The battle lines for talks on a post-Brexit settlement between Britain and the EU have been set, accompanied by a predictable opening salvo of cross-channel accusations ahead of negotiations that begin on Monday.
UK prime minister Boris Johnson on Thursday published a 30-page plan to guide Britain’s approach to talks on a future relationship with the EU; on Tuesday the 27 members of the EU agreed their own negotiating mandate, running to 46 pages.
The task of the negotiating teams will be to find a compromise between the two texts, which include very different visions of the future terms of trade between the UK and EU, and to conclude a deal before the Brexit transition period ends on December 31.
Both sides are targeting a free trade agreement, removing most tariffs and quotas. These are the four key points to watch:
Level playing field
London and Brussels agreed in October in a political declaration that a “robust” regime to ensure “fair and open competition” between the UK and the EU would be required to underpin a new trading relationship. The problem is that they do not agree on what that means in practice.
Michael Gove, the cabinet office minister, said on Thursday that Britain wanted full autonomy to set its own rules on state aid, labour and the environment without being legally tied to EU standards, which Brussels views as “a reference point”.
Mr Gove added that Britain wanted much looser “level playing field” rules than those proposed by the EU, such as those agreed between the EU and Canada. He does not accept the EU’s contention that Britain’s geographic proximity to the bloc requires much tighter rules.
“Geography is no reason to undermine democracy,” he told MPs. Downing Street rejects out of hand the EU’s demands that Britain should continue to apply Brussels rules on state aids in perpetuity.
However the British mandate does accept that both sides should commit “not to weaken or reduce” current levels of labour and environmental protection. Trade experts believe there is enough ambiguity in the language being used by the two sides to allow a compromise.
Fisheries
Britain becomes an “independent coastal state” as a result of Brexit and is legally entitled control of what Mr Johnson calls the country’s “spectacular maritime wealth”.
Ensuring that fishing rights do not die with Brexit is a priority for the EU’s coastal states, not least France. The EU mandate demands “continued reciprocal access” to each other’s waters: nobody disputes fishing grounds are richer on the British side.
The sector employs fewer than 180,000 people in the EU but is the economic lifeblood of coastal communities, giving the industry added political leverage. In the UK, fisheries account for 0.1 per cent of the UK economy, but the sector is totemic to Brexiters.
The EU wants a long-term deal guaranteeing access to British waters for the bloc’s fishermen, there will be a separate treaty on this, while the British mandate argues that there should be “annual negotiations” to agree reciprocal access.
Mr Gove cited the current arrangements where Norway, Iceland and the Faroes agree annual fisheries deals with the EU as what Britain wants to achieve. That will not be enough for Brussels; fisheries could be the first big flashpoint of the talks.
Financial services
Financial services accounted for 6.9 per cent of UK gross domestic product in 2018 and future access to the European market is crucial not just for the City of London but to EU consumers and businesses who rely on its deep pool of capital.
The EU negotiating mandate says that the two sides will oversee interactions between the systems using “respective unilateral equivalence frameworks”, where both sides recognise the efficacy of each other’s regulations.
Mark Carney, Bank of England governor, has said Britain should not be a ‘rule taker’ from Brussels © Charlie Bibby/FT
The City of London generally accepts the view of Mark Carney, Bank of England governor, that Britain should not be a “rule taker” from Brussels and that access to the single market should be through an equivalence regime.
But the British mandate confirms that Mr Johnson’s negotiators will attempt to secure a more stable regime than that on offer from Brussels to third countries, under which equivalence approval can be withdrawn with just 30 days’ notice.
It talks about “appropriate consultation and structured processes for the withdrawal of equivalence findings” — in other words a way to allow both sides time to sort out their differences before access is withdrawn. The EU will play hardball on this.
The timetable
Trade talks begin in Brussels on Monday and will switch to London later in the month. David Frost, a pro-Brexit former British ambassador to Denmark, will lead the talks for the UK; Michel Barnier will continue as the EU’s chief negotiator.
Brussels sees time as one of its big advantages in the negotiations because EU negotiators think Britain has more to lose from a “no-deal” outcome than the EU27.
Mr Johnson on Thursday tried to counter this threat by claiming that he would be happy to walk away from the talks in June if “the broad outline of an agreement” was not in sight and if negotiations were unlikely to be wrapped up by September.
Few in Brussels believe the real haggling will start before the autumn, so a game of chicken will develop in the coming months.
Mr Johnson is adamant that Britain would be prepared to exit the transition period on December 31 without a trade deal and to do business with the EU on World Trade Organization terms, with tariffs and quotas as well as plenty of paperwork.
Businesses in the UK are being told to prepare for that worst-case outcome. It would hurt both sides, but Brussels knows that because the EU is such a big part of total UK trade proportionately, it would hurt Britain more.
“If Number 10’s vision of sovereignty means jumping off the cliff edge, no one will be able to stop Britain,” said one EU diplomat. “A no-deal would hurt Britain more than the EU.”
Source: Economy - ft.com
