Boris Johnson chose the Royal Naval College in Greenwich to make his long-awaited “free trade” speech. In the vast Painted Hall, a celebration of Britain’s maritime supremacy and global dominion, he proclaimed: “This is the newly forged United Kingdom, on the slipway.”
On the day that the UK and Brussels set out their competing visions of their future-relationship, the prime minister said Britain was about to embark on an expansion of global trading ties comparable with that ushered in by the “new maritime technology” of the 18th century.
But before he had even begun speaking, Michel Barnier, the EU’s chief Brexit negotiator, made clear that access to the EU’s market would come with tough conditions attached — both in terms of Britain’s continued adherence to the bloc’s rules and on its acceptance of a role for the European Court of Justice.
Mr Johnson insists that such demands are unjustified and that Brussels has failed to grasp the fact that Britain is now an independent, sovereign country.
“There is no need for a free trade agreement to involve accepting EU rules on competition policy, subsidies, social protection, the environment, or anything similar any more than the EU should be obliged to accept UK rules,” he said, noting that Britain wants a trade deal that is “similar to Canada’s”.
Does Johnson have a point?
Britain is right that existing EU trade deals with other countries, such as Canada and Japan, contain nothing comparable to the “level playing field” of regulatory alignment that the EU is asking of Britain.
Brussels’ draft mandate for the negotiations says the EU will offer a tariff-free, quota-free trade deal if Britain agrees to keep upholding EU labour market and environmental laws as they stand at the end of the country’s post-Brexit transition period at the end of the year.
For state aid, the EU is going further and asking Britain to fully apply the EU’s system of subsidy restrictions, and for its authorities to work in “close co-operation” with the European Commission.
But Brussels argues that Britain is not really seeking a trade deal that is “similar to Canada’s”.
The planned market liberalisation — set out in a political declaration that Mr Johnson agreed with EU leaders last year — goes beyond any agreement the EU has with another leading economy.
Mr Barnier also said that the geographical proximity of the UK and the size of trade flows made the situation unique.
What is an Australia-style trade deal?
Mr Johnson said that if it’s impossible to reach a deal with the EU, there is always the alternative model of Australia.
The remarks have prompted plenty of head scratching in Brussels, where officials note that there is little in the bloc’s relationship with Canberra that goes beyond basic World Trade Organization terms.
The EU and Australia have a civil aviation agreement, a mutual recognition agreement on product testing, and even a 2008 agreement on trade in wine — covering non-tariff issues such as labelling. But the limitations of the current relationship are such that Australia is at present negotiating a trade agreement with the EU along Canada lines.
Trade experts see the Australia idea as little more than a euphemism for a no-deal Brexit at the end of 2020, meaning tariffs on UK-EU trade.
Mr Johnson’s preferred Canada-style deal would put the UK-EU relationship on a different footing — with preferential market access for goods and services and extensive regulatory co-operation.
What are EU demands on regulatory alignment?
Brussels argues that the concept of a regulatory “level playing field” is not new.
The Canada deal, known as Ceta, includes commitments by both sides not to weaken workers’ rights; Brussels is in the middle of a dispute settlement process with South Korea over what it alleges is Seoul’s violation of commitments to uphold International Labour Organization standards; and the EU’s trade deal with Japan contains a promise to honour the Paris climate agreement.
But the EU acknowledges that what it is asking of the UK goes further both in terms of the requirements themselves and how they are enforced. Brussels wants the UK-EU trade deal to grant both sides the right to take rapid action, including reducing market access, if the other does not live up to its obligations.
Another bone of contention is the role of the ECJ in policing any future trade deal. Brussels insists that the ECJ must be the final arbiter of any disputes over how to interpret EU law (something that the UK agreed to in the political declaration).
It is a role that could give the court an important say over issues such as whether Britain is living up to level playing field obligations.
For the EU, this is a non-negotiable point and is already part of pacts it has with other countries that refer to EU law, such as its association agreement with Ukraine.
Where does Britain want to diverge?
Mr Johnson and senior ministers have always been reluctant to say exactly how they want Britain to diverge from EU rules; they make a broader sovereignty point that they seek “a right to diverge, not an obligation”.
On the big “level playing field” question — covering issues such as competition policy, state aid, environmental regulation and workers’ rights — Mr Johnson wants Britain to have the right to forge its own policies.
He said Britain would never engage in “dumping” of any kind and that it was already more heavily regulated than the EU in most areas. “Are we going to insist that the EU does everything that we do, as the price of free trade?” he asked. “Of course not.”
Ministers privately tell companies that they do not expect to diverge greatly from existing rules in areas such as manufactured goods and food safety, making the point that this would require British companies to run two separate product lines.
But they often cite the right for the UK to set a “nimbler” regulatory framework in areas where the EU does not have rules, such as artificial intelligence, robots and driverless cars.
Mr Johnson has also spoken about the prospect of services industries, which are unlikely to be covered in any great depth in a Canada-style deal, operating under a more bespoke British regulatory system.
Source: Economy - ft.com
