Art of the Brexit deal

With the dead­line for the UK to ask for an ex­ten­sion tran­si­tion gone, Bri­tain shows it means busi­ness

The Daily Telegraph - Business - - Front Page - Liam Hal­li­gan

Ig­nor­ing the dead­line for re­quest­ing an ex­ten­sion shows UK means busi­ness

Face-to-face Brexit talks restarted in Brus­sels on Mon­day for the first time since the start of this pan­demic. And yes­ter­day, with me­dia at­ten­tion fo­cused on Covid-19, an im­por­tant mile­stone qui­etly passed.

The end of June dead­line for the UK to ap­ply for “tran­si­tion” pe­riod ex­ten­sion has gone. So we will fully leave the Euro­pean Union at the end of De­cem­ber, deal or no deal.

The Gov­ern­ment’s re­fusal to pro­long ne­go­ti­a­tions is a vic­tory for com­mon sense. Any prospect of an ex­ten­sion meant the chances of strik­ing a deal were slim – that’s how se­ri­ous deal­mak­ing works.

Now we’re def­i­nitely leav­ing, in six months’ time, minds will fo­cus and the hag­gling can be­gin in earnest.

Boris John­son has set an end of Septem­ber dead­line to con­clude any UK/EU free trade agree­ment – so busi­nesses have time to pre­pare for life be­yond the EU’s sin­gle mar­ket and cus­toms union. There’s three months to get this done, not six.

Since the Covid lock­down, talks have been held via video link – which David Frost, UK chief ne­go­tia­tor, be­lieves has hin­dered progress. He now warns “some of the EU’s un­re­al­is­tic po­si­tions will have to change” if any FTA is to be struck. “UK sovereignt­y, over our laws, courts, or our fish­ing wa­ters, is not up for dis­cus­sion,” he says. While ob­vi­ously stak­ing out ground, many will agree Frost has a point.

In 2017, Michel Barnier said that, if Brexit went ahead, “Bri­tain would be treated like any other third coun­try with no spe­cial favours”. The de­fault op­tion, he in­sisted, was a plain old FTA like those the EU has with Canada and South Korea. Back then, when

Down­ing Street was at the whim of a pro-Re­main Par­lia­ment, and Brexit looked re­versible, Barnier’s words were pre­sented as a warn­ing.

Now John­son has a chunky ma­jor­ity, and we’re def­i­nitely leav­ing, Bri­tain is ask­ing pre­cisely for an FTA like that al­ready signed by the EU with Canada. Yet the large green tick next to the maple leaf flag which once adorned Barnier’s fa­mous “stair­case” di­a­gram is now a big red cross.

De­spite Frost ask­ing for “no spe­cial favours”, pre­sent­ing de­tailed draft pro­to­cols based on FTAs the EU has al­ready struck else­where, Barnier says “non”. It seems Brus­sels is now guilty of the very “cherry-pick­ing” it has long said the UK must avoid.

Con­tin­ued in­sis­tence on a “level play­ing field” means Bri­tain would have to com­ply au­to­mat­i­cally with EU rules on labour, en­vi­ron­men­tal pro­tec­tion and state aid, con­trary to stan­dard in­ter­na­tional FTA prac­tice.

Some FTAs have “non-re­gres­sion clauses”, so nei­ther coun­try can di­lute ex­ist­ing stan­dards, in­clud­ing the EU’s deal with Canada. But that’s way short of be­ing forced to align with any fu­ture changes in EU law – which amounts to one-sided reg­u­la­tory dik­tat, with in­evitable dis­putes re­solved by the Euro­pean Court of Jus­tice.

This quasi-ju­di­cial body is no­to­ri­ously po­lit­i­cal, its rai­son d’être to serve EU in­ter­ests.

Barnier also wants Bri­tain kept in the Com­mon Fish­eries Pol­icy – with au­to­matic EU ac­cess to UK wa­ters, on un­changed quo­tas, in per­pe­tu­ity. This makes no sense, not least be­cause the CFP en­cour­ages dis­as­trous over­fish­ing. The Bri­tish fleet cur­rently gets less than a third of the quota across UK fish­ing grounds, a re­al­ity which has dec­i­mated a once proud in­dus­try – which, while rel­a­tively small, has his­tor­i­cally brought mod­er­ate eco­nomic re­lief to some of Bri­tain’s most mar­ginal re­gions.

There’s no prece­dent for mak­ing an FTA con­tin­gent on ac­cess to nat­u­ral re­sources, as Barnier in­sists. This is less a grown-up agree­ment between sov­er­eign na­tions than a colo­nial-style re­la­tion­ship which a large power im­poses on a much weaker one, typ­i­cally at the point of a gun. Nor­way holds an­nual EU fish­ing quota ne­go­ti­a­tions, so why not the UK?

If we do leave with no FTA, then the UK and EU will re­vert to trad­ing un­der World Trade Or­gan­i­sa­tion rules, which is no dis­as­ter.

Most trade in the world is un­der such ar­range­ments and stan­dard WTO tar­iffs are gen­er­ally low and fall­ing.

The UK trades us­ing WTO rules with the US, our sin­gle big­gest coun­try trad­ing part­ner. Bri­tain’s non-EU trade, largely un­der WTO rules, has grown fast in re­cent years, al­ready forms the ma­jor­ity of our trade and gen­er­ates a large sur­plus.

Our EU trade share has, at the same time, shrank – and such trade has long been in deficit. That’s de­spite the much-vaunted “sin­gle mar­ket”, un­der which many of our ser­vice ex­ports are, in prac­tice, blocked.

Some thought this corona cri­sis would have pro­voked a UK tran­si­tion ex­ten­sion. But while “No Deal” once looked scary, the post-Covid shift to­ward “sup­ply chain se­cu­rity” means global trade will any­way be re­con­fig­ured. Ad­di­tional cross-Chan­nel cus­toms pro­ce­dures can now be part of a world­wide sys­tem of ad­di­tional corona-re­lated checks. Plus, tak­ing back state aid pow­ers now may prove in­valu­able as the UK thinks about how to re­con­struct its econ­omy.

It was never likely John­son would opt for a longer tran­si­tion pe­riod. That would have bro­ken his De­cem­ber 2019 man­i­festo com­mit­ment. An ex­ten­sion would also have seen Bri­tain in­cur more than £15bn gross an­nual EU pay­ments, while re­main­ing on the hook to help res­cue eu­ro­zone mem­bers which seem, once again, on the verge of fi­nan­cial cri­sis.

The Prime Min­is­ter wants an EU trade deal, but not badly enough to ac­cept any­thing like Barnier’s con­di­tions. And the Septem­ber dead­line is real, not least as any FTA will need rat­i­fi­ca­tion by the Euro­pean Par­lia­ment and count­less EU re­gional as­sem­blies which could pull stunts. Never un­der­es­ti­mate the de­ter­mi­na­tion of Bel­gium’s tiny Wal­loon Assem­bly to hold an en­tire con­ti­nent to ran­som.

‘It seems Brus­sels is now guilty of the very cher­ryp­ick­ing it has long said the UK must avoid’

The EU wants to keep Bri­tain in the Com­mon Fish­eries Pol­icy, an idea that needs to be blown out of the wa­ter very fast

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