Barely 48 hours after Boris Johnson declared it was “very, very likely” that UK-EU trade deal talks would fail, the UK prime minister agreed to junk a Sunday deadline for a firm decision on their fate, and sent his officials back to the negotiating table.
Negotiators had toiled until late Saturday in Brussels on the core sticking points in the talks on a deal that is supposed to take effect on January 1: fair competition arrangements for companies achieved through a regulatory “level playing field”; and EU fishing rights in UK waters.
As British negotiators refuelled on late-night bacon sandwiches, and some of their EU counterparts headed off to a well-known Brussels friterie, both sides sensed there was a possible way forward.
“We are not close to a deal — it is just that there is enough progress for them to consider it is worth continuing the talks,” said one EU official. “We are not flogging a dead horse.”
Mr Johnson’s agreement to extend the talks in a 30-minute phone call on Sunday with European Commission president Ursula von der Leyen was his acknowledgment that it was worth further effort in the negotiations — and an implicit recognition of the consequences of abandoning them.
Boris Johnson briefs members of the Cabinet from his office in Downing Street after his call with European Commission president Ursula von der Leyen © Andrew Parsons / No10 Downing Street
Failure in the talks would leave the EU and UK trading on basic World Trade Organization terms from January 1: a scenario in which UK farmers would face potentially crippling tariffs on their exports and EU fishermen risked being expelled from their traditional hunting grounds in British waters.
To ram that final point home, Britain had even put some Royal Navy patrol ships on standby to stop EU fishing boats entering British waters in the event of a no-deal Brexit on January 1.
People close to the negotiations said the progress in the talks since Friday had been towards cracking what has become the key sticking point: the challenge of designing a system that can satisfy EU demands for fair business competition without falling foul of the UK’s determination to escape the bloc’s rules.
Efforts to square that circle have focused on designing what negotiators refer to as a “mechanism” that would allow either side to raise concerns if it felt that big differences in UK and EU environmental regulations, labour rights or other rules had placed its companies at a competitive disadvantage.
In such a scenario, there would then be consultations about what to do, and efforts to establish if the level playing field for business was really in jeopardy.
As a last resort, the injured party could take countermeasures — imposing tariffs on the other side’s products so as to mitigate the damage and restore fair competition.
Mr Johnson last week rejected what he claimed was Brussels’ attempt to get the UK to follow the evolution of EU rules, or “automatically” face trade sanctions — something the bloc has denied.
People briefed on the talks said the two sides were now exploring ways to make sure the system could not be abused by spurious claims, and to ensure that a strong role was given to independent arbitration.
Brussels has also sought to make clear that the mechanism for dealing with regulatory divergence would look at the outcome of each side’s rules, rather than how closely British standards mirrored EU ones in form.
Among the difficulties in designing the mechanism are establishing the burden of proof needed for when it can be triggered, as well as defining the industries that are impacted when it comes to the potential application of tariffs. But one EU diplomat said talks on the system were now “going in the right direction”.
The EU side remains unsure as to whether they are witnessing the customary drama that precedes any large trade deal, or whether Mr Johnson genuinely does not have the appetite to take the necessary political leaps needed to forge an agreement that impinges on what the Conservative party sees as the UK’s sovereignty.
But the tone of the call between Mr Johnson and Ms von der Leyen on Sunday appears to have been friendly, with one EU official describing it as “cordial and businesslike”.
EU officials said several further days of talks in Brussels may be needed to work out whether the progress achieved this weekend can be built on.
The question is whether negotiators can hatch compromises that leaders feel can be sold on both sides of the English Channel, added one official.
People close to the talks emphasised the hard yards that remain to be travelled to get an agreement over the line, even after some negotiators put in 100-hour weeks to get the talks to this point.
While talks on the level playing field made tentative progress this weekend, the EU and UK remain stuck on key aspects of the other main issue that has dogged the negotiations: fishing.
According to diplomats, talks on quota rights for EU fishing boats in UK waters, as well as on the principle of access, are deadlocked.
One thing that has changed is a landmark deal, forged on Thursday at an EU leaders’ summit, to unlock a €1.8tn recovery fund and budget package, thereby removing some of the economic uncertainty that has been hanging over the bloc.
That may strengthen confidence among EU member states that they are ready for all consequences of the trade deal talks with the UK, including their possible failure.
“Progress is required across all remaining open fronts — because they are strategic for all sides,” said one EU official.
Source: Economy - ft.com
