance by Canada.

In addition, the letter does nothing to allay the fear that concessions to the UK could incentivize other member states to detach themselves at some point.

The letter and the draft agreement were constructed on the basis of what might be described as bricolage, insofar as their provisions were framed around sets of arrangements that are incorporated within the EU’s existing free-trade agreements with Canada, Norway, Mexico and Japan.

The whole exercise could be described less charitably as an overt assault on the EU’s principle of ‘no cherry picking or as Angela Merkel put it ‘keine Rosinenpickerei’.

The letter’s tone and style were however just as important as its content. It went considerably beyond diplomatic politesse and asserted that the EU’s demands were ‘unbalanced, and unprecedented’. It plaintively asked why the UK was ‘so unworthy’ of a free trade agreement along the lines it had proposed.

In his response, Barnier did not hide his irritation with the decision to go public, and called for ‘serious engagement’ by the two parties underlining that there is ‘no automatic entitlement’ for the UK.

Subsequent comments by both Frost and Gove continued to strike a defiant tone.

On 27 May, they gave evidence before the Commons’ Committee on the Future Relationship with the European Union (formerly the Brexit Committee), and stressed that the UK would not seek – nor accept – an extension to the transition period.

They also asserted that it was the EU, rather than the UK, that would have to give ground. It had, Frost said, to “evolve its position to reach an agreement … It’s their call”.

Why has the UK chosen to take such a forceful public stand at this point and what does it augur for the future? It could be understood as a ‘wedge’ strategy akin to those pursued over four decades by US Republicans.

There has long been a hope in London that some EU member states with traditionally close ties to the UK could be detached from the Franco-German bloc. Indeed, this hope dominated British thinking at the time of the 2016 referendum and during the initial stages of negotiations around the Withdrawal Agreement.

Frost’s tenure as the UK’s Ambassador to Denmark between 2006 and 2008, a country often seen in the past as a eurosceptic ally, may have led to residual hopes that Barnier can and will be reined in by some of the member states.

There is a telling clue in the wording of Frost’s letter:  ‘We are very clear that we are not seeking to negotiate directly with member states and that it is for you, as the EU’s negotiator, to manage any differences of perspective that may emerge.’ This may well mean exactly the opposite.

At first sight there might be something in this. There are good reasons for thinking that while the EU has remained surprisingly united during the divorce proceedings, it may yet prove to be more difficult to maintain unity in negotiations about the future relationship.

Neither of these interpretations however bears all that much scrutiny. Both the letter and the draft agreement are unconvincing as a negotiating ploy or as a wedge strategy.

The letter does not hold out any promise of prospective gains for the EU or particular member states, if they were to embrace the British deal. It does not even hint at the common negotiating tactic of asserting that a particular deal is in everybody’s shared interests.

Or is the hardline stance simply an effort to play hardball? The essential point about hardball strategies is however that they are hardly ever as hardball as they appear. Time is short. Barnier has said that there is a de facto deadline of 1 July by which the text of an agreement must be concluded.

Yet, despite their seemingly unyielding tone, there are, on the edges, hints that some form of agreement may be within grasp.

Alongside the more unbending comments to the Commons’ committee, Frost said “We are not saying that there can be no level playing field provisions … We are simply saying that there must be provisions which are appropriate to a free trade agreement …”

Even when it comes fishing, widely seen as one of the most intractable issues insofar as the UK is seeking to protect its coastal waters, Reuters reported the words of an unnamed EU diplomat: “Our opening line of keeping the current terms is impossible to uphold … We’d be looking to some narrowing of the positions …that’s where the room for compromise lies.”

At this point in time, some form of patchwork compromise based around bartering and regulatory differences between sectors therefore seems the most likely outcome.

The uncertainty that continues to surround the provisions of the Withdrawal Agreement addressing Northern Ireland say much about the negotiating styles of both parties.

The needs of the City are still in play and – after the pandemic – there is little enthusiasm even amongst hardcore Eurosceptics for another high-stakes standoff or the possibility of tailbacks reaching the M25. And the EU might just allow some cherries to be picked.

By Professor Mads Dagnis Jensen, and Professor Edward Ashbee, both Copenhagen Business School. 


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