Deal or no deal: a guide to trade negotiation terminology
Canada, Australia or somewhere else?
What has Boris Johnson said? The prime minister claimed that due to the stubborn intransigence of the EU, he had to conclude that the “Canada-style” trade deal that he was seeking was not going to be successfully negotiated without a fundamental change in Brussels’ negotiating positions. He said it was therefore important that British businesses prepare to trade with the EU on the basis of “arrangements that are more like Australia’s, based on simple principles of global free trade”.
So what’s a Canada-style deal?
The EU has a trade agreement with Canada called the Comprehensive Economic and Trade Agreement, or Ceta. This is the type of arrangement that, at the start of the Brexit talks, the EU’s negotiator, Michel Barnier, said would be possible if the UK wished to leave the single market and customs union. There would be checks on imports and exports and a great deal more red tape for businesses, as the UK would take itself out of the EU rulebook. But such a deal would reduce tariffs, or taxes, on imports and quotas – the amount of a product that can be exported without extra charges. What is being negotiated is something more than that enjoyed by Canada, however.
Both sides say they want a “zero tariff, zero quota” agreement. The Ceta deal goes some way to doing that – 98% of products are tariff free – but they do remain on poultry, meat and eggs, for example. Quotas also remain on some goods. “If they actually wanted a Canada-style deal, they should have extended the transition period – and then we could have gone through all the products and put tariffs and quotas in place, in return for lower demands on maintaining EU standards,” said one exasperated EU official.
Why does Johnson say this is now off the table?
Downing Street says the EU is offering less generous terms than the Ceta deal. There are various examples of this, including the length of stays for short-term business visitors or the lack of sector-specific provisions for key industries with technical barriers, such as motor vehicles, medicinal products, organics and chemicals.
The UK rightly says the demands on level playing field provisions also go beyond anything in the Ceta deal. These include non-regression from EU standards, with the raising of that baseline together over time, and a UK commitment to follow the bloc’s state aid, or domestic subsidy, rules. The EU has said that the sheer level of trade between the UK and the EU means it needs to be vigilant in maintaining fair competition. It has watered down its original demands on standards and state aid, but not enough for Downing Street.
What are Australia-style arrangements?
No 10 uses this as a more palatable short-hand for no deal. The EU does not have a free trade deal with Australia, although they are in negotiations. The two sides currently operate mainly on World Trade Organization rules, with huge tariffs on imports and exports.
It would be more accurate to describe no deal as an Afghanistan style arrangement. This is because the EU does have a few agreements in place with Australia that it would not have with the UK in the event of a failure of the current trade and security negotiations. These include an agreement on the transfer of EU passenger records to Australian border authorities to help combat crime and terrorism, and an agreement on the mutual recognition of conformity assessments, so that a product tested to EU standards in Australia is regarded as compliant.
▲ ‘Simple principles of global free trade’ will be Boris Johnson’s default